Exercise 4 (Direct Labor Budget)
Requirement 1
Assuming that the direct labor workforce is adjusted each quarter, the direct
labor budget would be:
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter Year
Units to be produced ................................ 5,000 4,400 4,500 4,900 18,800
Direct labor time per unit (hours) ................................ × 0.40 × 0.40 × 0.40 × 0.40 × 0.40
Total direct labor hours needed ................................ 2,000 1,760 1,800 1,960 7,520
Direct labor cost per hour ................................ × P11.00 × P11.00 × P11.00 × P11.00 × P11.00
Total direct labor cost ................................ P 22,000 P 19,360 P 19,800 P 21,560 P 82,720
Chapter 15 Functional and Activity-Based Budgeting
15-6
Requirement 2
Assuming that the direct labor workforce is not adjusted each quarter and
that overtime wages are paid, the direct labor budget would be:
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter Year
Units to be produced................................ 5,000 4,400 4,500 4,900 18,800
Direct labor time per unit (hours) ................................ × 0.40 × 0.40 × 0.40 × 0.40 × 0.40
Total direct labor hours needed................................ 2,000 1,760 1,800 1,960 7,520
Regular hours paid................................ 1,800 1,800 1,800 1,800 7,200
Overtime hours paid................................ 200 - - 160 360
Wages for regular hours
(@ P11.00 per hour)................................ P19,800 P19,800 P19,800 P19,800 P79,200
Overtime wages
(@ P11.00 per hour × 1.5)................................ 3,300 - - 2,640 5,940
Total direct labor cost................................ P23,100 P19,800 P19,800 P22,440 P85,140
Exercise 5 (Manufacturing Overhead Budget)
Requirement 1
Kiko Corporation
Manufacturing Overhead Budget
st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter Year
Budgeted direct labor-hours................................ 5,000 4,800 5,200 5,400 20,400
Variable overhead rate................................x P1.75 x P1.75 x P1.75 x P1.75 x P1.75
Variable manufacturing overhead................................ P 8,750 P 8,400 P 9,100 P 9,450 P 35,700
Fixed manufacturing overhead ................................ 35,000 35,000 35,000 35,000 140,000
Total manufacturing overhead ................................ 43,750 43,400 44,100 44,450 175,700
Less depreciation ................................................................ 15,000 15,000 15,000 15,000 60,000
Cash disbursements for
manufacturing overhead................................ P28,750 P28,400 P29,100 P29,450 P115,700
Requirement 2
Total budgeted manufacturing overhead for the year (a)................................ P175,700
Total budgeted direct labor-hours for the year (b) ................................20,400
Predetermined overhead rate for the year (a) ÷ (b) ................................ P 8.61
Functional and Activity-Based Budgeting Chapter 15
15-7
Exercise 6 (Selling and Administrative Budget)
Helene Company
Selling and Administrative Expense Budget
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter Year
Budgeted unit sales................................12,000 14,000 11,000 10,000 47,000
Variable selling and
administrative expense per
unit................................................................ x P2.75 x P2.75 x P2.75 x P2.75 x P2.75
Variable expense................................ P33,000 P 38,500 P 30,250 P 27,500 P129,250
Fixed selling and administrative
expenses:
Advertising................................................................ 12,000 12,000 12,000 12,000 48,000
Executive salaries................................40,000 40,000 40,000 40,000 160,000
Insurance ................................................................6,000 6,000 12,000
Property taxes................................ 6,000 6,000
Depreciation ................................ 16,000 16,000 16,000 16,000 64,000
Total fixed selling and
administrative expenses................................ 68,000 74,000 74,000 74,000 290,000
Total selling and administrative
expenses................................................................ 101,000 112,500 104,250 101,500 419,250
Less depreciation ................................ 16,000 16,000 16,000 16,000 64,000
Cash disbursements for selling
and administrative expenses................................ P 85,000 P 96,500 P 88,250 P 85,500 P355,250
Exercise 7 (Cash Budget Analysis)
Quarter (000 omitted)
1 2 3 4 Year
Cash balance, beginning ................................ P 9 * P 5 P 5 P 5 P 9
Add collections from customers................................ 76 90 125 * 100 391 *
Total cash available................................85 * 95 130 105 400
Less disbursements:
Purchase of inventory ................................ 40 * 58 * 36 32 * 166
Operating expenses................................ 36 42 * 54 * 48 180 *
Equipment purchases................................ 10 * 8 * 8 * 10 36 *
Dividends................................................................ 2 * 2 * 2 * 2 * 8
Total disbursements ................................88 110 * 100 92 390
Excess (deficiency) of cash
available over disbursements................................ (3)* (15) 30 * 13 10
