Cost Accounting (14th Edition)

ASSIGNMENT MATERIAL 225
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 processing and setup 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 costs budget
2. Borkenstick’s balance sheet for May 31 follows. Use it and the following information to prepare a cash
budget for Borkenstick 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. Borkenstick 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 $10,000 cash
dividend in June.
Borkenstick is making monthly interest payments of 0.5% (6% per year) on a $100,000 long term loan.
Borkenstick plans to pay the $7,200 of taxes owed as of May 31 in the month of June. Income tax
expense for June is zero.
30% of processing and setup costs, and 10% of marketing and general administration costs
are depreciation.
Required
Borkenstick
Balance Sheet
as of May 31
Assets
Cash $ 6,290
Accounts receivable $216,000
Less: Allowance for bad debts ƒƒ10,800 205,200
Inventories
Direct materials 6,186
Finished goods 77,250
Fixed assets $580,000
Less: Accumulated depreciation ƒƒ90,890 ƒ489,110
Total assets $784,036
Liabilities and Equity
Accounts payable $ 10,400
Taxes payable 7,200
Interest payable 500
Long-term debt 100,000
Common stock 200,000
Retained earnings ƒ465,936
Total liabilities and equity $784,036
3. Prepare a budgeted income statement for June and a budgeted balance sheet for Borkenstick as of
June 30.