ACC 206 Week 4 Problem 1, 2, 3. Get an A++.

ACC 206 Week 4 Problem 1, 2, 3. Get an A++.

Problem 1. Comprehensive budgeting 

The balance sheet of Watson Company as of December 31, 20X8, follows. 

WILLIAMS COMPANY

Balance Sheet

December 31, 20X1

Assets                                             

Cash                                                   $4,595

Accounts receivable                                                                 10,000 

Finished goods (575 units x $7.00)                                        4,025 

Direct materials (2,760 units x $0.50)                                    1,380 

Plant & equipment                                         $50,000 

Less: Accumulated depreciation                  10,000               40,000 

Total assets                                                                                  $60,000 

Liabilities & Stockholders’ Equity 

 Accounts payable to suppliers                                                 $14,000 

Common stock                                              $25,000 

Retained earnings                                          21,000                  46,000 

Total liabilities &. stockholders’ equity                                   $60,000 

  The following information has been extracted from the firm’s accounting records: 

1. All sales are made on account at $20 per unit. Sixty percent of the sales are collected in the month of sale; the remaining 40% are collected in the following month. Forecasted sales for the first five months of 20X9 are: January, 1,600 units,- February, 1,700 units; March, 1,900 units; April, 2,100 units; May, 2,200 units. 

2. Management wants to maintain the finished goods inventory at 30% of the following month’s sales. 

3. Watson uses four units of direct material in each finished unit. The direct material price has been stable and is expected to remain so over the next six months. Management wants to maintain the ending direct materials inventory at 60% of the following month’s production needs. 

4. Seventy percent of all purchases are paid in the month of purchase; the remaining 30% are paid in the subsequent month. 

5. Watson’s product requires 30 minutes of direct labor time. Each hour of direct labor costs $9. 

Instructions: 

a. Rounding computations to the nearest dollar, prepare the following for January through March: 

1) Sales budget 

2) Schedule of cash collections 

3) Production budget 

4) Direct material purchases budget 

5) Schedule of cash disbursements for material purchases 

6) Direct labor budget 

b. Determine the balances in the following accounts as of March 31: 

1) Accounts Receivable 

2) Direct Materials 

3) Accounts Payable 

Problem 2. Basic flexible budgeting 

Sydney Inc., has the following budgeted production costs: 

 Direct materials                                                        $0.45 per unit 

Direct labor                                                                 1.80 per unit 

Variable factory overhead                                        2.30 per unit 

Fixed factory overhead 

Supervision                                                                  $26,000 

Maintenance                                                               18,000 

Other                                                                            12,000 

 The company normally manufactures between 20,000 and 25,000 units each quarter. Should output exceed 25,000 units, maintenance and other fixed costs are expected to increase by $6,000 and $4,500, respectively. 

During the recent quarter ended March 31, Centron produced 25,500 units and incurred the following costs: 

Instructions: 

a. Prepare a flexible budget for 21,000, 23,000, and 24,500 units of activity. 

b. Was Sydney’s experience in the quarter cited better or worse than anticipated? Prepare an appropriate performance report and explain your answer. 

c. Explain the benefit of using flexible budgets (as opposed to static budgets) in the measurement of performance. 

 Direct Materials                                                     $11,710 

Direct Labor                                                             47,175 

Variable factory overhead                                     53,940 

Fixed factory overhead 

 Supervision                                                             24,500 

  Maintenance                                                         23,700 

 Other                                                                       16,800 

 Total production costs                                       $177,825

Problem 3. Straightforward variance analysis 

Andy Enterprises uses a standard costing system. The standard cost sheet for product no. 551 follows. 

Direct materials: 4 units @ $6.50                                          $26.00 

Direct labor: 8 hours @ $8.50                                                 68.00 

Variable factory overhead: 8 hours             @ $7.00            56.00 

Fixed factory overhead: 8 hours                  @ 2.5                 20.00 

Total standard cost per unit                                                      $170.00 

 The following information pertains to activity for December: 

1. Direct materials acquired during the month amounted to 26,350 units at $6.40 per unit. All materials were consumed in operations. 

2. Arrow incurred an average wage rate of $8.75 for 51,400 hours of activity. 

3. Total overhead incurred amounted to $508,400. Budgeted fixed overhead totals $1.8 million and is spread evenly throughout the year. 

4. Actual production amounted to 6,500 completed units. 

 Instructions: 

a. Compute Andy’s direct material variances. 

b. Compute Andy’s direct labor variances. 

c. Compute Andy’s variances for factory overhead

ACC 206 Week 4 Problem 1, 2, 3. Get an A++.