A business pays weekly wages of 20,000 on Friday for a five-day ...

[berenicecastro]

A business pays weekly wages of 20,000 on Friday for a five-day week ending on that day. If the fiscal period ends on Wednesday, the adjusting entry is
 a. debit Wages Expense, 12,000; credit Drawing, 12,000.
  b. debit Wages Expense, 12,000; credit Wages Payable, 12,000.
  c. debit Drawing, 12,000; credit Wages Payable, 12,000.
  d. debit Wages Payable, 12,000; credit Wages Expense, 12,000.
  e. none of these.

Question 2

Comprehensive budgeting problem; activity-based costing, operating and financial budgets.
 
  Tyva makes a very popular undyed cloth sandal in one style, but in Regular and Deluxe. The Regular sandals have cloth soles and the Deluxe sandals have cloth-covered wooden soles. Tyva is preparing its budget for June 2015 and has estimated sales based on past experience.
  Other information for the month of June follows:
 
  Tyva accounts for direct materials using a FIFO cost flow assumption.
 
  Tyva uses a FIFO cost flow assumption for finished goods inventory.
   All the sandals are made in batches of 50 pairs of sandals. Tyva incurs manufacturing overhead costs, marketing and general administration, and shipping costs. Besides materials and labor, manufacturing costs include setup, processing, and inspection costs. Tyva ships 40 pairs of sandals per shipment. Tyva uses activity-based costing and has classified all overhead costs for the month of June as shown in the following chart:
 
   Required:
  1. Prepare each of the following for June:
  a. Revenues budget
  b. Production budget in units
  c. Direct material usage budget and direct material purchases budget in both units and dollars; round to dollars
  d. Direct manufacturing labor cost budget
  e. Manufacturing overhead cost budgets for setup, processing, and inspection activities
  f. Budgeted unit cost of ending finished goods inventory and ending inventories budget
  g. Cost of goods sold budget
  h. Marketing and general administration and shipping costs budget
  2. Tyva's balance sheet for May 31 follows.
 
  Use the balance sheet and the following information to prepare a cash budget for Tyva for June. Round to dollars.
   All sales are on account; 60 are collected in the month of the sale, 38 are collected the following month, and 2 are never collected and written off as bad debts.
   All purchases of materials are on account. Tyva pays for 80 of purchases in the month of purchase and 20 in the following month.
   All other costs are paid in the month incurred, including the declaration and payment of a 15,000 cash dividend in June.
   Tyva is making monthly interest payments of 0.5 (6 per year) on a 150,000 long-term loan.
   Tyva plans to pay the 10,800 of taxes owed as of May 31 in the month of June. Income tax expense for June is zero.
   30 of processing, setup, and inspection costs and 10 of marketing and general administration and shipping costs are depreciation.
  3. Prepare a budgeted income statement for June and a budgeted balance sheet for Tyva as of June 30, 2015.

[Joc]

Answer to Question 1

B

Answer to Question 2

1a.
Revenues Budget
For the Month of June, 2015

Units Selling Price Total Revenues
Regular 2,000 120 240,000
Deluxe 3,000 195 585,000
Total 825,000

b.
Production Budget
For the Month of June, 2015

Product
Regular Deluxe
Budgeted unit sales 2,000 3,000
Add: target ending finished goods inventory 400 600
Total required units 2,400 3,600
Deduct: beginning finished goods inventory 250 650
Units of finished goods to be produced 2,150 2,950

c.
Direct Material Usage Budget in Quantity and Dollars
For the Month of June, 2015

Material
Cloth Wood Total
Physical Units Budget
Direct materials required for
Regular (2,150 units  1.3 yd.; 0 b.f.) 2,795 yds. 0 b.f.
Deluxe (2,950 units  1.5 yds.; 2 b.f.) 4,425 yds. 5,900 b.f.
Total quantity of direct materials to be used 7,220 yds. 5,900 b.f.

Cost Budget
Available from beginning direct materials inventory
(under a FIFO cost-flow assumption)
 3,219  6,060
To be purchased this period
Cloth: (7,220 yd.  610 yd.)  5.25 per yd. 34,703
Wood: (5,900  800)  7.50 per b. f. 38,250
Direct materials to be used this period 37,922 44,310 82,232

Direct Materials Purchases Budget
For the Month of June, 2015

Material
Cloth Wood Total
Physical Units Budget
To be used in production 7,220 yds. 5,900 ft
Add: Target ending direct material inventory 386 yds. 295 ft
Total requirements 7,606 yds. 6,195 ft
Deduct: beginning direct material inventory 610 yds. 800 ft
Purchases to be made 6,996 yds. 5,395 ft

