BudgetingSuggested Answers and SolutionsBUDGETINGTHEORIES:1.D 16.C 31.C 46.D2.B 17.C 32.B 47.C3.D 18.C 33.D 48.A4.C 19.B 34.B 49.A5.A 20.D 35.A 50.D6.D 21.C 36.D7.D 22.A 37.B8.C 23.C 38.B9.A 24.D 39.C10.D 25.A 40.C11.A 26.D 41.B12.B 27.C 42.C13.B 28.B 43.B14.C 29.A 44.C15.A 30.D 45.BPROBLEMS:1.A 11.A 21.A 31.B 41.C2.A 12.D 22.C 32.A 42.C3.B 13.C 23.A 33.B 43.B4.C 14.A24.C 34.D 44.A5.C 15.B 25.B 35.D 45.A6.D 16.D 26.D 36.C 46.B7.D 17.C 27.D 37.D 47.D8.B 18.C 28.C 38.A 48.D9.A 19.B 29.A 39.B 49.D10.A 20.D 30.A 40.A 50.B103BudgetingSuggested Answers and SolutionsSOLUTIONS:1. Answer:AThe amount of fxed costs in operating branches 10 warehouses isP400,000 (the fxed cost line intercepts the vertical axis).Total operating costs P2,900,000Less fxed costs400,000Total variable costs (10 warehouses) P2,500,000Variable costs per branch:P2,500,000 10 P 250,0002. Answer:ASales of M (2,900 x P9.50) P27,550Cost of goods sold (2,900 x P9.50) 19,430Gross proft 8,120Direct expenses selling (0.1 x 27,550) 2,755Separable income 5,3653. Answer:BFixed cost:1,000,000 x 0.4 400,000Variable cost:600,000/80,000 P7.50 per unitBudgeted overhead:400,000 + (100,000 x 7.50) P1,150,0004. Answer:CFebruary sales 20,000Finished goods inventory end 23,000 x 0.05 1,150Finished goods inventory beg ( 1,000)Budgeted production 20,150104BudgetingSuggested Answers and Solutions5. Answer:CBudgeted sales, First Quarter 120,000 unitsAdd Required Ending Finished goods:30% x 160,000 48,000 unitsTotal units required 168,000 unitsLess Beginning Finished goods 36,000 unitsBudgeted production in units 132,000 units6. Answer:DRaw materials required by June production:1,200 x 2 2,400Add:Ending materials inventory1,300 x 2 . 1.5 3,900Total materials required 6,300Deduct Beginning material inventory 2,400 x 1.5 3,600Budgeted materials purchase 2,7007. Answer:DAugust SeptemberSales 6,000 10,000End Finished goods inventory2,000 2,400Beg Finished goods inventory (1,200) (2,000)Budgeted production6,00010,400Required use of raw materials 21,400 31,200End raw materials 3,120Beg raw materials (2,040)Purchase of raw materials 21,480Peso purchase @ P15 330,3008. Answer:BMaterials required by June production 1,300 x 2 2,600Add Ending raw materials inventory1,600 x 2 x 0.5 1,600Total materials required 4,200105BudgetingSuggested Answers and SolutionsDeduct Beginning materials inventory 1,300 x 2 x 0.5 1,300Materials to be purchased 2,900106BudgetingSuggested Answers and Solutions9. Answer:ABudgeted sales 300,000Less decrease in Finished goods inventory 10,000Budgeted production 290,000Material Q required by production290,000 x 3 870,000Less decrease in Material Q inventory60,000 80,000 20,000Budgeted purchase in pounds, Material Q 850,00010. Answer:ACost of units sold(0.65 x P800,000) P520,000Add Desired ending inventory 140,000Total cost of goods available for sale 660,000Deduct Beginning inventory130,000Budgeted purchases P530,00011. Answer:ACost of goods sold P750,000 x 0.6 P450,000Add Ending InventoryP800,000 x 0.6 x 0.5 240,000Total available for sale P690,000Deduct Beginning inventory P450,000 x 0.5 225,000Budgeted purchases, February P465,00012. Answer:DCost of sales P120,000Add Desired ending inventory 42,000Total available for sale162,000Deduct Budgeted purchases 100,000Beginning inventory P62,000

