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ACC 206 Week 4_balance sheet of Watson

Company_Complete A+ Answer
ACC 206 Week 4_balance sheet of Watson Company_Complete A+ Answer
ACC 206 Week 4 Assignment
Please complete the following exercises below in either Excel or a word document (but
must be single document). You must show your work where appropriate (leaving the
calculations within Excel cells is acceptable). Save the document, and submit it in the
appropriate week using the Assignment Submission button. Actual Manufacturing
Variable Overheads Expenditure 508400
1. Comprehensive budgeting
The balance sheet of Watson Company as of December 31, 20X1, follows. Actual hours
x Standard Variable Overhead Rate per hour 359800
WATSON COMPANY 148600
Balance Sheet
December 31, 12X1 Idle Capacity
Assets 359800
Cash $4,595 1800000
Accounts receivable 10,000
Finished goods (575 units x $7.00) 4,025
Direct materials (2,760 units x $0.50) 1,380
Plant & equipment $50,000
Less: Accumulated depreciation 10,000 40,000 3,59,800
Total assets $60,000 1,50,000 150000
Liabilities & Stockholders Equity 5,09,800
Accounts payable to suppliers $14,000 5,08,400
Common stock $25,000 1,400 Favorable
Retained earnings 21,000 46,000
Total liabilities &. stockholders equity $60,000 (21,500) Unfav
The following information has been extracted from the firms accounting records:
1. All sales are made on account at $20 per unit. Sixty percent of the sales are collected
in the month of sale; the remaining 40% are collected in the following month.
Forecasted sales for the first five months of 20X2 are: January, 1,500 units,- February,
1,600 units; March, 1,800 units; April, 2,000 units; May, 2,100 units.
2. Management wants to maintain the finished goods inventory at 30% of the following
months sales. 5700 Favorbale
3. Watson uses four units of direct material in each finished unit. The direct material
price has been stable and is expected to remain so over the next six months.
Management wants to maintain the ending direct materials inventory at 60% of the
following months production needs.
4. Seventy percent of all purchases are paid in the month of purchase; the remaining
30% are paid in the subsequent month.
5. Watsons product requires 30 minutes of direct labor time. Each hour of direct labor
costs $7.
Instructions: -14400 Unfav
a. Rounding computations to the nearest dollar, prepare the following for January

through March:
1) Sales budget
2) Schedule of cash collections
3) Production budget
4) Direct material purchases budget
5) Schedule of cash disbursements for material purchases
6) Direct labor budget
b. Determine the balances in the following accounts as of March 31:
1) Accounts Receivable
2) Direct Materials
3) Accounts Payable
2. Basic flexible budgeting
Centron, Inc., has the following budgeted production costs:
Direct materials $0.40 per unit
Direct labor 1.80 per unit
Variable factory overhead 2.20 per unit
Fixed factory overhead
Supervision $24,000
Maintenance 18,000
Other 12,000
The company normally manufactures between 20,000 and 25,000 units each quarter.
Should output exceed 25,000 units, maintenance and other fixed costs are expected to
increase by $6,000 and $4,500, respectively.
During the recent quarter ended March 31, Centron produced 25,500 units and
incurred the following costs:
Direct Materials $10,710
Direct Labor 47,175
Variable factory overhead 51,940
Fixed factory overhead
Supervision 24,500
Maintenance 23,700
Other 16,800
Total production costs $174,825
Instructions:
a. Prepare a flexible budget for 20,000, 22,500, and 25,000 units of activity.
b. Was Centrons experience in the quarter cited better or worse than anticipated?
Prepare an appropriate performance report and explain your answer.
c. Explain the benefit of using flexible budgets (as opposed to static budgets) in the
measurement of performance.
3. Straightforward variance analysis
Arrow Enterprises uses a standard costing system. The standard cost sheet for product
no. 549 follows.
Direct materials: 4 units @ $6.50 $26.00
Direct labor: 8 hours @ $8.50 68
Variable factory overhead: 8 hours @ $7.00 56
Fixed factory overhead: 8 hours @ 2.5 20
Total standard cost per unit $170.00
The following information pertains to activity for December:
1. Direct materials acquired during the month amounted to 26,350 units at $6.40 per
unit. All materials were consumed in operations.

2. Arrow incurred an average wage rate of $8.75 for 51,400 hours of activity.
3. Total overhead incurred amounted to $508,400. Budgeted fixed overhead totals $1.8
million and is spread evenly throughout the year.
4. Actual production amounted to 6,500 completed units.
Instructions:
a. Compute Arrows direct material variances.
b. Compute Arrows direct labor variances.
c. Compute Arrows variances for factory overhead.

ACC 206 Week 4_balance sheet of Watson

Company_Complete A+ Answer