Cost Budget
Cloth: (6,996 yds.  5.25 per yd.) 36,729
Wood: (5,395 ft  7.50 per b.f.) ______ 40,463
Total 36,729 40,463 77,192

d.
Direct Manufacturing Labor Costs Budget
For the Month of June, 2015

Output Units Direct Manufacturing Total Hourly Wage Total
Produced Labor-Hours per Unit Hours Rate
Regular 2,150 5 10,750 15 161,250
Deluxe 2,950 7 20,650 15 309,750
Total 31,400 471,000

e.
Manufacturing Overhead Costs Budget
For the Month of June 2015
Total
Machine setup
(Regular 43 batches1 2 hrs./batch + Deluxe 59 batches2 3 hrs./batch) 18/hour
 4,734
Processing (31,400 DMLH 1.80)
56,520
Inspection (5,100 pairs 1.35 per pair)
6,885
Total 68,139

1Regular: 2,150 pairs  50 pairs per batch = 43; 2Deluxe: 2,950 pairs  50 pairs per batch = 59

f.
Unit Costs of Ending Finished Goods Inventory
For the Month of June, 2015
Regular Deluxe
Cost per
Unit of Input Input per
Unit of Output Total Input per
Unit of Output Total
Cloth  5.25 1.3 yd  6.83 1.5 yd  7.88
Wood 7.50 0 b.f. 0.00 2 b.f. 15.00
Direct manufacturing labor 15.00 5 hr. 75.00 7 hrs. 105.00
Machine setup 18.00 0.04 hr. 1 0.72 0.06 hr1 1.08
Processing 1.80 5 hrs 9.00 7 hrs 12.60
Inspection 1.35 1 pair 1.35 1 pair 1.35
Total 92.90 142.91

1 2 hours per setup  50 pairs per batch = 0.04 hr. per unit;
3 hours per setup  50 pairs per batch = 0.06 hr. per unit.

Ending Inventories Budget
June, 2015

Quantity Cost per unit Total
Direct Materials
Cloth 386 yards 5.25 2,026.50
Wood 295 b.f. 7.50 2,212.50  4,239

Finished goods
Regular 400  92.90 37,160
Deluxe 600 142.91 85,746 122,906
Total ending inventory 127,145

g.
Cost of Goods Sold Budget
For the Month of June, 2015
Beginning finished goods inventory, June 1 (23,250 + 92,625) 115,875
Direct materials used (requirement c)  82,232
Direct manufacturing labor (requirement d) 471,000
Manufacturing overhead (requirement e) 68,139
Cost of goods manufactured 621,371
Cost of goods available for sale 737,246
Deduct ending finished goods inventory, June 30 (requirement f) 122,906
Cost of goods sold 614,340

h.
Nonmanufacturing Costs Budget
For the Month of June, 2015
Total
Marketing and general administration
8 825,000
66,000
Shipping
(5,000 pairs  40 pairs per shipment) 15
1,875
Total 67,875
2.
Cash Budget
June 30, 2015
Cash balance, June 1 (from Balance Sheet)  9,435
Add receipts
Collections from May accounts receivable 307,800
Collections from June accounts receivable
(825,000 60)
495,000

Total collection from customers 802,800
Total cash available for needs (x) 812,235
Deduct cash disbursements
Direct material purchases in May  15,600
Direct material purchases in June
(77,192 80)
61,754
Direct manufacturing labor 471,000
Manufacturing overhead
(68,139 70 because 30 is depreciation)
47,697
Nonmanufacturing costs
(67,875 90 because 10 is depreciation)
61,088
Taxes
Dividends 10,800
15,000
Total disbursements (y) 682,939
Financing
Interest at 6 (150,000 6 1  12) (z)
 750
Ending cash balance, June 30 (x)  (y)  (z) 128,546

3.
Budgeted Income Statement
For the Month of June, 2015
Revenues 825,000
Bad debt expense (825,000 2)
16,500
Net revenues 808,500
Cost of goods sold 614,340
Gross margin 194,160
Operating (nonmanufacturing) costs 67,875
Interest expense (for June) 750 68,625
Net income 125,535

Budgeted Balance Sheet
June 30, 2015

Assets
Cash  128,546
Accounts receivable (825,000 40)
330,000
Less: allowance for doubtful accounts 16,500 313,500
Inventories
Direct materials  4,239
Finished goods 122,906 127,145

Fixed assets 870,000
Less: accumulated depreciation
(136,335 + 68,139 30 + 67,875 10))
163,564 706,436
Total assets 1,275,627

Liabilities and Equity
Accounts payable (77,192 20)
 15,438
Interest payable 750
Long-term debt 150,000
Common stock 300,000
Retained earnings (698,904 + 125,53515,000)) 809,439
Total liabilities and equity 1,275,627