亨格瑞管理会计英文第15版练习答案07

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

CHAPTER 7

COVERAGE OF LEARNING OBJECTIVES

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

CHAPTER 7

Introduction to Budgets and Preparing the Master Budget

1.

Exhibit I

RAPIDBUY ELECTRONICS, INC.

Mall of America Store Budgeted Income Statement

For the Three Months Ending August 31, 20X8

Sales

Cost of goods sold (.62 × $300,000) Gross profit

Operating expenses:

Salaries, wages, commissions $60,000 Other expenses 12,000 Depreciation

1,500 Rent, taxes and other fixed expenses Income from operations. Interest expense* Net income

* See schedule g for calculation of interest.

$300,000 $114,000

$ 7,500

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

RAPIDBUY ELECTRONICS, INC.

Mall of America Store

Cash Budget

For the Three Months Ending August 31, 20X8

Beginning cash balance

$ 5,800 $ 5,600 Minimum cash balance desired (a) Available cash balance

Cash receipts & disbursements: Collections from customers (schedule b)

$ 75,200 $121,400 Payments for merchandise (schedule d)

(86,800) (49,600) Fixtures (purchased in May) (11,000) - Payments for operating expenses (schedule f) (b) Net cash receipts & disbursements

$(67,200) $ 41,600 Excess (deficiency) of cash before financing (a + b) Financing:

Borrowing, at beginning of period $ 67,000

$ - Repayment, at end of period - (41,000)

Interest, 10% per annum (c) Total cash increase (decrease) from financing

(d) Ending cash balance (beginning balance + b + c)

* See schedule g

$ 5,079

$ 90,800 (49,600)

- $ 11,000

$ - (10,000)

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

RAPIDBUY ELECTRONICS, INC.

Mall of America Store Budgeted Balance Sheet August 31, 20X8

Cash (Exhibit II) $ 5,862 Accounts payable $ 37,200 Accounts receivable* 86,400 Notes payable Merchandise inventory Total current liabilities $ 53,200 Total current assets $129,462 Net fixed assets: Owners' equity: $33,600 less $102,200 plus net depreciation of $1,500 income of $6,162 Total assets Total equities

*July sales, 20% × 90% × $80,000 $ 14,400 August sales, 100% × 90% × $80,000 Accounts receivable ** See schedule g Credit sales (90%) $126,000 $72,000 $72,000 $270,000 Cash sales (10%) Total sales (to Exhibit I) Cash sales $ 14,000 $ 8,000 $ 8,000 On accounts receivable from: April sales 10,800 - - May sales 50,400 12,600 - June sales - 100,800 25,200 July sales Total collections (to Exhibit II)

Desired purchases: 62% × next month's sales $86,800 Last month's purchases (to Exhibit II)

$49,600 $86,800

$49,600 $49,600

$37,200 $49,600

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

Accounts payable, August 31, 2008 (62% × September sales - to Exhibit III) $37,200 Cost of goods sold (to Exhibit I) $86,800 $49,600 $49,600

Salaries, wages, commissions $28,000 $16,000 $16,000 $60,000 Other Variable expenses 5,600 3,200 3,200 12,000 Fixed expenses 11,000 11,000 11,000 33,000 Depreciation Total operating expenses

Variable expenses $33,600 $19,200 $19,200 Fixed expenses Total payments for operating expenses

Beginning balance $67,000 $67,558 $26,000 Monthly interest expense @ 10% Ending balance before repayment 68,121 26,217 Principal repayment (from

statement of receipts and disbursements) (41,000) (10,000) Interest payment Ending balance

2. This is an example of the classic short-term, self-liquidating loan. The need for such a loan often arises because of the seasonal nature of a business. The basic source of cash is proceeds from sales to customers. In times of peak sales, there is a lag

between the sale and the collection of the cash, yet the payroll and suppliers must be paid in cash right away. When the cash is collected, it in turn may be used to repay the loan. The amount of the loan and the timing of the repayment are heavily

dependent on the credit terms that pertain to both the purchasing and selling functions of the business.

