E20-2 Zeller Electronics Inc. produces and sells two models of pocket calculators, XQ- 103 and XQ-104. The calculators sell for $12 and $25, respectively. Because of the intense competition Zeller faces, management budgets sales semiannually. Its projections for the first 2 quarters of 2010 are as follows. Unit Sales Product Quarter 1 Quarter 2 XQ-103 20,000 25,000 XQ-104 12,000 15,000 No changes in selling prices are anticipated. Instructions Prepare a sales budget for the 2 quarters ending June 30, 2010.

List the products and show for each quarter and for the 6 months, units, selling price, and total sales by product and in total. Answer ZELLER ELECTRONICS INC. Sales Budget For the Six Months Ending June 30, 2010 Quarter 1 Product Units Selling Price Total Sales XQ-103 20,000 $12 $240,000 XQ-104 12,000 $25 $300,000 Totals 32,000 $540,000 Quarter 2 XQ-103 25,000 $12 $300,000 XQ-104 15,000 $25 $375,000 Totals 40,000 $675,000 Six Months XQ-103 45,000 $12 $540,000 XQ-104 27,000 $25 $675,000 Totals 72,000 $1,215,000

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E20-5 Moreno Industries has adopted the following production budget for the first 4 months of 2011. Month Units Month Units January 10,000 March 5,000 February 8,000 April 4,000 Each unit requires 3 pounds of raw materials costing $2 per pound. On December 31, 2010, the ending raw materials inventory was 9,000 pounds. Management wants to have a raw materials inventory at the end of the month equal to 30% of next month’s production requirements. Instructions Prepare a direct materials purchases budget by month for the first quarter. Answer Moreno Industries

Direct Materials Purchases Budget For the Quarter Ending March 31, 2010 JanuaryFebruaryMarch Units to be Produced1000080005000 Direct Materials per Unit333 Total Pounds Needed for Production300002400015000 Add: Desired Ending Direct Materials (Pounds)720045003600 Total Materials Required372002850018600 Less: Beginning Direct Materials (Pounds) 900072004500 Direct Materials Purchases282002130014100 Cost per Pounds$2 $2 $2 Total Cost of Direct Materials Purchases$56,400 $42,600 $28,200 BE21-4 Hannon Company expects to produce 1,200,000 units of Product XX in 2010.

Monthly production is expected to range from 80,000 to 120,000 units. Budgeted variable manufacturing costs per unit are: direct materials $4, direct labor $6, and overhead $8. Budgeted fixed manufacturing costs per unit for depreciation are $2 and for supervision are $1. Prepare a flexible manufacturing budget for the relevant range value using 20,000 unit increments. Answer Hannon Company Monthly Flexible Manufacturing Budget For the Year 2010 Activity level Finished Units Variable Costs Direct Materials ($4) Direct Labor ($6) Overhead ($8) 80,000 $ 320,000 480,000 640,000 100,000 400,000 600,000 800,000 120,000 $ 480,000 720,000 960,000 Total Variable costs($18) $1,440,000 $1,800,000 $2,160,000 Fixed Costs Depreciation (1) Supervision (2) Total Fixed Costs200,000 100,000 300,000200,000 100,000 300,000200,000 100,000 300,000 Total Costs $1,740,000 $2,100,000 $2,460,000 (1)$2 x 1,200,000/12 (2) $2 x 1,200,000/12 E22-5

The standard cost of Product B manufactured by Mateo Company includes three units of direct materials at $5. 00 per unit. During June, 28,000 units of direct materials are purchased at a cost of $4. 0 per unit, and 28,000 units of direct materials are used to produce 9,000 units of Product B. Instructions (a) Compute the total materials variance and the price and quantity variances. (b) Repeat (a), assuming the purchase price is $5. 20 and the quantity purchased and used is 26,200 units.

Answer (a) Total materials variance: = (AQ X AP) - (SQ X SP) = (28,000 X $4. 70) - (27,000 X $5. 00) = $131,600 - $135,000 = $3,400 Favorable *9,000 X 3 Materials price variance: = (AQ X AP) - (AQ X SP) = (28,000 X $4. 70) - (28,000 X $5. 00) = $131,600 - $140,000 $8,400 Favorable Materials quantity variance: = (AQ X SP) - (SQ X SP) = (28,000 X $5. 00) - (27,000 X $5. 00) = $140,000 - $135,000 = $5,000 Unfavorable (b) Total materials variance: = (AQ X AP) - (SQ X SP) = (26,200 X $5. 20) - (27,000 X $5. 00) = $136,240 - $135,000 = $1,240 Unfavorable Materials price variance: = (AQ X AP) - (AQ X SP) = (26,200 X $5. 20) - (26,200 X $5. 00) = $136,240 - $131,000 = $5,240 Unfavorable Materials quantity variance: = (AQ X SP) - (SQ X SP) = (26,200 X $5. 00) - (27,000 X $5. 00) = $131,000 - $135,000 = $4,000 Favorable