Chapter 20: 5DQ (page 912)
Why should each department participate in preparing its own budget?
The participative or participatory budgeting technique is the process where each department of the organization working prepares its budget.
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Miami Solar budgets production of 5,300 solar panels for August. Each unit requires 4 hours of direct labor at a rate of \(16 per hour. Variable factory overhead is budgeted to be 70% of direct labor cost, and fixed factory overhead is \)180,000 per month. Prepare a factory overhead budget for August.
X-Tel budgets sales of \(60,000 for April, \)100,000 for May, and \(80,000 for June. In addition, sales commissions are 10% of sales dollars and the company pays a sales manager a salary of \)6,000 per month. Sales commissions and salaries are paid in the month incurred. Prepare a selling expense budget for April, May, and June.
What is a selling expense budget? What is a capital expenditures budget?
The management of Nabar Manufacturing prepared the following estimated balance sheet for June 2017:
NABAR MANUFACTURING Estimated Balance Sheet June 30, 2017 | |||
Assets | Liabilities and Equity |
| |
Cash | \( 40,000 | Accounts payable | \) 51,400 |
Accounts receivable | 249,900 | Income taxes payable. | 10,000 |
Raw materials inventory | 35,000 | Short-term notes payable | 24,000 |
Finished goods inventory | 241,080 | Total current liabilities | 85,400 |
Total current assets | 565,980 | Long-term note payable | 300,000 |
Equipment | 720,000 | Total liabilities | 385,400 |
Accumulated depreciation | (240,000) | Common stock | 600,000 |
Equipment, net. | 480,000 | Retained earnings | 60,580 |
Total stockholders’ equity | 660,580 | ||
Total assets. | \(1,045,980 | Total liabilities and equity | \)1,045,980 |
To prepare a master budget for July, August, and September of 2017, management gathers the following information:
Required
Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the third calendar quarter, except as otherwise noted below. Round calculations to the nearest whole dollar.
Mike’s Motors Corp. manufactures motors for dirt bikes. The company requires a minimum \(30,000 cash balance at each month-end. If necessary, the company borrows to meet this requirement, at a cost of 2% interest per month (paid at the end of each month). Any cash balance above \)30,000 at month-end is used to repay loans. The cash balance on July 1 is $34,000, and the company has no outstanding loans at that time. Forecasted cash receipts and forecasted cash payments (other than for loan activity) are as follows. Prepare a cash budget for July, August, and September.
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