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

1. 2.

(60-120 min.) $ refers to Australian dollars.

See Exhibits I, II, and III and supporting schedules a, b, c, d.

The cash budget and balance sheet clearly show the benefits of moving to just-in-time purchasing (though the transition would rarely be accomplished as easily as this example suggests). However, the company would be no better off if it left much of its capital tied up in cash -- it has merely substituted one asset for

another. At a minimum, the excess cash should be in an interest bearing account -- the interest earned or forgone is one of the costs of inventory.

$148,800 30,000 $156,200 $206,200

$168,000 74,400

$91,200 84,000 $ 24,000 $100,000 Total sales (100% on credit)

60% of current month's sales 30% of previous month's sales

10% of second previous month's sales Total collections

Desired ending inventory Cost of goods sold Total needed

Beginning inventory Purchases

$ 24,000* $148,000 $ 24,000 $164,000 * Actual ending January (and beginning February) inventory level is $32,200, as inventory levels are drawn down toward desired level of $24,000.

100% of previous month's purchases March 31 accounts payable

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

WALLABY KITE Cash Budget

For the Three Months Ending March 31, 20X2

Cash balance, beginning $ 20,000 $ 20,400 Minimum cash balance desired

(a) Available cash balance

Cash receipts and disbursements: Collections from customers

(Schedule b) 188,800 252,400 Payments for merchandise (Schedule d) (142,200) - Rent (32,200) (1,000) Wages and salaries (60,000) (60,000) Miscellaneous expenses (10,000) (10,000)

Dividends (6,000) - Purchase of fixtures

(b) Net cash receipts & disbursements $ (61,600) $181,400 Excess (deficiency) of cash before financing (a + b) Financing:

Borrowing, at beginning of period $ 62,000

$ - Repayment, at end of period - (62,000) Simple interest, 10% monthly (c) Total cash increase (decrease) from financing

(d) Cash balance, end (beginning balance + c + b)

$138,767

200,000 (131,800) (1,000) (60,000) (10,000)

$ (14,800)

$ -

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

WALLABY KITE Budgeted Income Statement

For the Three Months Ending March 31, 20X2

Sales (Schedule a)

Cost of goods sold (Schedule c) Gross margin

Operating expenses:

Rent*

$ 67,000 Wages and salaries 180,000 Depreciation. 3,000 Insurance 1,500 Miscellaneous

Net income from operations Interest expense Net income

*(January-March sales less $40,000) × .10 plus 3 × $1,000

$680,000 $340,000

$ 58,500

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

WALLABY KITE Budgeted Balance Sheet

March 31, 20X2

Current assets: Cash (Exhibit I)

$123,967 Accounts receivable*

88,800 Merchandise inventory (Schedule c) 24,000 Unexpired insurance

Fixed assets, net: $50,000 + $12,000 - $3,000 Total assets

Liabilities:

Accounts payable (Schedule d) $76,000 Rent payable. 64,000 Dividends payable Stockholders' equity**

Total liabilities and stockholders' equity.

*February sales (.10 × $280,000) plus March sales (.40 × $152,000) = $88,800 **Balance, December 31, 20X1 $102,800 Add: Net income Total $160,267 Less: Dividends paid Balance, March 31, 20X2

$241,267

$146,000

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

Budgeting 1) provides an opportunity for managers to reevaluate existing activities and evaluate possible new activities, 2) compels managers to think ahead by formalizing their responsibilities for planning, 3) aids managers in communicating objectives to units and coordinating actions across the organization, and 4) provides benchmarks to evaluate subsequent performance. Budgeting is primarily attention directing because it helps managers to focus on operating or financial problems early enough for effective planning or action. Strategic planning covers no specific time period, is quite general, and often is not built around financial statements. Long-range planning usually has a 5- or 10-year horizon and consists of financial statements without much detail. Budgeting usually has a horizon of one year or less, and consists of financial statements with much detail. Continuous budgets add a month (or quarter) in the future as the month (or quarter) just ended is dropped. Therefore, the continuous budget provides a continually updated budget looking twelve months ahead. When the new month (or quarter) is added, the budget for the remainder of the current year may also be revised. When companies revise the budgets for the remainder of the current year, they usually compare subsequent results to the original budget (a fixed target) in addition to comparing them to the latest revised budget. If the measures used to reward employees in the performance evaluation system are not aligned with the goals of the company, the incentives from the evaluation system may lead employees to take actions that conflict with the interests of the company. Lower-level managers bias their forecasts to create budgetary slack or padding. Upper-level managers adjust for this bias in creating a revised budget. Therefore, lower-level managers introduce additional bias to compensate for the adjustment that will be made by upper-level managers, and upper-level managers introduce additional