107BudgetingSuggested Answers and Solutions108BudgetingSuggested Answers and Solutions13. Answer:CLL MM NNBudgeted production 622,000 622,000 622,000Requiredmaterialsperunit of product 0.50 1.00 1.2Materials required 311,000 622,000 746,400Unit cost P0.60P1.70 P1.00Peso amounts of materialsused by units produced P186,600 P1,057,400P746,400Budgeted sales in units 640,000Add Finished goods, end 90,000Total 730,000Deduct Finished goods, beginning 108,000Budgeted production 622,00014. Answer:ATotal payments for purchases in June P140,000Deduct payments applicable to purchase of: June (P100,000 x 0.6) P60,000 May(P200,000 x 0.30) 60,000 120,000Payments applicable to April purchase P20,000Credit purchase in April:P20,000 0.10 P200,00015. Answer:BMaterials required by production 500,000 x 2 1,000,000Increased in materials inventory (50,000 40,000)10,000Purchases 1,010,00016. Answer:D109BudgetingSuggested Answers and SolutionsRequired pounds by production 180,000Ending raw materials required 60,000Beginning raw materials ( 30,000 )Budgeted purchases 210,000110BudgetingSuggested Answers and Solutions17. Answer:CBeginning Inventory (8000 x 3.5) 28,000Required Purchases8,000Direct Materials Used for Production (8000 x 3) (24,000 )Desired Ending Inventory12,00018. Answer:CSales for three-month period:July 400,000August 400,000 x 1.05 420,000September 420,000 x 1.05 441,000Total 1,261,000Inventory, September 30(441,000 x 1.05 x 0.8) 370,440Total Requirements1,631,440Less July Inventory300,000Budgeted Production 1,331,44019. Answer:BTotal cash collections P57,000Deductions collections on September sales(P80,000 x 0.6) 48,000Collections applicable to July and August sales P9,000 Credit sales in July:P9,000 2 0.15 P30,00020. Answer:DCollections from:January sales (P860,000 x 0.8 x 0.75) P516,000December sales (January 1 Accounts) 299,000Collections of credit sales 815,000111BudgetingSuggested Answers and SolutionsCash sales(P860,000 x 0.2) 172,000Total cash received P987,000112BudgetingSuggested Answers and Solutions21. Answer:ACash from sale of:March 700 x 8,000 x 0.6 3,360,000February 1,000 x 8,000 x 0.3 2,400,000January600 x 8,000 x 0.09432,000 Total 6,192,00022. Answer:CCash sales (March)0.2 x P420,000 P84,000Collections of account sales: March sales:(P420,000 x 0.8 x 0.7) 235,200 February sales:(P300,000 x 0.8 x 0.25) 60,000 January sales:(P240,000 x 0.8 x .05) 9,600Total cash from sales P388,80023. Answer:ACollections sales of:June:P8,000 x 0.7 P5,600May:P7,000 x 0.3 2,100Total collections from sales P7,70024. Answer:CBeginning Cash P20,000Add:Cash collected on June's sales (P300,000 x .8 x .98) 235,200Cash collected on May's sales((P300,000/1.25) x .2) 48,000 283,200Total P303,200Less:Cash paid on June's purchases (P240,000 x .6 x .99)142,560Cash paid on May's purchases (P200,000 x .4)80,000222,560113BudgetingSuggested Answers and SolutionsEnding cash balance P80,640114BudgetingSuggested Answers and Solutions25. Answer:BOctober 90,000 x .95 P85,500November100,000 x .85 85,000December 85,000 x .70 59,500Fourth quarter sales collected in fourth quarterP230,00026. Answer:DCost of goods sold P1,680,000Deduct desired