Management And Accounting Web

# 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

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).

See Figure 9-2 for a graphic view of PPVV concept.