Preparing a Direct Materials Purchases Budget

Tulum Inc. makes a Mexican chocolate mix sold in 4-pound boxes. Planned production in units for the first 3 months of the coming year is:

Each box requires 4.2 pounds of chocolate mix and one box. Company policy requires that ending inventories of raw materials for each month be 10% of the next month’s production needs. That policy was met for the ending inventory of December in the prior year. The cost of 1 pound of chocolate mix is $1.50. The cost of one box is $0.10.

Required:

1. Calculate the ending inventory of chocolate mix in pounds for December of the prior year and for January and February. What is the beginning inventory of chocolate mix for January?

2. Prepare a direct materials purchases budget for chocolate mix for the months of January and February.

3. Calculate the ending inventory of boxes for December of the prior year and for January and February. Round your answers to the nearest whole unit.

4. Prepare a direct materials purchases budget for boxes for the months of January and February.

Paulis Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During February, the kennel budgeted for 2,500 tenant-days, but its actual level of activity was 2,480 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for February:

Data used in budgeting:

Actual results for February:

The activity variance for net operating income in February would be closest to:

Garrison 16e Rechecks 2018-06-07

Multiple Choice

• $236 U

• $264 F

• $236 F

• $264 U

Preparation of a complete master budget

The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 2015:

To prepare a master budget for April, May, and June of 2015, management gathers the following information:

• Sales for March total 20,500 units. Forecasted sales in units are as follows: April, 20,500; May, 19,500; June, 20,000; and July, 20,500. Sales of 240,000 units are forecasted for the entire year. The product's selling price is $23.85 per unit and its total product cost is $19.85 per unit

• Company policy calls for a given month's ending raw materials inventory to equal 50% of the next month's materials requirements. The March 31 raw materials inventory is 4,925 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,000 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.

• Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's expected unit sales. The March 31 finished goods inventory is 16,400 units, which complies with the policy.

• Each finished unit requires 0.50 hours of direct labor at a rate of $15 per hour.

• Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $20,000 per month is treated as fixed factory overhead.

• Sales representatives' commissions are 8% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,000.

• Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable.

• The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of the sale).

• All raw materials purchases are on credit, and no payables arise from any other transactions. One month's raw materials purchases are fully paid in the next month.

• The minimum ending cash balance for all months is $40,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.

• Dividends of $10,000 are to be declared and paid in May.

• No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 35% in the quarter and paid in the third calendar quarter.

• Equipment purchases of $130,000 are budgeted for the last day of June.

Required

Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar.

1. General and administrative expense budget.
2. Cash budget.

Check  

(2) Units to produce: April, 19,700; May, 19,900

(3) Cost of raw materials purchases, April, $198,000

(5) Total overhead cost, May, $46,865

(8) Ending cash balance: April, $83,346; May, $124,295

(10) Budgeted total assets, June 30: $1,299,440

Dahlia is in the 32 percent tax rate bracket and has purchased the following shares of Microsoft common stock over the years: Date Purchased Shares Basis 7/10/2008 500 $ 20,000 4/20/2009 400 18,320 1/29/2010 600 20,160 11/02/2012 350 13,720 If Dahlia sells 1,100 shares of Microsoft for $66,000 on December 20, 2018, what is her capital gain or loss in each of the following assumptions? (Do not round intermediate calculations.)

a. She uses the FIFO method.

Dahlia is in the 32 percent tax rate bracket and has purchased the following shares of Microsoft common stock over the years:

If Dahlia sells 1,100 shares of Microsoft for $66,000 on December 20, 2018, what is her capital gain or loss in each of the following assumptions? (Do not round intermediate calculations.)

b. She uses the specific identification method and she wants to minimize her current year capital gain.

List the four health care funding methods used in Canada. State the health care funding method used in your jurisdiction and describe the payroll implication, if any.

Transaction 4
The owners paid $2,500 for website advertising. They were able to get a good deal because one of the company's owners also owns stock in the website company. The owners also paid $5,500 for some advertising in local newspapers. [Note: Combine both transactions into one entry].