decrease in inventories70,000Budgeted purchases P1,610,000Add decrease in Accounts Payable150,000Budgeted payments for purchases P1,760,00027. Answer:DCash sales P70,000Collections from account sales: January(P340,000 x 0.60) 204,000 December (P50,000 x 30/40) 37,500 November 20,000Total cash receipts in January P331,50028. Answer:CGross receivable collected months salesNovember2,000,000 x .12P240,000October 1,800,000x .75 1,350,000September 1,600,000 x .06 96,000August1,900,000 x .0476,000 Total creditP1,762,000115BudgetingSuggested Answers and Solutions29. Answer:AThe balance of Accounts Receivable as of January 31, its frst month ofoperations, will increase by P400,000 because the frst collection onaccount sales will be in February.However, a question of how much increase in Accounts Receivable inFebruary will equal to the diference between the February credit salesand 70% of January sales.30. Answer:ACash balance, March 1 3,000Collections: (50,000 x 0.65) + (60,000 x 0.35) 53,500Payment for purchases (20,000 x 0.5) + (18,000 x 0.5) (19,000)Selling and administrative expenses (4,000)Loan and interest payments (25,000)Cash balance, March 31 8,50031. Answer:BThe balance of Accounts Receivable, based on the collection patternfor Liberal Sales Company, equals 40 percent of credit sales for thatmonth: P1,500,000 x 0.8 x 0.4 P480,00032. Answer:ANovember costs(P1,952,000 P288,000) x 0.75 P1,248,000October costs (P1,568,000 P288,000) x 0.25)320,000Total disbursementsP1,568,00033. Answer:BMaterials required by 2nd Quarters production 45,000 x 2.5 kgs. 112,500116BudgetingSuggested Answers and SolutionsAdd:Materials inventory, end: 40,000 x 2.5 x0.25 25.000Total materials required 137,500Less:Materials inventory, beginning:112,500 x 0.25 28,125Total budget purchases in kilograms 109,37534. Answer:DBudgeted sales 18,000Add Finished goods inventory, end 11,400Total 29,400Deduct Finished good inventory, beginning 15,000Budgeted production 14,400Raw materials required by production(14,400 x 6 0.9)6,000Desired Raw materials inventory end 24,400Total120,400Deduct Raw materials inventory, beginning21,000Budgeted purchase of raw materials99,40035. Answer:DUnder fexible budget, analysis should be based on actual levelachieved.Indirect labor cost per unit (P360,000 200,000 units) P1.80Flexible budget allowance:14,500 units x P1.80P26,10036. Answer:CJanuary FebruaryBudgeted sales 11,900 11,400Add: Ending inventory (130%) 14,820 15,600Total 26,720 27,000Less:Beginning inventory 15,470 14,820117BudgetingSuggested Answers and SolutionsBudgeted purchases (units) 11,250 12,180Unit purchase price200200Budgeted peso purchases P2,250,000 P2,436,000

Budgeted inventories:December 31 130% x 11,900 15,470January 31 130% x 11,400 14,820February 28 130% x 12,000 15,600March 31 130% x 12,200 15,860118BudgetingSuggested Answers and Solutions37. Answer:D Payments for:February purchases 54% x P2,436,000 P1,315,440January purchases 46% x P2,250,000 1,035,000Total payments for purchases P2,350,440Selling, general and administrative expenses:February:[(P3,420,000 x 0.15) P20,000]0.54266,220 January: [(P3,570,000 x 0.15) P20,000]0.46237,130Total cash disbursements P2,853,79038. Answer:ABillings of December 