Gilbert manufacturing Company manufactures a special line of tools.

As of December 31, 20X1,

the Statement of Financial Position of the firm is as follows:

Gilbert Company
Statement of Financial Position
December 31, 20X1

Assets Equities
Current Assets Current Liabilities
Cash 150000 Accounts payable 140000
Accounts receivable 220000 Taxes payable 156000
Inventories 592000 Current portion of 83000
Other current assets 23000 long-term debt
Total current assets 985000 Total current liabilities 379000
Long-term liabilities 576000
Total liabilities 955000

Long-term assets Equity

Property, plant, and 2475000 Share capital 350000
equipment Retained earnings 1305000
Less: Accumulated 850000 Total 1655000
depreciation
Net 1625000 Total equities 2610000
Total assets 2610000

Estimated sales:
Units 6400
Price per unit 800
Finished goods inventory:
Beginning 900 units @ 500
Ending 1000
Work in progress:
NONE

Raw materials:
Materials
R S
Materials required per unit 3 units 5 units
of finished product
Beginning inventory 2200 4000
Ending inventory 1300 4600
Unit cost P 10 P 30
Direct labor P 146 per unit produced

Overhead is estimated as follows:

Variable:
Indirect materials and supplies P5.85 per unit produced
Materials handling 9.07 per unit
Other indirect labor 5.07 per unit
Fixed:
Supervisor labor P175000
Maintenance and repair 85000
Plant administration 173000
Utilities 87000
Depreciation 280000
Insurance 43000
Property taxes 117000
Other indirect labor 41000

Marketing and administrative expenses are budgeted as follows:

Variable marketing costs:
Sales commision P40.625 per unit sold
Other marketing costs P16.250 per unit sold

Fixed marketing costs:

Sales salaries P100000
Advertising 193000
Other 78000

Administrative costs (all fixed):

Administrative salaries P254000
Data processing services 103000
Legal and other professional fees 180000
Depreciation - building, furniture, 42000
and equipment
Taxes - other than income 160000
Other 26000

Additional Information:
The treasurer's office also provided the following information and estimates:
1. All sales are on account and collections from customers are expected to amount to
P 5,185,000
2. Equipment costing P 300,000 with accumulated depreciation of P 275,000 will be sold at its
net book value. New equipment costing P 320,000 will be purchased during the year.
3. Accounts payable will increase by P 15,000 and assumed to be for materials purchases only.
4. Income taxes will be provided at an average rate of 35% of income before taxes while P 252,000
will be paid during the year.
5. Dividends amounting to P 140,000 will be paid during the year and the current portion of the
long-term debt shall also be settled at the end of the year. Interest rate is 8% per annum.

Required: Prepare the Master Budget for Gilbert Company for the year ending December 31, 20X2.

Based on the above preliminary data, each of Gilbert Company's budgets will now be discussed and
illustrated.
Schedule 1
Sales Budget
For 20x2

Units Price per unit Total sales revenue

Estimated sales 6400 ₱ 800.00 ₱ 5,120,000.00
Schedule 2
Production Budget
For 20x2

Units to be sold 6400

Add: Desired ending inventory 1000
Total 7400
Less: Beginning inventory 900
Units to be produced 6500
Schedule 3
Raw Materials Purchases
For 20x2

Materials
R S
Units required for production
R (6500 x 3) 19500
S (6500 x 5) 32500
Add: Desired ending inventory 1300 4600
Total units required 20800 37100
Less: Beginning inventory 2200 4000
Units to be purchased 18600 33100
Unit price (P) 10 30

Total purchases ₱ 186,000.00 ₱ 993,000.00

Schedule 4

Number of units to be produced 6500

Multiply by: Direct labor cost per unit 146
Total budgeted direct labor cost ₱ 949,000.00
Schedule 5
Budgeted Manufacturing Overhead
For 20x2

Variable overhead: units needed to produce 6500

Indirect materials and supplies (@5.85) ₱ 38,000.00
Materials handling (@9.07) ₱ 59,000.00
Other indirect labor (@5.07) ₱ 33,000.00
Total ₱ 130,000.00
Fixed manufacturing overhead:
Supervisor labor ₱ 175,000.00
Maintenance and repair ₱ 85,000.00
Plant administration ₱ 173,000.00
Utilities ₱ 87,000.00
Depreciation ₱ 280,000.00
Insurance ₱ 43,000.00
Property taxes ₱ 117,000.00
Others ₱ 41,000.00
Total ₱ 1,001,000.00
Total manufacturing overhead ₱ 1,131,000.00
Schedule 6
Budgeted Statement of Cost of Sales
For 20x2