adjustments for the additional bias. This cycle can quickly destroy the potential benefits of budgets. A manager may make short-run decisions to increase profits that are not in the company’s best long-run interests, such as offering customers excessively favorable credit terms or cutting discretionary expenditures such as R&D and advertising, trading future sales for current profits. In the extreme, the manager might choose to falsely report inflated profits. First, by moving this year's sales into next year or moving next year's expenses into this year, the manager ensures a higher level of reported profit (and probably a higher bonus) next year. Second, by decreasing this year's income, the manager avoids

ratcheting up of performance expectations in setting the bonus target for the next year.

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

Budgeted performance is better than past performance as a basis for judging current performance because the budget contains no hidden inefficiencies and can be founded on current rather than past economic conditions.

Budgets are especially important in environments that are rapidly changing. They force managers to look forward and plan for change. Budgets force analysis of the factors that are bringing about the changes.

No. When budgeting in done correctly, it is an important aid to managers. Managers need time to plan and coordinate their various activities. Budgeting forces them to take time from the day-to-day problems and focus on longer-term issues.

The sales forecast is the starting point for budgeting because all other operating activities of the company are affected by the volume of sales.

The sales forecast is influenced by past patterns of sales, estimates made by the sales force, general economic conditions, competitors' actions, changes in prices, market research studies, and advertising and sales promotion plans.

An operating budget is used as a guide for production and sales and it focuses on the income statement. A financial budget is used to control the receipt and disbursement of funds and it focuses on the statement of cash receipts and disbursements.

Operating expenses are costs charged to the income statement in a particular period. Some operating expenses may be associated with the sales of the period, and others may be costs of being in business for the period. Disbursements for these

operating expenses, that is, the cash payments for them, may come in a previous period (assets purchased in one period and depreciated over future periods) or a future period (wages accrued in a period but paid in the next period), as well as during the period.

A cash budget is an attempt to monitor and regulate the flow of cash in optimum fashion.

Budgeting will be effective only if it is accepted by those managers who are responsible for controlling costs. Since their performance will be measured against the budget, they must be educated in the assumptions underlying the budget and convinced of its objectivity and relevance.

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

Both functional and activity-based master budgets begin with the forecasted demand for products or services. However, whereas functional budgets then determine the inventory, materials, labor, and overhead budgets, the activity-based budget focuses on determining the demand for key activities. This demand is measured by the cost-driver unit for each activity. Then the budgeted resource consumption rates are used to set the budgets for resources such as materials, labor, and overhead. The focus on activities and consumption rates in activity-based budgeting is what managers believe offers value from an operational control perspective.

No. Financial planning models are mathematical statements of the relationships in the organization among all the operating and financial activities and of other major internal and external factors that may affect the financial results of decisions. But

financial planning models are only as good as the assumptions and inputs used to build them. Managers must understand the models to provide appropriate assumptions and inputs. If managers do not understand budgeting, using financial planning models can result in GIGO (garbage in, garbage out).

Setting up the master budget on a spreadsheet is time-consuming -- the first time. However, if it is done properly, with maximum flexibility, then the ease of subsequent use probably will more than offset that initial cost. Ultimately, though, the master budget system must meet the cost-benefit test. Improved budgeting systems are only worthwhile if they offer net benefits. Preparing and revising the master budget of a large company just would not be feasible without the aid of a computer.

