I See The Light Budgets

I SEE THE LIGHT DO 10 11 12 13 14 15 16 17 18 19 20 21 Background Information I SEE THE LIGHT (ISTL) is a subchapter S corporation that manufactures children's lampsinightlights for use in bedrooms. These lamps are sold nationwide through a group of independent sales representati -- who have an exclusive sales region. The business is in its tenth year and has asked you to assist in pleing for next year's operations. The lamps are ceramic figurines of animals, boats, boys and girls playing and singing, all in delightful colors. The owner of the business, Big Al, creates a drawing for the figurine and faxes it to a plant in China where a mold is created and a sample produced and hand painted. If the mold meets the expectations of Big Al an order of 500 lamp parts is placed. Each lamp kit consists of the parts required to complete one lamp: a figurine, a lamp shade and the required electrical components. There are presently 10 different figurines that come in six different colors; 60 models. There are presently 10 workers in the plant. They are responsible for receiving the raw material, manufacturing the product, packing and shipping. In addition to Big Al there are two office workers who are responsible for all administrative duties. Big Al had his accountant prepare the Projected Income Statement and Balance Sheet presented on page two. Big Al heard about your skills in managerial accounting and would like your assistance in the following 22 areas: 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 Part 1 Fixed and Variable Cost Determinations - Unit Cost Calculations Part 2 Cost Volume Relationships - Profit Planning Part 3 Budgets Part 4 Process Costing Part 5 Job Order Costing Part 6 Standard Costing - Variance Analysis Part 7 Capital Decision Making To upload your work to Big Al the file without changing the name. Pay attention to the specific location that Excel saves the file. Return to the bottom of the page that you downloaded the file from: Cybertext.com, The Book List. Building Blocks of Accounting-A Managerial Perspective, Enter password, Upload Your Excel File. If you upload an old version of the file the results will not update. Keep two copies of your spreadsheet in two separate places in case one of Big Al's competitors sends someone to destroy your work or it is lost in transmission You may find it easier to work on this project if you print a hard copy of all the pages. 40 NOTE: H K B D E I See The Light Projected Income Statement For the Period Ending December 31, 20x1 $ 1,125,000.00 750,000.00 $ 375,000.00 + + Sales 25,000 lamps @ $45.00 Cost of Goods Sold @ $30.00 Gross Profit Seling Expenses: Fixed Variable (Commission per unit) $3.00 Administrative Expenses Fixed Variable $2.00 Total Selling and Administrative Expenses: Not Profit $ 23,000.00 75,000.00 $ 98,000.00 $ 42.000.00 50,000.00 92,000.00 190,000.00 $ 185,000.00 I See The Light Projected Balance Sheet As of December 31, 20x1 34.710.00 67,500.00 Current Assets Cash Accounts Receivable Inventory Raw Material Lamp Kits Work in Process Finished Goods Total Current Assets 8,000.00 500 @ $16.00 0 3000 @ $30.00 90,000.00 $ 200,210.00 $ 20,000.00 6,800.00 Fixed Assets Equipment Accumulated Depreciation Total Fixed Assets Total Assets 13,200.00 $ 213.410.00 54,000.00 54,000.00 Current Liabilities Accounts Payable Total Liabilities Stockholder's Equity Common Stock Retained Eamings Total Stockholder's Equity Total Liabilities and Stockholder's Equity $ 12,000.00 147.410.00 159.410.00 $ 213,410,00 G H D B E 3 4 PART 1 5 Fixed and Variable Cost Determinations Unit Cost Calculations 6 O- 42 8 The projected cost of a lamp is calculated based upon the projected increases or decreases to 9 current costs. The present costs to manufacture one lamp are: 10 11 Lamp Kit: $16.0000000 per lamp 19 Direct Labor 2.0000000 per lamp (4 lamps/hr.) 20 Variable Overhead: 2.0000000 per lamp 21 Fixed Overhead 10.0000000 per lamp (based on normal capacity of 25,000 lamps) 22 28 Cost per lamp: $30.0000000 per lamp 29 30 Expected increases for 20x2 31 When calculating projected increases round to TWO ($0.00) decimal places. 32 38 1. Material Costs are expected to increase by 3.50%. 39 40 2. Labor Costs are expected to increase by 4.00% 41 3. Variable Overhead is expected to increase by 2.00%. 48 49 4. Fixed Overhead is expected to increase to $285,000 50 51 5. Fixed Administrative expenses are expected to increase to $62.000. 52 58 6. Variable selling expenses (measured on a per lamp basis) are expected to increase 59 by 6.50%. 61 7. Fixed selling expenses are expected to be $39,000 in 20x2. 62 68 8. Variable administrative expenses (measured a per lamp basis) are expected to 69 Increase by 4.00%. 70 71 On the following schedule develop the following figures: 72 1- 20x2 Projected Variable Manufacturing Unit Cost of a lamp. 78 79 2- 20x2 Projected Variable Unit Cost per lamp. 80 81 3. 20x2 Projected Fixed Costs. 