Budgeted sales of the companys only product for the next five months are: January 9,300 units February
Question:
Budgeted sales of the company’s only product for the next five months are:
January | 9,300 units |
February | 6,400 units |
March | 7,700 units |
April | 5,700 units |
May | 6,600 units |
• The selling price is $54 per unit.
Prepare the following elements of the master budget for this problem:
6. Ending finished goods inventory budget.
7. Selling and administrative expense budget.
8. Cash budget.
9. Budgeted income statement.
10. Budgeted balance sheet.
SCHEDULE OF EXPECTED CASH COLLECTIONS
• All Sales are on account.
• The company collects 63% of credit sales in the month of the sale and 37% of credit sales in the following month.
• The accounts receivable balance on January 1 was $0.
PRODUCTION BUDGET
• The company desires to have inventory on hand at the end of each month equal to 19% of the following month’s budgeted unit sales.
• On December 31, 0 units were on hand.
DIRECT MATERIALS BUDGET
• 5.85 pounds of material are required per unit of product.
• Management desires to have materials on hand at the end of each month equal to 12% of the following month’s production needs.
• The beginning materials inventory was 0 pounds.
• The material costs $.53 per pound.
SCHEDULE OF EXPECTED CASH DISBURSEMENTS FOR MATERIAL
• 53% of a month’s purchases are paid for in the month of purchase; 47% is paid for in the following month.
• No discounts are given for early payment.
• The accounts payable balance on December 31 was $0.
DIRECT LABOR BUDGET
• Each unit produced requires .64 hours of direct labor.
• Each hour of direct labor costs the company $10.75.
• Management fully adjusts the workforce to the workload each month.
MANUFACTURING OVERHEAD BUDGET
• Variable manufacturing overhead is $3.30 per direct labor-hour.
• Fixed manufacturing overhead is $91,000 per month. This includes $17,000 in depreciation, which is not a cash outflow.
ENDING FINISHED GOODS INVENTORY BUDGET
• Blair, a new startup business, uses absorption costing in its budgeted income statement and balance sheet.
• Manufacturing overhead is applied to units of product on the basis of direct labor-hours.
• The company has no work in process inventories.
SELLING AND ADMINISTRATIVE EXPENSE BUDGET
• Variable selling and administrative expenses are $1.58 per unit sold.
• Fixed selling and administrative expenses are $71,000 per month and include $11,000 in depreciation.
CASH BUDGET
1. A line of credit is available at a local bank.
a. All borrowing occurs at the beginning of the month, and all repayments occur at the end of the month. Borrowing occurs in increments of $1,000.
b. Any interest incurred during the first quarter will be paid at the end of the quarter. The interest rate is 16% per year.
2. Blair, a new startup business, desires a cash balance of at least $30,000 at the end of each month. The cash balance at the beginning of January was $18,000.
3. Cash dividends of $18,000 are to be paid to stockholders in February.
4. Equipment purchases of $164,000 are scheduled for January and $148,000 for February. This equipment will be installed and tested during the first quarter and will not become operational until April, when depreciation charges will commence.
Additional Information:
The following balances exist on January 1:
Land $300,000
Equipment $162,000
Common Stock $480,000
complete budget 1-5 provided below
Requrement for this assignment:
Prepare the following elements of the master budget for this problem:
