EXERCISE 7.

6) Regional Laboratories SA, is a company dedicated to the manufacture of drugs and takes directly to pharmacies. This 2001 and currently manufactures three products: Dimetilxosalena (D), diyodohidroxiquinolena (Di) and zenofendicloropo

The general manager was hired as an expert advisor to prepare the master budget 2002. To this end it provides the followi

BALANCE
At December 31, 2001 ASSETS circulating cash customers Material inventory Finished Goods Inventory TOTAL CIRCULATING NO CIRCULANTING ground Plant and Equipment Accumulated Depreciation TOTAL NO CIRCULATING LIABILITIES SHORT TERM suppliers Notes payable Income tax payable LONG TERM Obligations payable

$ $ $ $ $

50,000 50,000 80,005 150,000 330,005

$ 550,000 $ 1,000,000 $ 50,000 $ 1,500,000

CAPITAL ACCOUNTANT Capital contributed Capital won

ASSETS TOTAL

$ 1,830,005

TOTAL LIABILITIES + EQUITY

MATERIALS Material A Material B Material C Labor

D 15 grs 6 grs 9 grs 3 hrs

PRODUCT REQUIREMENT DI 13 grs 7 grs 4 grs 1 hrs

The labor hour cost $ 10 the first half and $ 11 the second. The manufacturing overhead applied based on labor hours COST 1 semester 2semester Labor $ 10.00 $ 11.00

INFORMACIN DE INVENTARIOS Inv. Inicitial Inv. Final 1 Semester 2 Semester 10000 8000 15000 4000 5000 3000 10000 7000 5000 3000 5000 2000 Cost 1 Semester $ 2.00 $ 2.70 $ 4.00 -

CONCEPT Material A Material B Material C Product D PRoduct DI Product Z

Suppose that the initial inventories are equal at the end of the first half. No items in process inventory PRODUCTS Di 200.00 $ 220.00 $ 10000 uni 5000 uni 100.00 120.00 6000 uni 4000 uni

D Sale price 1st Semester Sale price of the 2nd Semester Planned Sales 1st Semester Planned Sales 2nd semester $ $

SELLING AND ADMINISTRATIVE EXPENSES depreciation Salaries and Wages Commissions several several Interest on obligations GASTOS DE FABRICACIN INDIRECTOS depreciation insurance maintenance maintenance energy energy several

$ $ $ $ $

10,000 200,000 5% projected Sales 6,000 1 semester 7,000 2 semester 30,000 annual

$ $ $ $ $ $ $

100,000 5,000 30,000 35,000 20,000 32,000 10,000

annual annual 1 semester 2 semester 1 semester 2 semester annual

additional data a)In 2002 it will acquire a new machine, valued at $ 50,000 and depreciation is not recognized 200 new vehicles = b) The rate of income tax is 35% $ 50,000

Income Tax = c) The profit sharing rate is 10% cast Uti =

35%

10%

d) In 2002 he charged all accounts receivable of 2001 ACCOUNTS RECEIVABLE 2001 customers e) In 2002 he paid all payables 2001 ACCOUNTS PAYABLE 2001 LIABILITIES SHORT TERM suppliers Notes payable LONG-TERM Obligations payable

50,000

$ $ $

50,000 100,000 150,000

f) In 2002 he paid only 60% of the value of purchased materials Payment purchased materials = 60% Payment purchased materials 2003 =

g) 90% of the 2002 sales will be charged in that period, the rest in 2003 SALES 2002 = SALES 2003 = h)It will pay the tax payable 2002 to 2001 ACCOUNTS PAYABLE 2001 BY income tax payable i) Suppose annual inflation of 10% annual inflation = 10% 90% 10% SALES total 2002 SALES total 2002

50,000

EXERCISE SOLUTION 7.6

Statement Cash Flow Balance Sheet

Arm the Sales Budget Arming the Production Budget Arm Budget Direct Depletion Arm Budget Raw Material Purchasing Direct Arm Budget Direct Labor Arm GIF Budget Arming the Operating Expense Budget Inventories Arm Budget

SALES BUDGET
Laboratorios Regionales S.A
I SEMESTER II SEMESTER D Di Z D 10000 uni 6000 uni 5000 uni 5000 uni $ 200.00 $ 100.00 $ 150.00 $ 220.00 $ 2,000,000 $ 600,000 $ 750,000 $ 1,100,000 $ 3,350,000 $ 5,680,000

