Chapter 9 Class Problem Extension
From Management Accounting:
Concepts, Techniques & Controversial Issues
Provided by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida
Chapter 9 Class Problem | Chapter 9 Main Page
Suppose the requirements for this problem were simply to prepare a budgeted income statement for March. You can do this with the answers to 1., 3., 7., 9. and 10 as follows:
| Budgeted Income Statement | ||
| 1. Sales (5,200)($250) | $1,300,000 | |
| Less Cash discounts: (1,300,000)(.9)(.8)(.01) | 9,360 | |
| (1,300,000)(.1)(.01) | 1,300 | 10,660 |
| Net Sales | 1,289,340 | |
| 7. Cost of Goods Sold: | ||
| At standard (5,200)($110) | $572,000 | |
| PPVV** (5,000 - 5,245*)($40) | -9,800 | 562,200 |
| Gross Profit | $727,140 | |
| 9. Less Selling & Adm. Exp. 50,000 + 50(5,200) | 310,000 | |
| 10. Less Bad Debts Expense (1,300,000)(.9)(.03) | 35,100 | |
| Net Income before taxes | $382,040 | |
| * 5,200 + .15(5,500) - .15(5,200) = 5,245 budgeted units to
be produced. ** PPVV = planned production volume variance. The overhead rate is based on 500 robot hours, or 5,000 units per month. Since the company plans to produce 5,245 units, there is a favorable planned production volume variance of $9,800 i.e., (5,000 - 5,245)($40). |
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See Figure 9-2 for a graphic view of PPVV concept.