Question

Jordan and Taylor are too busy baking brownies to schedule an appointment with you. They did send you the enclosed questions for you to answer.

Chapter 21 Questions:

1. Units to be produced annually: 200,000 tins
Direct labor: 1 hour per 100 tins
Variable overhead costs per direct labor hour:
Indirect materials $2.05
Indirect labor $1.20
Utilities $9.25
Maintenance $3.50
Fixed overhead costs per quarter:
Insurance $3,000
Depreciation $2,000
Rent $12,000

What is the budgeted total manufacturing overhead for the year? (5 points)

2. Sales: 60,000 tins per quarter
Variable costs per dollar of sales: sales commissions 5%, delivery expense .5%, and advertising 1.5%.
Fixed costs per quarter: sales salaries $40,000, office rent $1,500, utilities $1,200, and repairs expense $200.
Selling price: $10 per tin

What is the budgeted total selling and administrative expenses for the quarter? (5 points)

3. Sales are 30% cash and 70% on credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale. Sales were December $180,000; January $220,000; February $250,000; and March $300,000.

What was total cash received in March?

Answer 1

1.Budgeted Total maufacturing overhead for the year:

Units to be produced annually = 200,000 tins

Direct Labor = 1 hour per 100 tins

Total direct labour hours = 200,000 tins / 100 tins = 2000 hours

Particulars	Amount	Workings
Variable overhead costs:
Indirect materials	$4,100	(2000 hours x $2.05)
Indirect labor	$2,400	(2000 hours x $1.20)
Utilities	$18,500	(2000 hours x $9.25)
Maintenance	$7,000	(2000 hours x $3.5)
Total variable overhead costs (A)	$32,000
Fixed overhead costs:
Insurance	$12,000	($3000 x 4 quarters)
Depreciation	$8,000	($2000 x 4 quarters)
Rent	$48,000	($12000 x 4 quarters)
Total fixed overhead costs (B)	$68,000
Budgeted total manufacturing overhead (A+B)	$100,000

2.Budgeted total selling and administrative expenses for the quarter:

Particulars	Amount	Workings
Variable costs:
Sales commission	$30,000	60,000tins x $10 x 5%
Delivery expenses	$3,000	60,000tins x $10 x 0.5%
Advertisement	$9,000	60,000tins x $10 x 1.5%
Total variable costs (A)	$42,000
Fixed costs:
Sales salaries	$40,000
Office Rent	$1,500
Utilities	$1,200
Repaired expenses	$200
Total fixed costs (B)	$42,900
Budgeted total selling and administrative expenses (A+B)	$84,900

3.Total cash received in March:

	December	January	February	March
1. Sales of the month	$180,000	$220,000	$250,000	$300,000
2. Cash sales [30% of 1]	$54,000	$66,000	$75,000	$90,000
3. Credit sales - 70% [1-2 ]	$126,000	$154,000	$175,000	$210,000
4. Collected 10% in same month (10% of 3)	$12,600	$15,400	$17,500	$21,000
5. Collected 50% in next month (50% of 3)		$63,000	$77,000	$87,500
6. Collected 36% in subsequent month (36% of 3)			$45,360	$55,440
7. Total cash collection (2+4+5+6)	$666,00	$144,400	$214,860	$253,940

Cash received in March = $253,940