Developing a Master Budget for a Manufacturing Organization: Challenge Problem

Computer Accessories Inc. assembles a computer networking device from kits of imported components. You have been asked to develop a quarterly and annual operating budget and pro forma income statements for next year. You have obtained the following information:

Beginning$-$of$-$year balances Cash$$75,000$ Accounts receivable $($previous quarter$$s sales$)$$$245,000$ Raw materials$950$kitsFinished goods$1,500$ kitsAccounts payable $($materials$)$$$125,000$ Borrowed funds$$30,000$ Desired end$-$of$-$year inventory balances Raw materials$1,000$ kitsFinished goods$1,600$ kitsDesired end$-$of$-$quarter balances Cash$$30,000$ Raw materials as a portion of the following quarter$$s production$0\mathrm{.}20$ Finished goods as a portion of the following quarter$$s sales$0\mathrm{.}30$ Manufacturing costs Standard cost per unit Units Unit price Total Direct labor hours at rate$0\mathrm{.}50$ hour$$30\mathrm{.}00$ $$15\mathrm{.}00$ Raw materials$1$ kit $$75\mathrm{.}0075\mathrm{.}00$ Variable overhead$/$labor hour$0\mathrm{.}50$ hour $$5\mathrm{.}002\mathrm{.}50$ Total standard variable cost$$92\mathrm{.}50$ Fixed cost per quarter Cash$$110,000$ Depreciation$15,000$ Total$$125,000$ Selling and administrative costs $$8\mathrm{.}00$ Variable cost per unitFixed costs per quarter Cash$$150,000$ Depreciation$7,500$ Total$$157,500$ Interest rate per quarter$0\mathrm{.}015$ Portion of sales collected Quarter of sale$0\mathrm{.}70$ Subsequent quarter$0\mathrm{.}29$ Bad debts$0\mathrm{.}01$ Portion of purchases paid Quarter of purchase$0\mathrm{.}60$ Subsequent quarter$0\mathrm{.}40$ Unit selling price$$225$ Sales forecast QuarterFirst Second Third Fourth Unit sales$4,4004,6004,5004,800$

Additional information

$$ All cash payments except purchases are made quarterly as incurred.

$$ All borrowings occur at the start of a quarter.

$$ All repayments on borrowings occur at the end of a quarter.

$$ At the time the principal is repaid, interest is paid on the portion of principal that is repaid.

$$ Borrowings and repayments may be made in any amount

Required

Note: Do not use negative signs with any of your answers in the requirements that follow.

Part A: A sales budget for each quarter and the year.

Part B: A production budget for each quarter and the year.

Part C: A purchases budget for each quarter and the year

Part D: A manufacturing cost budget for each quarter and the year

Part E: A selling and administrative expense budget for each quarter and the year.

Part F: A cash budget for each quarter and the year.

Part G: A pro forma contribution income statement for each quarter and the year.

Electric Monkey Computer AccessoriesCash Budget For the Year Ending December $31$FirstSecondThirdFourthTotalBeginning balance

Operating cash receipts:Current quarter's sales

Previous quarter's sales

Total operating receipts

Total available for operations

Cash disbursements:Purchases:Current quarter

Previous quarter

Direct labor

Var. manufacturing overhead

Fixed manufacturing overhead

Variable selling and admin.

Fixed selling and admin.

Interest

Total disbursements

Available before borrowing or repayment

Borrowing

Repayment

Ending balance