31:Collections with 3% discount: P3,630,000 x 0.6 x 0.97 P2,112,660Collections end of JanuaryP3,630,000 x 0.25907,500Billings of November 30:P3,540,000 x 0.09318,600Total collections P3,338,76039. Answer:BBudgeted March sales 12,000Add:Ending inventory units 15,860Total units required 27,860Less:Beginning inventory units 15,600Budgeted purchases in units, March 12,26040. Answer:APayments for purchases in the month of:December (0.2 x P120,000 x 0.6) P14,400January(0.2 x P160,000 x 0.4) 12,800Total January disbursements for purchases P27,200119BudgetingSuggested Answers and Solutions41. Answer:CPayments for purchases:May purchase (0.2 x P200,000 x 0.6) P24,000June purchase(0.2 x P220,000 x 0.4) 17,600Total 41,600Labor costs 60,000Fixed Overhead 30,000Interest payments 45,000Commission(0.03 x P1,020,000) 30,600 Total disbursementsP207,20042. Answer:CJune cash sales(P390,000 x 0.1) P39,000Collections from account sales: April sales(P390,000 x 0.9 x 0.7) 245,700May sales(P420,000 x 0.9 x 0.3) 113,400Total cash receipts, June P398,10043. Answer:BMarketable securities purchased on:June P5,600July 126,900Cumulative purchase of MS P132,50044. Answer:ACash Budget (P000)June July Aug SeptCash receipts P398.1 P404.9 P382.2 P374.9Cash disbursements 367.5 278.0 296.5 702.5Net cash infow (outfow) 30.6 126.9 85.7 ( 327.6)Beginning cash balance 25.0 50.0 50.0 50.0Cumulative cash balance 55.6 176.9 135.7 ( 277.6)M/S sold (purchased)- 5.6 - 126.9 - 85.7 218.2120BudgetingSuggested Answers and SolutionsCash loan 0.0 0.0 0.0 109.4Cash balance, end P50.0 P50.0 P50.0 P50.0121BudgetingSuggested Answers and SolutionsCash Receipts (P000)June July Aug SeptAccount sales (90%) P351.0 P315.0 P378.0 P369.0Cash sales P39.0 P35.0 P42.0 P41.0Collection of accounts First month(30%) 245.7 105.3 94.5 113.4 Second month (70%) 113.4 264.6 245.7 220.5Total P398.1 P404.9 P382.2 P374.9Cash Payments(P000)June July Aug SeptPurchases P210.0 P240.0 P320.0 P230.0First month (45%) P99.0 P94.5 P108.0 P144.0Second month (55%) 110.0 121.0 115.5 132.0Total purchases paid 209.0 215.5 223.5 276.0Labor 58.5 52.5 63.061.5General overhead 10.0 10.0 10.0 10.0Interest 35.0 35.0Cash dividend 25.0Taxes 30.0 30.0Purchase of equipt. 290.0Total payments P367.5 P278.0 P296.5 P702.545. Answer:AAugust salesBilled 8/20P350,000 x 18% P63,000 Billed 9/10P350,000 x 80% x 98%274,400Collections in Sept from Aug sales P337,40046. Answer:BRusson provides 25 percent of next months quantity sales.25% x P400,000 x 80% = P80,00047. Answer:DMay sales billed June 10250,000x18% P45,000122BudgetingSuggested Answers and SolutionsJune Sales: Billed June 20300,000 x 18%54,000 Billed July 10300,000 x .80 z .98 235,200July sales Billed July 20 P350,000 x .80 x .98P274,400July CollectionsP608,60048. Answer:DCash Balance, January 1P 88,000Cash from accounts receivablesNovember and December Sales 35,000January Sales 120,000 x .5 60,000P95,000Payment for purchases 72,000 x .97 (P 69,840)Expenses (24,000 5,000) (P 19,000)Cash balance, January 31 P94,16049. Answer:DSale of December P23,000January (120,000 x .3) P36,000February (110,000 x .5) P55,000Total P114,00050. Answer:BPayment for Purchases of January78,000 x .97 P75,660Expenses (24,200 - 5,000) P19,200Total P94,860123