E 22-19: Budgeted Balance Sheet
E 22-19
| |
|Budgeted Balance Sheet |
|July 31, 2012 |
|Assets | |
|Current assets: | |
| Cash …show more content…
|$7,100 |
| Accounts receivable | 3,640 |
| Inventory | 15,700 …show more content…
|
| Total current assets | $26,440 |
|Plant assets: | |
| Furniture and fixtures $34,500 | |
| Accumulated depreciation (30,730) | 3,770 |
|Total assets | $30,210 |
|Liabilities | |
|Current liabilities: | |
| Accounts payable |$2,400 |
|Total liabilities | 2,400 |
|Stockholders’ Equity | |
|Stockholders’ equity |$27,810 |
|Total liabilities and stockholders’ equity |$30,210 |
P22-22A
|Thumbtack Office Supply |
|Sales Budget |
|April – May 2012 |
| |April |May |
|Sales |$40,000 |$40,800 a |
|Thumbtack Office Supply |
|Inventory, Purchases, and Cost of Goods Sold Budget |
|April – May 2012 |
| |April |May
|
|Cost of goods sold a |$20,000 |$20,400 |
|Desired ending inventory | 16,100b | 16,200c |
|Desired inventory |$36,100 |$36,600 |
|Beginning inventory | (16,000)d |(16,100)e |
|Purchases |$20,100 |$20,500 |
|Thumbtack Office Supply |
|Operating Expenses Budget |
|April – May 2012 |
| |April |May |
|Variable operating expenses: | | |
| Commissions expense a |$2,000 |$2,040 |
|Fixed operating expenses: | | |
| Salaries expense |$7,000 |$7,000 |
| Rent expense |2,400 |2,400 |
| Depreciation expense |200 |200 |
| Insurance expense | 100 | 100 |
| Total fixed operating expenses | $9,700 | $9,700 |
|Total operating expenses |$11,700 |$11,740 |
|Thumbtack Office Supply |
|Budgeted Income Statements |
|Months Ending April – May 2012 |
| |April |May |
|Sales revenue |$40,000 |$40,800 |
|Cost of goods sold | 20,000 | 20,400 |
|Gross profit |$20,000 |$20,400 |
|Variable operating expenses: | | |
| Commission expense | 2,000 | 2,040 |
| Contribution margin |$18,000 |$18,360 |
|Fixed operating expenses: | | |
| Salaries expense |$7,000 |$7,000 |
| Rent expense |2,400 |2,400 |
| Depreciation expense |200 |200 |
| Insurance expense | 100 | 100 |
|Total fixed operating expenses |$9,700 |$9,700 |
|Operating income |$8,300 |$8,660 |
| Income tax expense | 1,660a | 1,732b |
|Net income |$6,640 |$6,928 |
P23-28A
Price Variances:
|Price variance |= |Actual price |− |Standard price |× |Actual quantity |
| | |per input unit | |per input unit | |of input |
| | | | | | | |
|Direct materials |= | ($0.17 per lb. − $0.25 per lb.) |× |10,000 lbs. |
|price variance | | | | |
| | | | | | | |
| |= |$800 F | | | | |
| | | | | | | |
|Direct labor |= |($0.15 per min. − $0.12 per min.) |× |202,000 minutes |
|price variance | | | | |
| | | | | | | |
| |= |$6,060 U | | | | |
Efficiency Variances:
|Efficiency |= |Actual quantity |− |Standard quantity |× |Standard price |
|variance | | of input | | of input | |per input unit |
| | | | | | | |
|Direct materials |= | (10,000 lbs. – 12,580 lbs.) |× |$0.25 per lb. |
|efficiency variance | | | | |
| | | | | | | |
| |= |$645 F | | | | |
| | | | | | | |
|Direct labor |= | (202,000 mins. – 188,700 mins.) |× |$0.12 per minute |
|efficiency variance | | | | |
| | | | | | | |
| |= |$1,596 U | | |
| | | | | |
|Journal Entry |
|DATE |ACCOUNTS AND EXPLANATIONS |POST. |DEBIT |CREDIT |
| | |REF. | | |
| | |Materials inventory (10,000 x $0.25) | | 2,500 | |
| | | Direct materials price variance | | |800 |
| | | Accounts payable (10,000 x $0.17) | | |1,700 |
| | | | | | |
| | |Work in process inventory (12,580 x $0.25) | | 3,145 | |
| | | Direct materials efficiency variance | | |645 |
| | | Materials inventory | | |2,500 |
| | | | | | |
| | |Manufacturing wages (202,000 x $0.12) | |24,240 | |
| | |Direct labor price variance | | 6,060 | |
| | | Wages payable (202,000 x $0.15) | | |30,300 |
| | | | | | |
| | |Work in process inventory (188,700 x $0.12) | |22,644 | |
| | |Direct labor efficiency variance | | 1,596 | |
| | | Manufacturing wages (202,000 x $0.12) | | |24,240 |
Variable overhead variances:
|VOH Spending variance |= |Actual overhead |- |[Actual min. |x |Standard price] |
