ACCT 2332 PROJECT 2 (2014)

Required:
1) (5 pts) Construct Harry’s cash budget for the 3 months April, May, and June, and the total for the 2nd quarter.
Fixed overhead expenses requiring the use of cash may be grouped together as a single line item called “fixed overhead”. Variable overhead items may be grouped together as a single line item called “variable overhead”.
Sales revenue in February
Sales Revenue in March
Purchases in March

4,050,000
4,150,000
1,350,000

CASH BUDGET
April
Units sold
Collected from February sale
Collected From March sale
Collected From April sale
Collected From May sale
Collected From June sale
Total Collected

May
180,000

June
200,000

Total
210,000

PAYMENTS
For March purchases
For April purchases
For May purchases
For June purchases
Labor costs
Variable Overhead
Fixed Overhead
Selling and administrative
Total Payments
Collections - Payments

2) (5 pts) Construct Harry’s contribution margin format budgeted income statement for the 3 months April, May, and June and the total for the 2nd quarter. Fixed overhead expenses maybe grouped together as fixed overhead. Variable overhead expenses maybe grouped together as variable overhead.

BUDGETED
INCOME
STATEMENT
Sales Revenues
Variable costs
Materials
Labor
Overhead
Total variable costs
Contribution Margin
Fixed production Cost
Fixed Selling and Admin
Net Income

April

May

June

Total

3) (Optional: 2 bonus pts) Explain why Harry is facing a cash flow problem in May even though his business is profitable.

4) (5 pts) During April Harry actually produced and sold 175,000 widgets. Actual sales revenues were $4,342,000. Actual costs were as detailed in the table below. Complete the table by constructing a flexible budget and performance report including variances for April based on 175,000 widgets.

Cost Item

Actual results

Sales Revenues

$4,342,000

Direct Materials

$1,515,625

Direct Labor

$881,436

Supplies

$166,288

Electric Power

$701,354

Indirect Labor

$339,272

Salaries and Supervision

$175,549

Maintenance

$37,336

Insurance

$12,000

Permits and license fees

$68,000

Factory depreciation

$70,000

Other Overhead expenses

$33,173

Total Production
Expenses
Total Selling &
Administrative Expenses

$4,000,033

Total Expenses

$4,329,486

Operating Income

$329,453

$12,514

Flexible Budget
for 175,000
units

Flexible Budget
Variance

5) (Optional: 2 bonus pts) Write a brief report explaining the most important reasons why Harry’s profits were different from the amount projected in the master budget.

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    ACCT 2332 PROJECT 2 (2014) Solution

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