Oleans.com , Thumbtack Office Supply, Java Corporation

E22-19 : OLEANS.COM

Consider the following June actual ending balances and July 31, 2012, budgeted amounts for Oleans.com:

a. June 30 inventory balance, $17,750 

b. July payments for inventory, $4,300 

c. July payments of accounts payable and accrued liabilities, $8,200 

d. June 30 accounts payable balance, $10,600

e. June 30 furniture and fixtures balance, $34,500; accumulated depreciation balance, $29,830

f. June 30 equity, $28,360 

g. July depreciation expense, $900 

h. Cost of goods sold, 50% of sales

i. Other July expenses, including income tax, total $6,000, paid in cash 

j. June 30 cash balance, $11,400 

k. July budgeted credit sales, $12,700

l. June 30 accounts receivable balance, $5,140 

m. July cash receipts, $14,200

 

Requirement 

Prepare a budgeted balance sheet.

  

P22-22A: THUMBTACK OFFICE SUPPLY 

Thumbtack’s

March 31, 2012

, budgeted balance sheet follows:

Thumtack Office Supply 

Budgeted Balance Sheet 

March 31, 2012

Assets Liabilities 

Current Assets: Current Liabilities: 

Cash 18,000 Accounts Payable 12,500

Accounts receivable 12,000 Salary and commissions payable 1,400

Inventory 16,000 Total liabilities 13,900

Prepaid Insurance 2,200 

Total current assets 48,200 Stockholders’ Equity 

Common stock 16,000

Plant assets: Retained earnings 33,300

Equipment and fixtures 45,000 Total stockholders’ equity 49,300

Less: Accumulated depreciation 30,000 

Total plant assets 15,000 

Total Assets $63,200 Total liabilities & Stockholders’ Equity $63,200 

 

The budget committee of Thumbtack Office Supply has assembled the following data.

a. Sales in April were $40,000. You forecast that monthly sales will increase 2% over April’s sales in May. June’s sales will increase 4% over April’s sales. July’s sales will increase 20% over April’s sales. Collections are 80% in the month of sale and 20% in the month following sale.

b. Thumbtack maintains inventory of $11,000 plus 25% of the COGS budgeted for the following month. COGS = 50% of sales revenue. Purchases are paid 30% in the month of purchase and 70% in the month following the purchase.

c. Monthly salaries amount to $7,000. Sales commissions equal 5% of sales for that month. Salaries and commissions are paid 30% in the month incurred and 70% in the following month.

d. Other monthly expenses are as follows:

Rent expense 2,400 paid as incurred 

Depreciation expense 200 

Insurance expense 100 expiration of prepaid amount 

Income tax 20% of operating income, paid as incurred

 

Requirements

1. Prepare Thumbtack’s sales budget for April and May, 2012. Round all amounts to the nearest $1. 

2. Prepare Thumbtack’s inventory, purchases, and cost of goods sold budget for April and May. 

3. Prepare Thumbtack’s operating expenses budget for April and May. 

4. Prepare Thumbtack’s budgeted income statement for April and May.

 

P23-28A : JAVA 

Java manufactures coffee mugs that it sells to other companies for customizing with their own logos. Java prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 60,200 coffee mugs per month: 

Direct materials (0.2 lbs @ $0.25 per lb) 0.05 

Direct labor (3 minutes @ $0.12 per minute) 0.36 

Variable (3 minutes @ $0.05 per minute) 0.15 

Fixed (3 minutes @ $0.14 per minute) 0.42 0.57 

Total cost per coffee mug $0.98 

Actual cost and production information for July 2012 follow:

 

a. Actual production and sales were 62,900 coffee mugs. 

b. Actual direct materials usage was 10,000 lbs., at an actual price of $0.17 per lb.

c. Actual direct labor usage was 202,000 minutes at a total cost of $30,300.

d. Actual overhead cost was $10,000 variable and $30,500 fixed. 

e. Marketing and administrative costs were $115,000.

 Requirements

1. Compute the price and efficiency variances for direct materials and direct labor.

2. Journalize the usage of direct materials and the assignment of direct labor, including the related variances.

3. For manufacturing overhead, compute the variable overhead spending and efficiency variances and the fixed overhead spending and volume variances. 

4. Journalize the actual manufacturing overhead and the applied manufacturing overhead. Journalize the movement of all production from WIP. Journalize the closing of the manufacturing overhead account. 

5. Java intentionally hired more-skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise