Accounting Business Reporting for Decision Making

CHAPTER 9 Budgeting 415

supplies increased about 2 per cent during 2018. The prices of cleaning supplies were relatively

constant across the two years.

Transportation is provided by the nurses, who are reimbursed 20 cents per kilometre. The

clinic’s general overhead is allocated to programs on the basis of budgeted program salaries.

Required

a. Compare the results for 2017 and 2018. Does it appear that the financial performance has

improved in 2018?

b. If you were the general manager of the centre, what would you like to discuss with the head

of the visiting nurse program concerning the 2018 results? Explain.

c. If you were the head of the visiting nurse program, how would you respond to the concerns

raised in (b) above?

9.55 Production, labour, materials and sales budgets    LO4

Bullen & Company makes and sells upmarket carry bags for laptop computers. John Crane is res-

ponsible for preparing Bullen & Company’s master budget, and he has assembled the data below

for 2018.

The direct labour rate includes wages, all employee-related benefits, and the employer’s share

of payroll tax. Labour-saving machinery will be fully operational by March. Also, as of 1 March,

the company’s enterprise agreement calls for an increase in direct labour wages; this has been

included in the direct labour rate.

Bullen & Company expects to have 10 000 bags in inventory at 31 December 2017, and has a

policy of carrying 50 per cent of the following month’s projected sales in inventory.

2018

January February March April

Estimated unit sales

Sales price per unit

Direct labour hours per unit

Direct labour hourly rate

Direct materials cost per unit

20 000

$80

4.0

$15

$10

24 000

$80

4.0

$15

$10

16 000

$75

3.5

$16

$10

18 000

$75

3.5

$16

$10

Required

Prepare the following budgets for Bullen & Company for the first quarter of 2018. Be sure to show

supporting calculations.

a. Production budget

b. Direct labour budget

c. Direct materials budget

d. Sales budget

9.56 Purchase, cost of sales, and cash collection budgets    LO4, 5

The Zeal Company operates antique and second-hand goods stores throughout Victoria. Such stores

are currently very popular and sales are increasing each month. It has budgeted the following sales

for the indicated months.

June July August

Sales on account

Cash sales

$2 730 000

523 000

$2 830 000

533 000

$2 930 000

543 000

Total sales $3 253 000 $3 363 000 $3 473 000

Zeal Company’s success in this specialty market is due in large part to the extension of credit

terms and the budgeting techniques implemented by the firm’s owner, Barbara Zeal. All merchan-

dise is marked up to sell at its invoice cost plus 25 per cent. Stated differently, cost is 80 per cent

of selling price. Merchandise inventories at the beginning of each month are 30 per cent of that