Prepare a general overhead budget for a company given the following information. The budget is to be used to determine the company’s cash flow. The company’s projected revenues are shown in the table below. The advertising budget is to be 1.5% of revenues. The budget for promotions is to include $6,000 in June for a company picnic, $5,000 in December for Christmas cards and gifts, and $8,000 in January for a company party. The company leases three vehicles for $350 per month per vehicle. The monthly fuel and maintenance cost for these vehicles is estimated to be $150 per month per vehicle. In October, the company plans on purchasing a new computer system for $20,000. The company employs five workers: the owner, a project manager/estimator, a secretary/receptionist, a bookkeeper, and an accounting clerk. The owner is paid $11,000 per month. The project manager/estimator is paid $7,500 per month. The secretary is paid $19 per hour and works an average of 44 hours per week. The bookkeeper is paid $25 per hour and works an average of 50 hours per week. The accounting clerk is paid $16 per hour and works an average of 43 hours per week. All of the hourly employees are paid for 52 weeks per year. Time and a half must be paid to hourly employees for work over 40 hours per week. The company contributes $250 per month per employee—including the owner—for health insurance. It also deposits 75 cents into an employee’s 401(k) account for every dollar the employee deposits. The maximum the company would deposit is 4.5% of an employee’s wages. This match includes the company’s owner. Historically, the employees have taken full advantage of this benefit. The current social security rate is 6.2% to $128,700 of wages per employee. The current Medicare rate is 1.45%. The company’s FUTA rate is 0.6% on the first $7,000 of wages per employee and the SUTA rate is 2% on the first $18,000 of wages per employee. The company is charged 0.75% of revenues, 1.5% of wages for hourly employees, and 2% of wages for salaried employees for general liability insurance. In January, the company pays $500 for a business license. It is anticipated that office supplies will cost $300 per month. Rent for the office space is $1,300 per month. Office utilities are expected to run $75 per month for water and sewer; $300 per month for power in June, July, and August and $175 per month during the remaining months of the year; and $200 per month for natural gas during November, December, January, and February and $75 per month during the remaining months of the year. It is anticipated that the company will spend $80 per month for postage and $120 per week for janitorial services. The estimated telephone costs are $150 per month for telephone and $220 per month to provide mobile phone service for the salaried employees. In December, the company plans on making a $4,000 charitable contribution to a local food bank. In April, the company must pay $2,500 for its annual plan-room membership. The company plans on spending $2,000 at the first of each quarter for accounting services to close the previous quarter’s books and an additional $3,000 in April for tax services. The estimated cost of meals is $250 per week. Bank fees are $150 per month. Allow $150 per month for miscellaneous expenses.

Month Revenue ($) January 1,152,000 February 1,068,000 March 1,177,500 April 1,153,500 May 840,000 June 817,500 July 750,000 August 586,500 September 513,000 October 690,000 November 738,000 December 774,000

Answer rating: 100% (QA)

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