Chapter 20: 7E2 (page 918)
Addison Co. budgets production of 2,400 units during the second quarter. In addition, information on its direct labor and its variable and fixed overhead is shown below. For the second quarter, prepare (2) a factory overhead budget
The total factory overhead budget will be$555,600.
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For each of the following items 1 through 6, indicate yes if it describes a potential benefit of budgeting or no if it describes a potential negative outcome of budgeting.
4. Some employees might overstate expenses in budgets
Use the following information to prepare the July cash budget for Acco Co. It should show expected cash receipts and cash payments for the month and the cash balance expected on July 31.
a. Beginning cash balance on July 1: \(50,000.
b. Cash receipts from sales: 30% is collected in the month of sale, 50% in the next month, and 20% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), \)1,720,000; June (actual), \(1,200,000; and July (budgeted), \)1,400,000.
c. Payments on merchandise purchases: 60% in the month of purchase and 40% in the month following purchase. Purchases amounts are: June (actual), \(700,000; and July (budgeted), \)750,000.
d. Budgeted cash payments for salaries in July: \(275,000.
e. Budgeted depreciation expense for July: \)36,000.
f. Other cash expenses budgeted for July: \(200,000.
g. Accrued income taxes due in July: \)80,000.
h. Bank loan interest paid in July: $6,600.
Following are selected accounts for a company. For each account, indicate whether it will appear on a budgeted income statement (BIS) or a budgeted balance sheet (BBS). If an item will not appear on either budgeted financial statement, label it NA.
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office salaries expense . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . .
Amortization expense . . . . . . . . . . . . . . .
Interest expense on loan payable . . . . . . .
Cash dividends paid . . . . . . . . . . . . . . . . . .
Bank loan owed . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . .
Hockey Pro budgets production of 3,900 hockey pucks during May. The company assigns variable overhead at the rate of \(1.50 per unit. Fixed overhead equals \)46,000 per month. Prepare a factory overhead budget for May.
The production budget for Manner Company shows units to be produced as follows: July, 620; August, 680; and September, 540. Each unit produced requires two hours of direct labor. The direct labor rate is currently \(20 per hour but is predicted to be \)21 per hour in September. Prepare a direct labor budget for the months July, August, and September.
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