Week
7 P7-2, P7-3, P7-6 EXCEL TEMPLTES –
Principles of Accounting
P7-2 Glide
Tire Company's budgeted unit sales for the year 2008 were:
Passenger car tires 120,000
Truck tires 25,000
The
budgeted selling price for truck tires was $200 per tire and for passenger car
tires was $65 per tire. He beginning finished goods inventories was expected to
be 2,000 truck tires and 5,000 passenger tires, for a total cost of $326,478,
with desired ending inventories at 2,500 and 6,000, respectively, with a total
cost of $400,510. There was no anticipated beginning or ending work in process
inventory for either type of tire.
The
standard materials quantities for each type of fire were as follows:
Truck Passenger
Car Rubber 30lbs 10 lbs
Steel belts 4 lbs 1.5
lbs
The
purchase prices of rubber and steel were $2 and $3 per pound, respectively. The
desired ending inventories for rubber and steel were 75,000 and 7,500 pounds
respectively. The estimated beginning inventories for rubber and steel were
60,000 and 6,000 pounds, respectively.
The
direct labor hours required for each type of tire were as follows:
Molding Department
Finishing
Department
Truck
Tire
0.25 0.15
Passenger
car
tire
0.10 0.05
The
direct labor rate for each department is as follows:
Molding
department
$15 per hour
Finishing
department
$13 per hour
Budgeted
factory overhead costs for 2008 were as follows:
Indirect
materials
198,500
Indirect
labor 213,200
Depreciation
of building and equipment
157,500
Power
and light
122,900
Total
692,100
Required:
Prepare
each of the following budgets for Glide for the year ended 2008:
1.
Sales budget
2.
Production budget
3.
Direct material budget
4.
Direct labor budget
5.
Factory overhead budget
6.
Cost of goods sold budget
P7-3 A
listing of budgeted selling and administrative expenses for Glide Tire Company
in P7-2 for the year ended December 31, 2008, were as
follows:
Advertising expense
942,000
Office rent expense 125,000
Office salaries
expense 821,000
Office supplies expense
45,500
Officers' salaries expense 661,000
Sales salaries expense 868,000
Telephone and fax expense 33,500
Travel
expense 443,000
Required:
Prepare
a selling and administrative expenses budget, in good form, for the year
2008.
Using
the information above and the budgets prepared in P7-2, prepare a budgeted
income statement for the year 2008, assuming an income tax rate of 40%.
P7-6 Flexible budget
for factory
overhead
P7-6 Presented
below are the monthly factory overhead cost budget (at normal capacity of 5,000
units or 20,000 direct labor hours) and the production and cost data for a
month.
Factory Overhead
Cost Budget
Fixed cost:
Depreciation
on building and machinery 1,200
Taxes
on building and machinery 500
Insurance
on building and machinery 500
Superintendent's
salary 1,500
Supervisors'
salaries
2,300
Maintenance
wages 1,000
7,000
Variable cost:
Repairs
400
Maintenance
supplies
300
Other
supplies 200
Payroll
taxes 800
Small
tools 300
2,000
Total
standard factory
overhead
$9,000
Required:
1. Assuming
that variable costs will vary in direct proportion to the change in volume,
prepare a flexible budget for production levels of 80%, 90% and 110% of normal
capacity. Also determine the rate for application of factory overhead to
work in process at each level of volume in both units and direct labor hours.
2. Prepare
a flexible budget for production levels of 80%, 90% and 110%, assuming that
variable costs will vary in direct proportion to the change in volume, but with
the following exceptions. (Hint: Set up a third category for semi fixed
expenses).
a.
At 110% of capacity, an assistant department head will be needed at a salary of
$10,500 annually.
b. At
80% of capacity, the repairs expense will drop to one-half of the amount at
100% capacity.
c. Maintenance
supplies expense will remain constant at all levels of
production.
d. At
80% of capacity, one part-time maintenance worker, earning $6,000 a year, will
be laid off.
e. At
110% of capacity, a machine not normally in use and on which no depreciation is
normally recorded will be used in production. Its cost was $12,000, it
has a ten-year life, and straight-line depreciation will be taken.
3. Using
the facts and the flexible budget prepared in 1, determine the budgeted cost at
96% of capacity, using interpolation.
4.
Using the flexible budget prepared in 1, determine the budgeted cost at 104%
capacity, using a method other than interpolation.
SOLUTION PREVIEW
Problem 7-6
1. Assuming that variable costs will vary in direct
proportion to the change in volume, prepare a flexible budget for production
levels of 80%, 90% and 110% of normal capacity. Also determine the rate
for application of factory overhead to work in process at each level of volume
in both units and direct labor hours.
Factory Overhead Cost Budget
|
Percent of normal capacity
|
80%
|
90%
|
110%
|
Number of units
|
4,000
|
4,500
|
5,500
|
Number of standard direct labor
hours
|
16,000
|
18,000
|
22,000
|
Budgeted factory overhead:
|
|
|
|
|
Fixed cost:
|
|
|
|
|
|
Depreciation on building and
machinery
|
$1,200
|
$1,200
|
$ 1,200
|
|
|
Taxes on building and machinery
|
500
|
500
|
500
|
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