| |= |$10,000 |- |[(202,000 /3) |x | $0.15 ) |
| |= | $100 F | | | | |
| |
|VOH Efficiency variance |
|= |
|[Actual min. |
|- |
|Standard min. allowed |
|] x |
|Standard price |
| |
| |
|= |
|[ ( 202,000 |
|- |
|188,700 ) /3 ] |
|x |
|$0.15 |
| |
| |
|= |
|$665 U |
| |
| |
| |
| |
| |
Fixed overhead variances:
|FOH Spending variance |= |Actual overhead |- |Budgeted overhead |
| |= |$30,500 |- |$25,284 |
| |= | $5,216 U | | |
|FOH Volume variance |= |Budgeted overhead |- |Applied overhead |
| |= |$25,284 |- |(62,900 x $0.42) |
| |= | $1,134 F | | |
__________
Flexible budget overhead for 62,900 coffee mugs: Variable overhead (62,900 units × $0.15 / unit) $ 9,435 Fixed overhead (60,200 units × $0.42 / unit) 25,284* Total flexible budget overhead $34,719
|Journal Entry |
|DATE |ACCOUNTS AND EXPLANATIONS |POST. |DEBIT |CREDIT |
| | |REF. | | |
| | |Manufacturing overhead ($10,000 + $30,500) | |40,500 | |
| | | Various accounts | | |40,500 |
|Journal Entry |
|DATE |ACCOUNTS AND EXPLANATIONS |POST. |DEBIT |CREDIT |
| | |REF. | | |
| | |Work in process inventory [62,900 x ($0.15+$0.42]] | |35,853 | |
| | | Manufacturing overhead | | |35,853 |
|Journal Entry |
|DATE |ACCOUNTS AND EXPLANATIONS |POST. |DEBIT |CREDIT |
| | |REF. | | |
| | |Finished goods inventory | |61,642* | |
| | | Work in process inventory | | |61,642 |
*$3,145 + $22,644 + $35,853 = $61,642
|Journal Entry |
|DATE |ACCOUNTS AND EXPLANATIONS |POST. |DEBIT |CREDIT |
| | |REF. | | |
| | |Variable overhead efficiency variance | | 665 | |
| | |Fixed overhead spending variance | |5,216 | |
| | | Variable overhead spending variance | | | 100 |
| | | Fixed overhead volume variance | | |1,134 |
| | | Manufacturing overhead ($40,500-$35,853) | | |4,647 |
Hiring more-skilled, higher-paid labor led to an unfavorable direct labor price variance. Given the unfavorable direct labor efficiency variance, it does not appear that these more-skilled workers performed efficiently.
The overall net effect is unfavorable, thus management’s decision was not a good one.
| |
|Budgeted Balance Sheet |
|July 31, 2012 |
|Assets | |
|Current assets: | |
| Cash …show more content…
|$7,100 |
| Accounts receivable | 3,640 |
| Inventory | 15,700 …show more content…
|
| Total current assets | $26,440 |
|Plant assets: | |
| Furniture and fixtures $34,500 | |
| Accumulated depreciation (30,730) | 3,770 |
|Total assets | $30,210 |
|Liabilities | |
|Current liabilities: | |
| Accounts payable |$2,400 |
|Total liabilities | 2,400 |
|Stockholders’ Equity | |
|Stockholders’ equity |$27,810 |
|Total liabilities and stockholders’ equity |$30,210 |
P22-22A
|Thumbtack Office Supply |
|Sales Budget |
|April – May 2012 |
| |April |May |
|Sales |$40,000 |$40,800 a |
|Thumbtack Office Supply |
|Inventory, Purchases, and Cost of Goods Sold Budget |
|April – May 2012 |
| |April |May
|
|Cost of goods sold a |$20,000 |$20,400 |
|Desired ending inventory | 16,100b | 16,200c |
|Desired inventory |$36,100 |$36,600 |
|Beginning inventory | (16,000)d |(16,100)e |
|Purchases |$20,100 |$20,500 |
|Thumbtack Office Supply |
|Operating Expenses Budget |
|April – May 2012 |
| |April |May |
|Variable operating expenses: | | |
| Commissions expense a |$2,000 |$2,040 |
|Fixed operating expenses: | | |
| Salaries expense |$7,000 |$7,000 |
| Rent expense |2,400 |2,400 |
| Depreciation expense |200 |200 |
| Insurance expense | 100 | 100 |
| Total fixed operating expenses | $9,700 | $9,700 |
|Total operating expenses |$11,700 |$11,740 |
|Thumbtack Office Supply |
|Budgeted Income Statements |
|Months Ending April – May 2012 |
| |April |May |
|Sales revenue |$40,000 |$40,800 |
|Cost of goods sold | 20,000 | 20,400 |
|Gross profit |$20,000 |$20,400 |
|Variable operating expenses: | | |
| Commission expense | 2,000 | 2,040 |
| Contribution margin |$18,000 |$18,360 |
|Fixed operating expenses: | | |
| Salaries expense |$7,000 |$7,000 |
| Rent expense |2,400 |2,400 |
| Depreciation expense |200 |200 |
| Insurance expense | 100 | 100 |
|Total fixed operating expenses |$9,700 |$9,700 |