SALES BUDGETED (*) SALE PRICE TOTAL TOTAL SEMESTER TOTAL ANNUAL

PRODUCTION BUDGET
Laboratorios Regionales S.A
I SEMESTER II SEMESTER

SALES BUDGETED (+) INV FINAL (-) INV INITIAL PRODUCTION

D 10000 uni 10000 uni -10000 uni 10000 uni

Di 6000 uni 5000 uni -5000 uni 6000 uni

Z 5000 uni 5000 uni -5000 uni 5000 uni

D 5000 uni 7000 uni -10000 uni 2000 uni

PRODUCTION ANNUAL

D 12000 uni

ANNUAL Di 8000 uni

BUDGET OF RAW MATERIAL REQUIREMENT

Laboratorios Regionales S.A
I SEMESTER RAW MATERIAL RAW A MATERIAL RAW B MATERIAL C 150000 uni 60000 uni 90000 uni 78000 uni 42000 uni 24000 uni 50000 uni 30000 uni 25000 uni 278000 uni 132000 uni 139000 uni $ 2.00 $ 2.70 $ 4.00 $ 556,000 $ 356,400 $ 556,000

D Di Z TOTAL COST BY KG TOTAL

MATERIALS PURCHASE BUDGET

Laboratorios Regionales S.A
I SEMESTER RAW MATERIALA RAW MATERIALB RAW MATERIAL C 278000 uni 132000 uni 139000 uni 10000 15000 5000 288000 uni 147000 uni 144000 uni -10000 -15000 -5000 278000 uni 132000 uni 139000 uni $ 2.00 $ 2.70 $ 4.00 $ 556,000 $ 356,400 $ 556,000

MATERIAL REQUIREMENT FINAL INVENTORY WANTED NEC TO BUY INITIAL INVENTORY TOTAL TO BUY COST PER KG COST OF PROCUREMENT

LABOR BUDGET
Laboratorios Regionales S.A
I SEMESTER D DI Z 10000 uni 6000 uni 5000 uni 3 hrs 1 hrs 2 hrs 30000 hrs 6000 hrs 10000 hrs $ 10.00 $ 10.00 $ 10.00 $ 300,000 $ 60,000 $ 100,000

REQUEST FOR PRODUCTION HRS REQUIRED BY PRODUCT TOTAL HOURS COST PER HOUR COST OF MOD TOTAL ANNUAL

OVERHEAD BUDGET PRODUCTION

Laboratorios Regionales S.A
depreciation insurance maintenance energy several TOTAL RATE OF APPLICATION = GIF TOTAL HRS MOD $ 232,000 58000 hrs RATE OF APPLICATION = $ 4.00 $ $ $ $ $ $ 100,000 5,000 65,000 52,000 10,000 232,000

RATE OF APPLICATION =

BUDGET AND ADMINISTRATIVE EXPENSES

Laboratorios Regionales S.A
depreciation Salaries and Wages Commissions several $ $ $ $ 10,000 200,000 284,000 13,000

Interest on obligations TOTAL

$ $

30,000 537,000

Commissions = Commissions =$

5% VENTAS PROYECTADAS 284,000

INVENTORY FINAL BUDGET

Laboratorios Regionales S.A
COST UNIT $ $ $ $ $ $ D 31.50 18.00 39.60 33.00 12.00 134.10 COST UNIT $ $ $ $ $ $ Di 27.30 21.00 17.60 11.00 4.00 80.90

RAW MATERIAL A RAW MATERIAL B RAW MATERIAL C MOD GIF TOTAL

BUDGET RAW MATERIAL INVENTORY AND FINISHED PRODUCTS

Laboratorios Regionales S.A
INV FINAL RAW MATERIALA RAW MATERIAL B RAW MATERIAL C D Di Z TOTAL 8000 4000 3000 7000 3000 2000 COST UNIT INV FINAL IN DLARES $ 2.10 $ 16,800 $ 3.00 $ 12,000 $ 4.40 $ 13,200 $ 134.10 $ 938,700 $ 80.90 $ 242,700 $ 91.00 $ 182,000 $ 1,405,400

BUDGET COST OF SALES

Laboratorios Regionales S.A
I SEMESTRE $ 1,468,400 II SEMESTRE 432,000

RAW MATERIAL REQUIRED

(+) OD HAND (+) EXPENSES IF (=) COST OF PRODUCTION (+) INV ART ORIGINAL ENDING (=) ENDED ART AVAILABLE (-) ART FINAL INVENTORY TERMIN (=) COST OF SALES BUDGETED

$ 460,000 $ 116,000 $ 2,044,400

$ $ $

132,000 116,000 680,000

STATEMENT BUDGETED
Laboratorios Regionales S.A
to December 31, 2002

SALES (-) Cost of sales (=) GROSS PROFIT (-) OPERATING EXPENSES (=) OPERATING INCOME (-) 15% JOB SHARING (=) TAXABLE (-) 22% INCOME TAX (=) NET INCOME

$ $ $ $ $ $ $ $ $

5,680,000 (1,511,000.00) 4,169,000 (537,000) 3,632,000 (544,800) 3,087,200 (679,184.00) 2,408,016.00