82 88 60 LO For 20x2 the selling price per lamp will be $45.00. If the variable cost increase by $4.50 a unit how many lamps must be sold to breakeven? (0.01) Breakeven sales in units (Shce we cannot sell part of a unt round up to the next intreded) For 20x2 the selling price per lamp will be $45.00. If the vanable cost decreased by $4,50 a unit how many lamps must be sold to breakeven? (6.02) Breakeven sales in units (Since we cannot sol part of a round up to the rest until needed) 6. If for 20x2 the selling price per lamp is increased to $49.50 a unit how many lamps must be sold to breakeven? Breakeven sales in units (Since we are so part of ant round up to the need unit reeded) (0.03) 6 If for 20x2 the selling price per lamp is decreased to $40.50 a unit how many lamps must be sold to breakeven? Breakeven sales in units (Since we cool port of a un round up to the next if needed) 15.04 125 120 127 128 D E TI F c B PART 3 Budgets 8 32 33 34 7 Division N has decided to develop its budget based upon projected sales of 43,000 lamps at 8 $55.00 per lamp 9 The company has requested that you prepare a master budget for the year. This budget is to be used E for planning and control of operations and should be composed of: 30 31 1. Production Budget 2. Materials Budget 40 3. Direct Labor Budget 4. Factory Overhead Budget 5. Selling and Administrative Budget 6. Cost of Goods Sold Budget 7. Budgeted Income Statement B. Cash Budget 74 Notes for Budgeting 75 55 The company wants to maintain the same number of units in the beginning and ending inventories of 87 work-in-process, and electrical parts while increasing the inventory of Lamp Kits to 725 pieces and 88 decreasing the finished goods by 20% 90 Complete the following budgets 1 Production Budget Planned Sales Desired Ending Inventory of Finished Goods Total Needed Less: Beginning inventory Total Production 45 46 47 48 58 59 60 61 62 72 73 76 89 100 101 102 103 104 114 115 116 117 118 128 129 130 131 (7.01) D 2 3 . 5 D Ready D E F G 2 Materials Budget Lamp Kits Needed for Production Desired Ending Inventory Total Needed Less: Beginning Inventory Total Purchases Cost per piece Cost of Purchases (Round to two places, St#.##) 3 Direct Labor Budget (8.01) {8.02) {8.03) (8.04) (8.05) (8.06) (8.07) Labor Cost Per Lamp Production Total Labor Cost (Round to two places, $##.##) (8.08) 4 Factory Overhead Budget Variable Factory Overhead: Variable Factory Overhead Cost Per Unit Number of Units to be produced Total Variable Factory Overhead (Round to two places, sw.) Fixed Factory Overhead (8.09) (8.10) (8.11) Total Factory Overhead (Round to two places, St.8) c am D E F G H 4940 4 Factory Overhead Budget Overhead Allocation rate based on: 1. Number of Units Total Factory Overhead / Number of Units (Round to two places, $###.##) 5 Cost of making one unit next year Cost of one Lamp k Labor Cost Per Lamp Factory overhead per unit 19.01) 19.02) Total cost of one unit (Round to two places, S#### (9.03) {9.04) 6 Selling and Admin. Budget Fixed Seling Variable Selling (Round to two places, S##.##) Fixed Administrative Variable Administrative (Round to two places, S####) Total Selling and Administrative (Round to two places, $##.##) SAL Goods (9.05) (9.06) 7 Sold Round dollar to two places, SA (9.07) (9.08) Budget Beginning Inventory, Finished Goods Production Costs: Materials: Lamp Kits: Beginning inventory Purchased Available for Use Ending Inventory of Lamp Kits Lamp Kits Used In Production Total Materials Labor Overhead Cost of Goods Available Loss Ending Inventory, Finished Goods Cost of Goods Sold (9.09) (9.10) (9.11) (9.12) (9.13) (9.14) 7 Budgeted Income Statement 6 7 B 9 12 13 14 15 16 19 Sales Cost of Goods Sold Gross Profit Selling Expenses & Admin Expenses Net Income (10.01) G J K NNN D E H 19 20 21 22 23 8 Cash Budget 26 27 Assume actual cash receipts and disbursements will follow the pattem below: (Note: Receivables and 28 Payables of 12/31/x1 will have a cash impact in 20x2.) 29 30.1. 19.00% of sales for the year are made in November and December. Since our customers have 60 day terms 33 those funds will be collected be collected in January and February 34 2. 83,00% of material purchases will be paid during the year, the remaining portion will be paid in Januay or February 35 3. All other manufacturing and operating costs are paid for when incurred. 36 4. The budgeted depreciation expense is equal to 0.6% of the fixed manufacturing, seling and administrative expenses. 37. 5. Minimum Cash Balance needed for 20x2, $150,000 1 See The Light Projected Cash Budget 42 For the Year Ending December 31, 20x2 40 41 Round dollars to two 43 places, SNN Beginning Cash Balance Cash Inflows: Sales Collections Account Receivable (Sales last year not collected) Sales made and collected in 20x2 Cash Available (10.02) (10.03) (10.04) (10.05) 47 48 49 50 51 54 55 56 57 58 61 62 63 54 65 58 89 70 71 72 73 74 75 ZA Cash Outflows: Purchases Accounts Payable (Purchases last year) Purchases made and paid for in 20x2 Other Manufacturing Costs Direct Labor Total Manufacturing Overhead Selling and Administrative Less: Depreciation Total Cash Outfiows Budgeted Cash Balance before financing Needed Minimum Balance (10.00) (10.07) (10.00) (10.09) Amount to be borrowed of any (10.10) Budgeted Cash Balance