Bright Services pays wages of a part-time employee. The ...

[lidoalex]

Bright Services pays wages of a part-time employee. The transaction would involve a
 a. debit to Wages Expense.
   b. debit to Cash.
   c. credit to Wages Payable.
   d. credit to Prepaid Expenses.

Question 2

Budget schedules for a manufacturer.
 
  Lame Specialties manufactures, among other things, woolen blankets for the athletic teams of the two local high schools. The company sews the blankets from fabric and sews on a logo patch purchased from the licensed logo store site. The teams are as follows:
 
   Knights, with red blankets and the Knights logo
   Raiders, with black blankets and the Raider logo
 
  Also, the black blankets are slightly larger than the red blankets.
 
  The budgeted direct-cost inputs for each product in 2014 are as follows:
 
  Unit data pertaining to the direct materials for March 2014 are as follows:
 
  Unit cost data for direct-cost inputs pertaining to February 2014 and March 2014 are as follows:
 
  Manufacturing overhead (both variable and fixed) is allocated to each blanket on the basis of budgeted direct manufacturing labor-hours per blanket. The budgeted variable manufacturing overhead rate for March 2014 is 16 per direct manufacturing labor-hour. The budgeted fixed manufacturing overhead for March 2014 is 14,640. Both variable and fixed manufacturing overhead costs are allocated to each unit of finished goods.
  Data relating to finished goods inventory for March 2014 are as follows:
 
  Budgeted sales for March 2014 are 130 units of the Knights blankets and 190 units of the Raiders blankets. The budgeted selling prices per unit in March 2014 are 229 for the Knights blankets and 296 for the Raiders blankets. Assume the following in your answer:
 
   Work-in-process inventories are negligible and ignored.
   Direct materials inventory and finished goods inventory are costed using the FIFO method.
   Unit costs of direct materials purchased and finished goods are constant in March 2014.
 
  Required:
  1. Prepare the following budgets for March 2014:
  a. Revenues budget
  b. Production budget in units
  c. Direct material usage budget and direct material purchases budget
  d. Direct manufacturing labor budget
  e. Manufacturing overhead budget
  f. Ending inventories budget (direct materials and finished goods)
  g. Cost of goods sold budget
  2. Suppose Lame Specialties decides to incorporate continuous improvement into its budgeting process. Describe two areas where it could incorporate continuous improvement into the budget schedules in requirement 1.

Question 3

Quick Lab Company received cash on account from patients. The transaction would involve a
 a. credit to Income from Services.
   b. debit to Income from Services.
   c. credit to Accounts Receivable.
   d. credit to Cash.

[joewallace]

Answer to Question 1

a

Answer to Question 2

1a. Revenues Budget
Knights Blankets Raiders Blankets
Total
Units sold 130 190
Selling price  229  296
Budgeted revenues 29,770 56,240 86,010

b. Production Budget in Units
Knights Blankets Raiders Blankets
Budgeted unit sales 130 190
Add budgeted ending fin. goods inventory 22 27
Total requirements 152 217
Deduct beginning fin. goods inventory 12 17
Budgeted production 140 200

c. Direct Materials Usage Budget (units)
Red wool Black wool Knights logo patches Raiders logo patches
Total
Knights blankets:
1. Budgeted input per f.g. unit 4  1  
2. Budgeted production 140  140  
3. Budgeted usage (1  2) 560  140  

Raiders blankets:
4. Budgeted input per f.g. unit  5  1
5. Budgeted production  200  200
6. Budgeted usage (4  5)  1,000  200
7. Total direct materials
usage (3 + 6) 560 1,000 140 200

Direct Materials Cost Budget
8. Beginning inventory 35 15 45 60
9. Unit price (FIFO)  9  12  7  6
10. Cost of DM used from beginning inventory (8  9)  315  180 315  360  1,170
11. Materials to be used from purchases (7   525 985 95 140
12. Cost of DM in March  10  11  7  8
13. Cost of DM purchased and used in March (11  12) 5,250 10,835 665 1,120 17,870
14. Direct materials to be used (10 + 13) 5,565 11,015 980 1,480 19,040

Direct Materials Purchases Budget

Red wool Black wool Knights logos Raiders logos
Total
Budgeted usage
(from line 7) 560 1,000 140 200
Add target ending inventory 25 25 25 25
Total requirements 585 1,025 165 225
Deduct beginning inventory 35 15 45 60
Total DM purchases 550 1,010 120 165
Purchase price (March)  10  11  7  8
Total purchases 5,500 11,110 840 1,320 18,770

d. Direct Manufacturing Labor Budget

Budgeted Direct
Manuf. Labor-
Units Hours per Total Hourly
Produced Output Unit Hours Rate Total
Knights blankets 140 3 420 27 11,340
Raiders blankets 200 4 800 27 21,600
1,220 32,940

e. Manufacturing Overhead Budget

Variable manufacturing overhead costs (1,220  16) 19,520
Fixed manufacturing overhead costs 14,640
Total manufacturing overhead costs 34,160

Total manuf. overhead cost per hour = 34,160  1,220 = 28 per direct manufacturing labor-hour
Fixed manuf. overhead cost per hour =  14,640  1,220 = 12 per direct manufacturing labor-hour

f. Computation of unit costs of ending inventory of finished goods
Knights Blankets Raiders Blankets
Direct materials
Red wool (10  4, 0)  40  0
Black wool (11  0, 5) 0 55
Knights logos (7  1, 0) 7 0
Raiders logos (8  0, 1) 0 8
Direct manufacturing labor (27  3, 4) 81 108
Manufacturing overhead
Variable (16  3, 4) 48 64
Fixed (12  3, 4) 36 48
Total manufacturing cost 212 283

Ending Inventories Budget
Cost per Unit Units Total
Direct Materials
Red wool  10 25  250
Black wool 11 25 275
Knights logo patches 7 25 175
Raiders logo patches 8 25 200
900
Finished Goods
Knights blankets 212 22 4,664
Raiders blankets 283 27 7,641
12,305
Total 13,205

g. Cost of goods sold budget
Beginning fin. goods inventory, March 1, 2014 (1,440 + 2,550)  3,990
Direct materials used (from Dir. materials cost budget) 19,040
Direct manufacturing labor (Dir. manuf. labor budget) 32,940
Manufacturing overhead (Manuf. overhead budget) 34,160
Cost of goods manufactured 86,140
Cost of goods available for sale 90,130
Deduct ending fin. goods inventory, March 31, 2014 (Inventories budget) 12,305
Cost of goods sold 77,825

2. Areas where continuous improvement might be incorporated into the budgeting process:
(a) Direct materials. Either an improvement in usage or price could be budgeted. For example, the budgeted usage amounts for the fabric could be related to the maximum improvement (current usage  minimum possible usage) of yards of fabric for either blanket. It may also be feasible to decrease the price paid, particularly with quantity discounts on things like the logo patches.
(b) Direct manufacturing labor. The budgeted usage of 3 hours/4 hours could be continuously revised on a monthly basis. Similarly, the manufacturing labor cost per hour of 27 could be continuously revised down. The former appears more feasible than the latter.
(c) Variable manufacturing overhead. By budgeting more efficient use of the allocation base, a signal is given for continuous improvement. A second approach is to budget continuous improvement in the budgeted variable overhead cost per unit of the allocation base.
(d) Fixed manufacturing overhead. The approach here is to budget for reductions in the year-to-year amounts of fixed overhead. If these costs are appropriately classified as fixed, then they are more difficult to adjust down on a monthly basis.

Answer to Question 3

c