CASH FLOW STATEMENT BUDGETED

Laboratorios Regionales S.A
to December 31, 2002 OPENING BALANCE (+) INFLOW CHARGED SALES (90%) YEAR SALES TOTAL TICKET (=) AVAILABLE (-) OUT OF CASH PAYMENT OF MACHINERY CTS PAYMENT PAYABLE SUPPLIER TAX YEAR CURRENT YEAR TAX DIRECT LABOR GIF (WITHOUT DEPRECIATION) OPERATING EXPENSES (SIN depreciates) PAYMENT OF PURCHASES OF RAW MATERIAL (60%) TOTAL OUTPUT (=) CASH BALANCE

BALANCE
Laboratorios Regionales S.A
At December 31, 2001

ASSETS CURRENT cash customers Material inventory Term Art Inventory TOTAL CURRENT

$ 1,919,176 $ 568,000 $ 42,000 $ 1,363,400 $ 3,892,576

LIABILITIES SHORT TERM suppliers Notes payable

LONG-TERM

NO CURRENT ground Plant and Equipment Accumulated Depreciation TOTAL NON-CURRENT

Obligations payable $ 550,000 $ 1,050,000 $ (160,000) $ 1,440,000

EQUITY Capital contributed Capital won Contribution to capital fut

TOTAL ASSETS

$ 5,332,576

TOTAL LIABILITIES + EQUITY

d takes directly to pharmacies. This company began operations in uinolena (Di) and zenofendicloropotasio (Z).

2. To this end it provides the following information

otes payable come tax payable TOTAL SHORT TERM

$ $ $ $ $ $

50,000 100,000 50,000 200,000 150,000 350,000

bligations payable TOTAL LIABILITIES

APITAL ACCOUNTANT pital contributed TOTAL CAPITAL

$ $ $ $

1,390,380 80,625 1,480,005 1,830,005

OTAL LIABILITIES + EQUITY

CT REQUIREMENT DI 13 grs 7 grs 4 grs 1 hrs

Z 10 grs 6 grs 5 grs 2 hrs

d applied based on labor hours

TARIOS Cost 2 Semester $ 2.10 $ 3.00 $ 4.40 -

ocess inventory

CTS Z $ $ 150.00 150.00 5000 uni 5000 uni

ognized 200

yment purchased materials 2003 =

40%

es S.A
II SEMESTER Di Z 4000 uni 5000 uni $ 120.00 $ 150.00 $ 480,000 $ 750,000 $ 2,330,000

GET
II SEMESTER

es S.A

Di 4000 uni 3000 uni -5000 uni 2000 uni

Z 5000 uni 2000 uni -5000 uni 2000 uni

ANNUAL Z 7000 uni

REQUIREMENT
II SEMESTER RAW MATERIAL RAW A MATERIAL RAW B MATERIAL C 30000 uni 12000 uni 18000 uni 26000 uni 14000 uni 8000 uni 20000 uni 12000 uni 10000 uni 76000 uni 38000 uni 36000 uni $ 2.10 $ 3.00 $ 4.40 $ 159,600 $ 114,000 $ 158,400

es S.A

BUDGET
II SEMESTER RAW MATERIAL RAW A MATERIAL RAW B MATERIALC 76000 uni 38000 uni 36000 uni 8000 4000 3000 84000 uni 42000 uni 39000 uni -10000 -15000 -5000 74000 uni 27000 uni 34000 uni $ 2.10 $ 3.00 $ 4.40 $ 155,400 $ 81,000 $ 149,600

es S.A

T
II SEMESTER D DI 2000 uni 2000 uni 3 hrs 1 hrs 6000 hrs 2000 hrs 11.00 $ 11.00 $ 66,000 $ 22,000 $ $

es S.A

$ $

Z 2000 uni 2 hrs 4000 hrs 11.00 44,000 592,000

DUCTION

es S.A

IVE EXPENSES

es S.A

UDGET
COST UNIT $ $ $ $ $ $ Z 21.00 18.00 22.00 22.00 8.00 91.00

es S.A

ND FINISHED PRODUCTS
TOTAL INVENTORY

es S.A

Inventario $ 42,000 Final Mate prima Inventario $ 1,363,400 Final Prod Termi $ 1,405,400

ALES
II SEMESTRE TOTAL

es S.A

$ $ $ $ $

2,724,400.00 150,000.00 2,874,400.00 (1,363,400) 1,511,000.00

ETED

es S.A

BUDGETED

es S.A

2 $ $ 5,112,000 $ 50,000 $ $ $ 50,000 $ 150,000 $ 50,000 $ 679,184 $ 592,000 $ 132,000 $ 527,000 $ 1,112,640 $ $ (3,292,824) 1,919,176 5,162,000 5,212,000 50,000

es S.A

otes payable TOTAL SHORT TERM

$ $ $

741,760 544,800 1,286,560

bligations payable TOTAL LIABILITIES

$ 150,000 $

1,436,560

pital contributed

$ $ $ $ $

1,390,380 2,488,641 16,995 3,896,016 5,332,576

ontribution to capital fut TOTAL CAPITAL OTAL LIABILITIES + EQUITY