Spreadsheets can be used to make a mathematical model of an organization. It may take much effort to create the model, but once it is in place it can be used over and over again with minimal effort. Such a model is especially useful for sensitivity analysis, which is the asking of "what if" questions.

Budgets that are used primarily for limiting spending provide incentives for “game playing.” Accurate forecasts and estimates give way to strategies designed to

avoid budget cuts or to justify increased budgets. Budgets should have a much larger role in the effective and efficient management of an organization. A budget should be a

decision tool. It helps managers project the results of their decisions, thereby aiding them in making the right decisions. It also provides a base for adapting to change. Anything that results in loss of budget accuracy will limit the decision usefulness of the budget.

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

Accurate sales forecasts are essential to budgeting. Sales personnel are often “closest to the action” and therefore in the best position to make accurate forecasts. They are in direct contact with customers, and often they are the first to notice trends. A

central staff function, such as market research, can set parameters for forecasting and give some common ground rules. But usually it is important to get sales personnel heavily involved because they have information that no one else has. Most importantly, the more involved sales personnel are, the more committed they will be to achieving budgeted sales goals.

The planning that comes through a good budget process is important to all segments of an organization. Segments with both revenues and expenses can show a budgeted profit. Other segments that have only expenses, such as a research and

development department, still have to plan their operations. It is important to predict the resources needed to meet the segment’s objectives so that required resources can be

obtained. Budgeting provides a formal channel for communication between the segment and top management about what activities the segment is to undertake.

A key to employee acceptance of a budget is participation. Budgets created with the active participation of all affected employees are generally more effective than

budgets imposed on subordinates. If a budget is to help direct future activities, employees must accept the budget. Acceptance means believing that the budget reflects a desired future path for the organization. If a manager has been a participant in determining the future path – that is, helped develop the budget – he or she is more likely to accept it as a desirable objective.

(5 min.)

1. a. Capital budget 2. Sales budget (or operating budget) b. Cash budget 3. Continuous (rolling) c. Budgeted balance sheet 4. Overall goals of the organization

(10-15 min.)

Music Masters will be using cash until the beginning of 2010, at which time cash receipts will begin to exceed cash disbursements. Therefore, the following amount of venture capital is needed to carry the firm to the beginning of 2010: Initial capital investment $380,000 First year cash outflow (12 × $35,000) 420,000 Second year cash outflow [12 × ($35,000 - $30,000)] Total

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

1.

(10-15 min.)

Cost + (.25 × Cost) = Sales

1.25 × Cost = $2,100,000

Cost = $1,680,000

2.

Use the familiar identity, Beginning Inventory plus Purchases equals Cost of Goods Sold plus Ending Inventory. To compute required purchases, compute the inventory needed (Cost of Goods Sold plus Ending Inventory) and then subtract the amount that will come from Beginning Inventory:

$1,760,000 $2,326,400

Cost of goods sold ($2,200,000 1.25) Add: Target ending inventory .30 × ($2,360,000 1.25) Cost of goods needed Less: Beginning inventory .30 × ($2,200,000 1.25) Required Purchases

(25-30 min.)

1. July collections include: May sales billed June 5, .18 × .5 × $700,000 June sales billed June 20, .18 × .5 × $800,000 June sales billed July 5, .80 × .5 × $800,000 × .97 July sales billed July 20, .80 × .5 × $950,000 × .97 Total

$ 63,000

72,000 310,400 2. .60 × .25 × $800,000 = $120,000

3.

Ending inventory, .60 × .25 × $950,000

Merchandise needed for current month's sales, .60 × $800,000 Total needs

Beginning inventory, .60 × .25 × $800,000 Required Purchases

$142,500 622,500 $135,000 705,000

$ 90,000 630,000 4.