8. Cash budget.
9. Budgeted income statement.
10. Budgeted balance sheet.
1. a. | ||||
Sales Budget | ||||
Jan | Feb | Mar | Quarter | |
Budgeted unit sales | 9,3 | 6,4 | 7,7 | 23,4 |
Selling price per unit | $ 54 | $ 54 | $ 54 | $ 54 |
Budgeted sales revenue | $ 502,200 | $ 345,600 | $ 415,800 | $ 1,263,600 |
1.b. | ||||
Schedule of Expected Cash Collections | ||||
Jan | Feb | Mar | Quarter | |
Collection of | ||||
Jan sales | 316,386 | 185,814 | 502,2 | |
Feb sales | 217,728 | 127,872 | 345,6 | |
Mar sales | 261,954 | 261,954 | ||
Total cash collections | 316,386 | 403,542 | 389,826 | 1,109,754 |
2. | ||||
Production Budget | ||||
Jan | Feb | Mar | Qtr. | |
Budgeted unit sales | 9,3 | 6,4 | 7,7 | 23,4 |
Add: Desired ending inventory | 1,216 | 1,463 | 1,083 | 1,083 |
Total finished goods inventory needed | 10,516 | 7,863 | 8,783 | 24,483 |
Less: Beginning inventory | 0 | 1,216 | 1,463 | 0 |
Required production in units | 10,516 | 6,647 | 7,32 | 24,483 |
3. a. | ||||
Direct Materials Budget | ||||
Jan | Feb | Mar | Qtr. | |
Required production in units | 10,516 | 6,647 | 7,32 | 24,483 |
Qty. required per unit produced | 5.85 | 5.85 | 5.85 | 5.85 |
Total Qty required in production | 61,518.60 | 38,884.95 | 42,822.00 | 143,225.55 |
Add: Ending raw material inventory | 4,666.19 | 5,138.64 | 4,121.44 | 4,121.44 |
Total needs | 66,184.79 | 44,023.59 | 46,943.44 | 147,346.99 |
Less: Beginning inventory | 0 | 4,666.19 | 5,138.64 | 0 |
Required purchases in units | 66,184.79 | 39,357.40 | 41,804.80 | 147,346.00 |
Cost per unit | $ 0.53 | $ 0.53 | $ 0.53 | $ 0.53 |
Budgeted purchases in dollars | 35,077.94 | 20,859.42 | 22,156.54 | 78,093.90 |
3. b. : | ||||
Schedule of Expected Cash Disbursements for Materials | ||||
Jan | Feb | Mar | Qtr. | |
Disbursements for | ||||
Jan purchases | 18,591.31 | 16,486.63 | 35,077.94 | |
Feb purchases | 11,055.49 | 9,803.93 | 20,859.42 | |
Mar purchases | 11,742.97 | 11,742.97 | ||
Total expected account payable | 18,591.31 | 27,542.12 | 21,546.90 | 67,680.33 |
4. | ||||
Direct Labor Budget | ||||
Jan | Feb | Mar | Qtr. | |
Required production in units | 10,516 | 6,647 | 7,32 | 24,483 |
Direct labor hours per unit | 0.64 | 0.64 | 0.64 | 0.64 |
Total direct labor hours required | 6,730.24 | 4,254.08 | 4,684.80 | 15,669.12 |
Direct labor rate per hour | $ 10.75 | $ 10.75 | $ 10.75 | $ 10.75 |
Total cost of direct labor | 72,350.08 | 45,731.36 | 50,361.60 | 168,443.04 |
Manifacturing overhead budget | ||||
Jan | Feb | Mar | Qtr. | |
Direct labour hours required | 6730.24 | 4254.08 | 4684.8 | 15669.12 |
Variable manufacturing overhead (3.3 per direct labour hrs) | 22209.79 | 14038.46 | 15459.84 | 51708,09 |
Fixed manufacturing overhead | 91000 | 91000 | 91000 | 273000 |
Total manufacturing overhead | 113209.8 | 105038.5 | 106459.8 | 324708.1 |
Less Depreciation | 17000 | 17000 | 17000 | 51000 |
Cash disbursements for manufacturing overhead | 96209,8 | 88038.5 | 89459.8 | |
Ending Finished Good Inventory | ||||
Quantity | Cost | Total | ||
Direct materials | 5.85 | 0.53 | 3.1005 | |
Direct labor | 0.64 | 10.75 | 6.88 | |
Manifactruing overhead | 13.2608 | |||
Unit production cost | 23.24 | |||
Ending Finished Good inventory | ||||
Jan | Feb | Mars | ||
Ending Finished Good inventory in units | 1216 | 1463 | 1083 | |
Unit production cost | 23.24 | 23.24 | 23.24 | |
Total | 28259.84 | 34000.12 | 25168.92 | |
Selling & administrsative budget | ||||
Jan | Feb | Mars | Qtr | |
Budgetet sales in units | 9300 | 6400 | 7700 | 23400 |
Variable expense per unit | 1.58 | 1.58 | 1.58 | 1.58 |
Variable selling and administrative expense | 14694 | 10112 | 12166 | 36972 |
Fixed expense | 71000 | 71000 | 71000 | 213000 |
Total selling and administrative expense | 85694 | 81112 | 83166 | 249972 |
Less depreciation | 11000 | 11000 | 11000 | 33000 |
$ 74 694,00 | $ 70 112,00 | $ 72 166,00 | $ 216 972,00 |
Survey of Accounting
ISBN: 978-0078110856
3rd Edition
Authors: Thomas P. Edmonds, Frances M. McNair, Philip R. Olds, Bor-Yi