|Operating income |$8,300 |$8,660 |
| Income tax expense | 1,660a | 1,732b |
|Net income |$6,640 |$6,928 |
P23-28A
Price Variances:
|Price variance |= |Actual price |− |Standard price |× |Actual quantity |
| | |per input unit | |per input unit | |of input |
| | | | | | | |
|Direct materials |= | ($0.17 per lb. − $0.25 per lb.) |× |10,000 lbs. |
|price variance | | | | |
| | | | | | | |
| |= |$800 F | | | | |
| | | | | | | |
|Direct labor |= |($0.15 per min. − $0.12 per min.) |× |202,000 minutes |
|price variance | | | | |
| | | | | | | |
| |= |$6,060 U | | | | |
Efficiency Variances:
|Efficiency |= |Actual quantity |− |Standard quantity |× |Standard price |
|variance | | of input | | of input | |per input unit |
| | | | | | | |
|Direct materials |= | (10,000 lbs. – 12,580 lbs.) |× |$0.25 per lb. |
|efficiency variance | | | | |
| | | | | | | |
| |= |$645 F | | | | |
| | | | | | | |
|Direct labor |= | (202,000 mins. – 188,700 mins.) |× |$0.12 per minute |
|efficiency variance | | | | |
| | | | | | | |
| |= |$1,596 U | | |
| | | | | |
|Journal Entry |
|DATE |ACCOUNTS AND EXPLANATIONS |POST. |DEBIT |CREDIT |
| | |REF. | | |
| | |Materials inventory (10,000 x $0.25) | | 2,500 | |
| | | Direct materials price variance | | |800 |
| | | Accounts payable (10,000 x $0.17) | | |1,700 |
| | | | | | |
| | |Work in process inventory (12,580 x $0.25) | | 3,145 | |
| | | Direct materials efficiency variance | | |645 |
| | | Materials inventory | | |2,500 |
| | | | | | |
| | |Manufacturing wages (202,000 x $0.12) | |24,240 | |
| | |Direct labor price variance | | 6,060 | |
| | | Wages payable (202,000 x $0.15) | | |30,300 |
| | | | | | |
| | |Work in process inventory (188,700 x $0.12) | |22,644 | |
| | |Direct labor efficiency variance | | 1,596 | |
| | | Manufacturing wages (202,000 x $0.12) | | |24,240 |
Variable overhead variances:
|VOH Spending variance |= |Actual overhead |- |[Actual min. |x |Standard price] |
| |= |$10,000 |- |[(202,000 /3) |x | $0.15 ) |
| |= | $100 F | | | | |
| |
|VOH Efficiency variance |
|= |
|[Actual min. |
|- |
|Standard min. allowed |
|] x |
|Standard price |
| |
| |
|= |
|[ ( 202,000 |
|- |
|188,700 ) /3 ] |
|x |
|$0.15 |
| |
| |
|= |
|$665 U |
| |
| |
| |
| |
| |
Fixed overhead variances:
|FOH Spending variance |= |Actual overhead |- |Budgeted overhead |
| |= |$30,500 |- |$25,284 |
| |= | $5,216 U | | |
|FOH Volume variance |= |Budgeted overhead |- |Applied overhead |
| |= |$25,284 |- |(62,900 x $0.42) |
| |= | $1,134 F | | |
__________
Flexible budget overhead for 62,900 coffee mugs: Variable overhead (62,900 units × $0.15 / unit) $ 9,435 Fixed overhead (60,200 units × $0.42 / unit) 25,284* Total flexible budget overhead $34,719
|Journal Entry |
|DATE |ACCOUNTS AND EXPLANATIONS |POST. |DEBIT |CREDIT |
| | |REF. | | |
| | |Manufacturing overhead ($10,000 + $30,500) | |40,500 | |
| | | Various accounts | | |40,500 |
|Journal Entry |
|DATE |ACCOUNTS AND EXPLANATIONS |POST. |DEBIT |CREDIT |
| | |REF. | | |
| | |Work in process inventory [62,900 x ($0.15+$0.42]] | |35,853 | |
| | | Manufacturing overhead | | |35,853 |
|Journal Entry |
|DATE |ACCOUNTS AND EXPLANATIONS |POST. |DEBIT |CREDIT |
| | |REF. | | |
| | |Finished goods inventory | |61,642* | |
| | | Work in process inventory | | |61,642 |
*$3,145 + $22,644 + $35,853 = $61,642
|Journal Entry |
|DATE |ACCOUNTS AND EXPLANATIONS |POST. |DEBIT |CREDIT |
| | |REF. | | |
| | |Variable overhead efficiency variance | | 665 | |
| | |Fixed overhead spending variance | |5,216 | |
| | | Variable overhead spending variance | | | 100 |
| | | Fixed overhead volume variance | | |1,134 |
| | | Manufacturing overhead ($40,500-$35,853) | | |4,647 |
Hiring more-skilled, higher-paid labor led to an unfavorable direct labor price variance. Given the unfavorable direct labor efficiency variance, it does not appear that these more-skilled workers performed efficiently.
The overall net effect is unfavorable, thus management’s decision was not a good one.