Ending inventory, .60 × .25 × next month's sales Merchandise needed for current month's sales, .60 × sales Total needs

Beginning inventory, .60 × .25 × current month's sales Required Purchases

Payments, 1/2 of current purchases, 1/2 of preceding month's purchases, .5 × $562,500 + .5 × $495,000

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

(15 min.) This illustration is straightforward and follows the chapter example closely. All amounts are in dollars. Credit sales, 30% 129,000 132,000 150,000 Cash sales, 70% Total sales, 100% Cash sales this month 301,000 308,000 350,000

100% of last month's credit sales Total collections (15-25 min.) This problem is slightly more complex than 7-30. All amounts are in thousands of Japanese yen. Credit sales, 80% 160,000 176,000 192,000 Cash sales, 20% Total sales Cash sales this month 40,000 44,000 48,000 50% of this month's credit sales 80,000 88,000 96,000 40% of last month's credit sales 62,400 64,000 70,400 10% of next-to-last month's credit sales Total collections

(10-15 min.)

Collections from: January sales: $360,000 × 12% $ 43,200 February sales: $400,000 × 10% × 99% 39,600 February sales: $400,000 × 25% 100,000 March sales: $450,000 × 50% × 98% Total cash collections

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

chapter. All amounts are in dollars. Some students need to be reminded that merchandise inventories are carried at cost, not at selling prices.

RENOVATION LIGHTING SUPPLY Purchases and Disbursements Budgets

Ending inventory 220,000 200,000 Cost of goods sold, 60% of sales Total needed 484,000 410,000 Beginning inventory Purchases

10% of this month's purchases 20,900 19,000 80% of last month's purchases 144,000* 167,200 10% of second-last month's purchases *.80 × 180,000 = 144,000 **.10 × 250,000 = 25,000

240,000 420,000 22,000 152,000

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

closely, except for requirement 1. All amounts are in euros.

1. 210,000 - [15,000 + .9 × (.6 × 300,000)] = 210,000 - [15,000 + .9(180,000)] = 210,000 - 177,000 = 33,000 2. LINKENHEIM GMBH

Purchases and Disbursements Budgets

Ending inventory* 171,600 198,600 Cost of goods sold, 60% of sales Total needed 351,600 372,600 Beginning inventory Purchases 80% of last month's purchases 120,000 113,280 20% of this month's purchases Disbursements for purchases *Inventory targets, end of month: June: 15,000 + .9 × (0.6 × 290,000) = 15,000 + .9 × (174,000) = 171,600 July: 15,000 + .9 × (0.6 × 340,000) = 15,000 + .9 × (204,000) = 198,600 August: 15,000 + .9 × (0.6 × 400,000) = 15,000 + .9 × (240,000) = 231,000

231,000 435,000 160,800

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

(20 min.) This is a straightforward exercise.

CARLSON COMPANY

Cash Budget

For the Month Ended June 30, 20X4

(in thousands)

Beginning Cash, May 31, 20X4 $ 15 Cash Receipts: Collections from customers from: June sales (.80 × $290) $232 May sales (.5 × 24)* 12 April sales Total cash available during June $279 Cash Disbursements: On accounts payable of May 31 $145 On June purchases, .25 × $192 48 Wages 36 Utilities 5 Advertising 10 Office expenses Ending Cash, June 30, 20X4

*$24,000 = 20% of May sales, 10% of which or half the remainder will be collected in June. All of April's remaining sales will be collected in June.

查尔斯亨格瑞管理会计英文版第15版北京大学出版社练习答案07

(20-25 min.) The collections from March sales are a bit tricky. Note that the receivable balance from March sales at March 31 is $450,000; therefore, four fifths (because 40/50 will be collected in April and 10/50 will be collected in May) will be received in April.

MERRILL NEWS AND GIFTS

Budgeted Statement of Cash Receipts and Disbursements

For the Month Ending April 30, 20X7

Cash balance, March 31, 20X7 Add receipts, collections from customers: From April sales, 1/2 × $1,000,000 $500,000 From March sales, 4/5 × $450,000 360,000 From February sales Total cash available Less disbursements: Merchandise purchases, $450,000 × 40% $180,000 Payment on accounts payable 460,000 Payrolls 90,000 Insurance premium 1,500 Other expenses 45,000 Repayment of loan and interest Cash balance, April 30, 20X7

$ 100,000 $1,040,000

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