Worksheet For Chapter Four

Jimma University
College of Business and Economics

Department of Accounting and Finance
M.Sc. Accounting and Finance Program
Model Worksheet for Chapter Four Master Budget
1. Sales, production, direct materials, direct labor, and factory overhead budgets
YOTO Tire Company
Yoto Tire Company’s budgeted unit sales for the year 2011 were:
Passenger car tires . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Truck tires . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,500
The budgeted selling price for truck tires was $300 per tire, and that for passenger car
tires was $90 per tire. The beginning finished goods inventories were expected to be 2,500
truck tires and 6,000 passenger tires, for a total cost of $400,510, with desired ending
inventories at 2,000 and 5,000, respectively, and a total cost of $326,478. There was no
anticipated beginning or ending work in process inventory for either type of tire.
The standard materials quantities for each type of tire were as follows:
Truck Passenger Car
Rubber . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 35 lb 15 lb
Steel belts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... .. 4.5 lb 2.0 lb
The purchase prices of rubber and steel were $3 and $2 per pound, respectively. The
desired ending inventories for rubber and steel were 60,000 and 6,000 pounds,
respectively. The estimated beginning inventories for rubber and steel were 75,000 and
January 30, 2021
7,500 pounds, respectively. The direct labor hours required for each type of tire were as
follows:
Modeling Department Finishing Department
Truck tire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 0.20 0.10
Passenger car tire . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 0.10 0.05
The direct labor rate for each department is as follows:
Molding Department . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . $13 per hour
Finishing Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15 per hour
Budgeted factory overhead costs for 2011 were as follows:
Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $170,560
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . 158,800
Depreciation of building and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . ………… 98,320
Power and light . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $553,680
Required:
Prepare each of the following budgets for Yoto for the year ended 2011:
a. Sales budget
b. Production budget
c. Direct material budget
d. Direct labor budget
e. Factory overhead budget
f. Cost of goods sold budget
2. Prepare Budgeted Financial Statements: Rhodes, Inc., is a fast-growing start-up firm
that manufactures bicycles. The following income statement is available for July:
January 30, 2021
Revenues (200 units @ $750 per unit) $150,000
Less: Manufacturing costs
Variable costs 21,840
Depreciation (fixed) 22,950
Less:
Marketing and administrative costs
Fixed costs (cash) 56,340
Depreciation (fixed) 19,050
Total costs $120,180
Operating profits $ 29,820
Sales volume is expected to increase by 20 percent in August, but the sales price is
expected to fall 10 percent. Variable manufacturing costs are expected to increase by 3
percent per unit in August. In addition to these cost changes, variable manufacturing
costs also will change with sales volume. Marketing and administrative cash costs are
expected to increase by 10 percent. Rhodes operates on a cash basis and maintains no
inventories. Depreciation is fixed and should remain unchanged over the next three
years.
Required
Prepare a budgeted income statement for August.
January 30, 2021

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Jimma University

College of Business and Economics

YOTO Tire Company

Passenger car tires . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000

Truck tires . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,500

Truck Passenger Car

Steel belts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... .. 4.5 lb 2.0 lb

Truck tire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 0.20 0.10

Passenger car tire . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 0.10 0.05

The direct labor rate for each department is as follows:

Molding Department . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . $13 per hour

Finishing Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15 per hour

Budgeted factory overhead costs for 2011 were as follows:

Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $170,560

Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . 158,800

Depreciation of building and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . ………… 98,320

Power and light . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,000

c. Direct material budget

d. Direct labor budget

e. Factory overhead budget

f. Cost of goods sold budget

2. Prepare Budgeted Financial Statements: Rhodes, Inc., is a fast-growing start-up firm

expected to fall 10 percent. Variable manufacturing costs are expected to increase by 3

expected to increase by 10 percent. Rhodes operates on a cash basis and maintains no

Prepare a budgeted income statement for August.

January 30, 2021

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