Problem 9-40 (60 minutes)1.Sales budget for 20x0:

UnitsPriceTotal

Light coils60,000$120$ 7,200,000

Heavy coils40,0001706,800,000

Projected sales$14,000,000

2.Production budget (in units) for 20x0:

Light CoilsHeavy Coils

Projected sales60,00040,000

Add: Desired inventories,December 31, 20x025,0009,000

Total requirements85,00049,000

Deduct: Expected inventories, January 1, 20x020,0008,000

Production required (units)65,00041,000

3.Raw-material purchases budget (in quantities) for 20x0:

Raw Material

SheetMetalCopper WirePlatforms

Light coils (65,000 units projected to be produced)130,00065,000__

Heavy coils (41,000 units projectedto be produced)102,50061,50041,000

Production requirements232,500126,50041,000

Add: Desired inventories, December 31, 20x018,00016,0007,000

Total requirements250,500142,50048,000

Deduct: Expected inventories,January 1, 20x016,00014,5006,000

Purchase requirements (quantity)234,500128,00042,000

4.Raw-material purchases budget for 20x0:

Raw MaterialRaw Material Required (units)Anticipated Purchase Price

Total

Sheet metal234,500$16$3,752,000

Copper wire128,000101,280,000

Platforms42,0003126,000

Total$5,158,000

5.Direct-labor budget for 20x0:

ProjectedProduction(units)HoursperUnitTotal Hours

RateTotalCost

Light coils65,0002130,000$15$1,950,000

Heavy coils41,0003123,000202,460,000

Total$4,410,000

6. Manufacturing overhead budget for 20x0:

Cost Driver QuantityCost Driver RateBudgeted Cost

Purchasing and material handling362,500 kg.a$0.55$199,375

Depreciation, utilities, and inspection106,000 coils b$4.00424,000

Shipping100,000c$1.00100,000

General manufacturing overhead253,000 hr. d$3.00 759,000

Total manufacturing overhead$1,482,375

a362,500 = 234,500 + 128,000 (from req. 3)b106,000 = 65,000 + 41,000 (from req. 2)c100,000 = 60,000 + 40,000 (total units sold, from problem)d253,000 = 130,000 + 123,000 (from req. 5)

PROBLEM 9-39 (40 MINUTES)

1.Empire Chemical Companys production budget (in gallons) for the three products for 20x2 is calculated as follows:YarexDarolNorex

Sales for 20x260,00040,00025,000

Add: Inventory, 12/31/x2(.08 20x3 sales) 5,2002,8002,400

Total required65,20042,80027,400

Deduct: Inventory, 12/31/x1

(.08 20x2 sales) 4,800 3,200 2,000

Required production in 20x260,40039,60025,400

2.The companys conversion cost budget for 20x2 is shown in the following schedule:

Conversion hours required:

Yarex (60,400 .07)4,228

Darol (39,600 .10)3,960

Norex (25,400 .16) 4,064

Total hours 12,252

Conversion cost budget (12,252 $20)$245,040

3.Since the 20x1 usage of Islin is 100,000 gallons, the firms raw-material purchases budget (in dollars) for Islin for 20x2 is as follows:

Quantity of Islin required for production in 20x2 (in gallons):Yarex (60,400 1)Darol (39,600 .7)Norex (25,400 .5)60,40027,720 12,700

Subtotal100,820

Add: Required inventory, 12/31/x2 (100,820 .10) 10,082

Subtotal110,902

Deduct: Inventory, 1/1/x2 (100,000 .10) 10,000

Required purchases (gallons) 100,902

Purchases budget (100,902 gallons $5 per gallon)$504,510

4.The company should continue using Islin, because the cost of using Philin is $76,316 greater than using Islin, calculated as follows:

Change in material cost from substituting Philin for Islin:20x2 production requirements:Philin (100,820 $5 1.2)Islin (100,820 $5)$604,920 504,100

Increase in cost of raw material$100,820

Change in conversion cost from substituting Philin for Islin:

Philin (12,252 $20 .9)$220,536

Islin (12,252 $20) 245,040

Decrease in conversion cost$(24,504)

Net increase in production cost$ 76,316

Note: all financial data in solution is in thousands (i.e., 000 omitted).

1. Schedule of cash collections:JanuaryFebruaryMarch

Collection of accounts receivable:

$55,000 x 20%...$ 11,000

Collection of January sales ($150,000):

60% in January; 35% in February .. 90,000$ 52,500

Collection of February sales ($180,000):

60% in February; 35% in March.. 108,000$ 63,000

Collection of March sales ($185,000):

60% in March; 35% in April.. 111,000

Sale of equipment. 5,000

Total cash collections$101,000$160,500$179,000

2. Schedule of cash disbursements:JanuaryFebruaryMarch

Payment of accounts payable...$ 22,000

Payment of January purchases ($90,000):

70% in January; 30% in February.. 63,000$ 27,000

Payment of February purchases ($100,000):

70% in February; 30% in March.. 70,000$ 30,000

Payment of March purchases ($140,000):

70% in March; 30% in April.. 98,000

Cash operating costs.. 31,000 24,000 45,000

Total cash disbursements...$116,000$121,000$173,000

3. Cash budget:JanuaryFebruaryMarch

Beginning cash balance.$ 20,000$ 20,000$ 44,300

Total receipts. 101,000 160,500 179,000

Subtotal.$121,000$180,500$223,300

Less: Total disbursements 116,000 121,000 173,000

Cash excess (deficiency) before financing$ 5,000$ 59,500$ 50,300

Financing:

Borrowing to maintain $20,000 balance.. 15,000

Loan principal repaid (15,000)

Loan interest paid.. (200)*

Ending cash balance$ 20,000$ 44,300$ 50,300

* $15,000 x 8% x 2/12