Page 907 - Accounting Principles (A Business Perspective)

23. Budgeting for planning and control

Problem E Galaxy Lighting Company manufactures and sells lighting fixtures. Estimated sales for the next
three months are:
September $350,000
October 500,000
November 400,000
Sales for August were USD 400,000. All sales are on account. Galaxy Lighting Company estimates that 60 per
cent of the accounts receivable are collected in the month of sale with the remaining 40 per cent collected the
following month. The units sell for USD 30 each. The cash balance for September 1 is USD 100,000.
Generally, 60 per cent of purchases are due and payable in the month of purchase with the remainder due the
following month. Purchase cost per unit for materials is USD 18. The company maintains an end-of-the-month

inventory of 1,000 units plus 10 per cent of next month's unit sales.
Prepare a cash receipts schedule for September and October and a purchases budget for August, September, and
October.
Problem F Refer to the previous problem. In addition to the information given, selling and administrative
expenses paid in cash are USD 120,000 per month.
Prepare a monthly cash budget for September and October for Galaxy Lighting Company.

Alternate problems
Alternate problem A Cougars Company prepares monthly operating and financial budgets. Estimates of sales
in units are made for each month. Production is scheduled at a level high enough to take care of current needs and
to carry into each month one-half of the next month's unit sales. Direct materials, direct labor, and variable
manufacturing overhead are estimated at USD 12, USD 6, and USD 4 per unit, respectively. Total fixed
manufacturing overhead is budgeted at USD 480,000 per month. Sales for April, May, June, and July 2009 are
estimated at 100,000, 120,000, 160,000, and 120,000 units. The inventory at 2009 April 1, consists of 50,000

units with a cost of USD 28.80 per unit.
a. Prepare a schedule showing the budgeted production in units for April, May, and June 2009.
b. Prepare a schedule showing the budgeted cost of goods sold for the same three months assuming that the
FIFO method is used for inventories.
Alternate problem B Following is a summary of operating data of Bugs Company for the year 2008:
Sales $ 7,00,000
Cost of goods manufactured and
sold:
Direct materials $1,200,000
Direct labor 1,100,000
Variable manufacturing overhead 300,000
Fixed manufacturing overhead 800,000 3,400,000
Gross margin $ 3,600,000
Selling expenses:
Variable $ 300,000
Fixed 400,000 700,000
2,900,000
General and administrative
expenses:
Variable $ 100,000
Fixed 1,200,000 1,300,000
Net operating income $ 1,600,000

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