Account:               Dollar amount:   

Account:   Dollar amount:   

Account: Dollar amount:   

Account: Dollar amount:   

Account: Dollar amount:   

Account options: Cash, Accounts Receivable, Inventory, Prepaid Rent, Fixtures and Equipment, Accounts Payable, Interest Payable, Wages Payable, Notes Payable, Paid-in Capital, Retained Earnings, Leave Blank

Fictitious information is provided below. Answer both required questions. **Be sure to show your work in detail. Not doing so will result in reduced or no credit given.

For the year recently completed, TeamLogicIT had net income of $35,000. Balances in the company's current asset and current liability accounting for the beginning and ending of the year were as follows:

Also, the accumulated depreciation account had total credits of $20,000 during the year. TeamLogicIT did not record any gains or losses during the year.

**Based on the above and in consideration of the indirect method, determine the net cash provided by operating activities for the year.

Using the following information ... to forecast the incremental expected Profit or Loss from the new clinic.

Generic Hospital is contemplating the opening of a clinic in an underserved rural community. The marketing people project 5,000 office visits in year one with an average charge of $100 per clinic visit. The consensus is that half of the visits will be Medicare patients with an average payment of $50 per visit. Thirty percent (30%) of the visits are expected to be from patients insured with BC with the expectation for payment set at 80% of the average charge. Another 15% of the patients will have some form of Medicaid coverage with an expected payment of $20 per visit. The remaining patients are expected to be bad debt and charity care with no payment. The expenses consist of $120,000 for salary and benefits. This covers one nurse practitioner and one all purpose assistant. The office lease, insurance, and other fixed costs are projected to be $60,000 per year. The hospital would borrow $20,000 (Debt) from the Bank to buy used Equipment to outfit the office. The interest on the loan would be $1,500 in year one. The equipment to outfit the space cost $20,000 and has an expected useful life of 5 years. The variable cost for such items as supplies, forms, and postage is estimated at $10.00 per visit. Assuming no allocation of any corporate overhead, compute the forecasted year 1 profit or loss.

(do not to confuse Balance Sheet items with those needed to prepare a forecasted P&L)

IAS 16, Property, Plant and Equipment allows companies to choose either the cost model or the revaluation model to measure the carrying amount of property, plant and equipment subsequent to its initial recognition as an asset.

Discuss how you should account for revaluation gains and losses when the valuation model is used. In addition, explain how the reversals of the revaluation gains and losses should be reported.

Skylar and Walter Black have been married for 25 years. They live at 883 Scrub Brush Street, Apt. 52B, Las Vegas, NV 89125. Skylar is a homemaker and Walter is a high school teacher. His W-2 form is located on the next tab. Skylar's Social Security number is 222-43-7690 and Walt's is 700-01-0002. Neither are age 65 or older. The Blacks provide all the support for Skylar's mother, Rebecca Backin (Social Security number 411-66-2121), who lives in a nursing home in Reno, NV and has no income. Walter's father, Alton Black (Social Security number 343-22-8899), lives with the Blacks in Las Vegas. Although Alton received Social Security benefits of $7,600 in 2018, the Blacks provide over half of Alton's support.

The Blacks moved from Maine to Nevada. As a result, they sold their house in Maine on January 4, 2018. They originally paid $76,000 for the home on July 3, 1993, but managed to sell it for $604,000. They spent $13,000 on improvements over the years. They are currently renting in Las Vegas while they look for a new home.

The school district reimbursed Walter $550 for moving expenses. These are reflected on his W-2 (see separate tab). Walter’s previous job, as a high school teacher in Maine, was only 5 miles from his home. Skylar was unemployed prior to the move.

The Blacks received a 1099-DIV from their mutual fund investments (see separate tab).

The Blacks own a ski condo located at 123 Buncombe Lane, Brian Head, UT 84719. The condo was rented for 184 days during 2018 and used by the Blacks for 16 days. Pertinent information about the condo rental is as follows:

Required:
Complete Form 1040 and the schedules and forms provided for the Blacks.