Beginning work in process inventory ₱ -

Manufacturing costs
Direct materials
Beginning inventory [(2200 R @ P10) + (4000 S @ P30) ₱ 142,000.00
S3 Purchases ₱ 1,179,000.00
Total ₱ 1,321,000.00
Less: Ending inventory [(1300 R @ P10) + (1600 S @ P30)] ₱ 151,000.00
Total direct materials cost ₱ 1,170,000.00
Direct labor (6500 @ 146) ₱ 949,000.00
S5 Manufacturing overhead ₱ 1,131,000.00
Total manufacturing cost ₱ 3,250,000.00
Less: Ending work in process inventory ₱ -
Cost of goods manufactured ₱ 3,250,000.00
Add: Beginning finished goods inventory (900 @ P500) ₱ 450,000.00
Total available for sale ₱ 3,700,000.00
Less: Ending finished goods inventory (100 @ P500) ₱ 500,000.00
Cost of sales ₱ 3,200,000.00
Schedule 7
Budgeted Marketing and Administrative Costs
For 20X2

Variable marketing Costs

Sales commision (6400 @ P40.625) ₱ 260,000.00
Others (6400 @ P16.25) ₱ 104,000.00
Total ₱ 364,000.00
Fixed marketing costs
Sales salaries ₱ 100,000.00
Advertising ₱ 193,000.00
Others ₱ 78,000.00
Total ₱ 371,000.00
Total administrative cost ₱ 735,000.00
Administrative cost (all fixed)
Administrative salaries ₱ 254,000.00
Data processing services ₱ 103,000.00
Legal and other professional fees ₱ 180,000.00
Depreciation - building, furnitures, and equipment ₱ 42,000.00
Taxes - other than income ₱ 160,000.00
Other ₱ 26,000.00
Total ₱ 765,000.00

Total marketing and administrative cost ₱ 1,500,000.00

Schedule 8
Gilbert Manufacturing Company
Cash Budget
For the Budget Year Ending December 31, 20X2

Cash balance, Jan. 1, 20X1 ₱ 150,000.00

Add: Estimated receipts
Collections from customers ₱ 5,185,000.00
Sale of assets ₱ 25,000.00
Total ₱ 5,210,000.00
Total cash available ₱ 5,360,000.00
Estimated disbursement
Payment for material purchases ₱ 1,164,000.00
Direct labor ₱ 949,000.00
Manufacturing overhead ₱ 851,000.00
Marketing and administrative expenses ₱ 1,458,000.00
Payments for income tax ₱ 252,000.00
Dividends ₱ 140,000.00
Reduction in long-term debt ₱ 83,000.00
Acquisition of new assets ₱ 320,000.00
Total disbursements ₱ 5,217,000.00

Cash balance, Dec. 31 ₱ 143,000.00

Schedule 9
Gilbert Manufacturing Company
Budgeted Income Statement
For the Budget Year Ending December 31, 20X2

S1 Sales ₱ 5,120,000.00
S6 Less: Cost of Sales ₱ 3,200,000.00
Gross profit ₱ 1,920,000.00
S7 Less: Marketing and administrative expenses ₱ 1,500,000.00
Net operating profit ₱ 420,000.00
Less: Interest expense ₱ 52,000.00
Net income before taxes ₱ 368,000.00
Less: Provision for income taxes ₱ 128,000.00
Net income after taxes ₱ 240,000.00
Schedule 10
Gilbert Manufacturing Company
Budgeted Statement of Financial Position
December 31, 20X2

Assets
Current assets
S8 Cash ₱ 143,000.00
Accounts receivable ₱ 155,000.00
Inventories ₱ 651,000.00
Other current asset ₱ 23,000.00
Total current assets ₱ 972,000.00

Long-term assets
Property, plant, and equipment ₱ 2,495,000.00
Less: Accumulated depreciation ₱ 949,000.00
Net ₱ 1,546,000.00
Total assets ₱ 2,518,000.00

Equities
Current liabilities
Accounts payable ₱ 155,000.00
Taxes payable ₱ 32,000.00
Current portion of long-term debt ₱ -
Total current liabilities ₱ 187,000.00
Long-term liabilities ₱ 576,000.00
Total liabilities ₱ 763,000.00

Equity
Share capital ₱ 350,000.00
Retained earnings ₱ 1,405,000.00
Total ₱ 1,755,000.00
Total equities ₱ 2,518,000.00