• Assume the taxpayers had health coverage for the entire year.
• Neither taxpayers wants to contribute to the presidential election campaign.
• If an amount box does not require an entry or the answer is zero, enter "0".
• Do not round any percentages.
• If required, round your answers to the nearest dollar.
• If required, enter a "loss" as a negative number on the tax form. Do not enter deductions as negative numbers.
• Special instructions for Form 8582: If required, use the minus sign to enter a "loss" as a negative number on the lines 1d, 4 and 16. However, per the instructions on the tax return, enter all numbers in Part II as positive amounts.

-------------------------------Complete Form 1040, Schedule 1, Schedule D, Form 8949, Schedule E, Form 8582--------------------------------------------------------------------------------

P12-2 The management of Shatner Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the company’s fi nished product The following information was collected from the accounting records and production data for the year ending December 31, 2017.1. 8,000 units of CISCO were produced in the Machining Department.2. Variable manufacturing costs applicable to the production of each CISCO unit were: direct materials $4.80, direct labor $4.30, indirect labor $0.43, utilities $0.40.All variable manufacturing and direct fixed costs will be eliminated if CISCO is pur-chased. Allocated costs will have to be absorbed by other production departments.3. Fixed manufacturing costs applicable to the production of CISCO were: Cost Item Direct Allocated Depreciation $2,100 $ 900 Property taxes 500 200 Insurance 900 600 $3,500 $1,700 4. The lowest quotation for 8,000 CISCO units from a supplier is $80,000.5. If CISCO units are purchased, freight and inspection costs would be $0.35 per unit, and receiving costs totaling $1,300 per year would be incurred by the Machining Department.Instructions(a) Prepare an incremental analysis for CISCO. Your analysis should have columns for (1) Make CISCO, (2) Buy CISCO, and (3) Net Income Increase/(Decrease).(b) Based on your analysis, what decision should management make?(c) Would the decision be different if Shatner Company has the opportunity to produce $3,000 of net income with the facilities currently being used to manufacture CISCO? Show computations.(d) What nonfi nancial factors should management consider in making its decision

b

c

d

Problem 15-1A Production costs computed and recorded; reports prepared LO C2, P1, P2, P3, P4

[The following information applies to the questions displayed below.]

Marcelino Co.'s March 31 inventory of raw materials is $80,000. Raw materials purchases in April are $590,000, and factory payroll cost in April is $379,000. Overhead costs incurred in April are: indirect materials, $58,000; indirect labor, $23,000; factory rent, $36,000; factory utilities, $21,000; and factory equipment depreciation, $52,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $685,000 cash in April. Costs of the three jobs worked on in April follow.

rev: 03_15_2018_QC_CS-121813

Problem 15-1A Part 2

1. Materials purchases (on credit).
2. Direct materials used in production.
3. Direct labor paid and assigned to Work in Process Inventory.
4. Indirect labor paid and assigned to Factory Overhead.
5. Overhead costs applied to Work in Process Inventory.
6. Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in cash.)
7. Transfer of Jobs 306 and 307 to Finished Goods Inventory.
8. Cost of goods sold for Job 306.
9. Revenue from the sale of Job 306.
10. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.)

2. Prepare journal entries for the month of April to record the above transactions.

Journal entry worksheet

John and Jessica are married and have one dependent child, Liz. Liz is currently in college at State University. John works as a design engineer for a manufacturing firm while Jessie runs a craft business from their home. Jessica’s craft business consists of making craft items for sale at craft shows that are held periodically at various locations. Jessica spends considerable time and effort on her craft business and it has been consistently profitable over the years. John and Jessica own a home and pay interest on their home loan (balance of $220,000) and a personal loan to pay for Lizzie’s college expenses (balance of $35,000).

Neither John and Jessica is blind or over age 65, and they plan to file as married-joint. Based on their estimates, determine John and Jessica’s AGI and taxable income for the year and complete pages 1 and 2 of Form 1040 (through taxable income, line 43) and Schedule A. Assume that the employer portion of the self-employment tax on Jessie’s income is $808. Joe and Jessie have summarized the income and expenses they expect to report this year as follows: