Question

Decker Manufacturing is preparing its master budget for the first quarter of the upcoming year. The following data pertain to Decker Manufacturing's operations 1: Data Table Current Assets as of December 31 (prior year): Cash $ 4,600 Accounts receivable, net $ 46,000 Inventory $ 15,500 Property, plant, and equipment, net $ 123,000 Accounts payable $ 43,000 Capital stock $ 124,000 Retained earnings $ 22,700 a. Actual sales in December were $71,000. Selling price per unit is projected to remain stable at $12 per unit throughout the budget period. Sales for the first five months of the upcoming year are budgeted to be as follows: January $ 99,600 February $ 118,800 March $ 115,200 April $ 108,000 May $ 103,200 b. Sales are 35% cash and 65% credit. All credit sales are collected in the month following the sale. c. Decker Manufacturing has a policy that states that each month's ending inventory of finished goods should be 10% of the following month's sales (in units). d. Of each month's direct material purchases, 20% are paid for in the month of purchase, while the remainder is paid for in the month following purchase. Three pounds of direct material is needed per unit at $2.00 per pound. Ending inventory of direct materials should be 20% of next month's production needs. e. Most of the labor at the manufacturing facility is indirect, but there is some direct labor incurred. The direct labor hours per unit is 0.05. The direct labor rate per hour is $9 per hour. All direct labor is paid for in the month in which the work is performed. The direct labor total cost for each of the upcoming three months is as follows: January $ 3,807 February $ 4,442 March $ 4,293 f. Monthly manufacturing overhead costs are $5,500 for factory rent, $2,900 for other fixed manufacturing expenses, and $1.10 per unit for variable manufacturing overhead. No depreciation is included in these figures. All expenses are paid in the month in which they are incurred. g. Computer equipment for the administrative offices will be purchased in the upcoming quarter. In January, Decker Manufacturing will purchase equipment for $5,000 (cash), while February's cash expenditure will be $12,200 and March's cash expenditure will be $16,600. h. Operating expenses are budgeted to be $1.25 per unit sold plus fixed operating expenses of $1,800 per month. All operating expenses are paid in the month in which they are incurred. No depreciation is included in these figures. i. Depreciation on the building and equipment for the general and administrative offices is budgeted to be $5,000 for the entire quarter, which includes depreciation on new acquisitions. j. Decker Manufacturing has a policy that the ending cash balance in each month must be at least $4,000. It has a line of credit with a local bank. The company can borrow in increments of $1,000 at the beginning of each month, up to a total outstanding loan balance of $150,000. The interest rate on these loans is 1% per month simple interest (not compounded). The company would pay down on the line of credit balance in increments of $1,000 if it has excess funds at the end of the quarter. The company would also pay the accumulated interest at the end of the quarter on the funds borrowed during the quarter. k. The company's income tax rate is projected to be 30% of operating income less interest expense. The company pays $10,000 cash at the end of February in estimated taxes. Requirement 1. Prepare a schedule of cash collections for January, February, and March, and for the quarter in total Requirement 2. Prepare a production budget. (Hint: Unit sales = Sales in dollars / Selling price per unit.) Requirement 3. Prepare a direct materials budget. (Round your answers to the nearest whole dollar.) Requirement 4. Prepare a cash payments budget for the direct material purchases from Requirement 3. (Round your answers to the nearest whole dollar.) Requirement 5. Prepare a cash payments budget for direct labor. Requirement 6. Prepare a cash payments budget for manufacturing overhead costs. (Round your answers to the nearest whole dollar.) Requirement 7. Prepare a cash payments budget for operating expenses. (Round your answers to the nearest whole dollar.) Requirement 8. Prepare a combined cash budget. (If a box is not used in the table leave the box empty; do not enter a zero. Use parentheses or a minus sign for negative cash balances and financing payments.) Requirement 9. Calculate the budgeted manufacturing cost per unit (assume that fixed manufacturing overhead is budgeted to be $0.80 per unit for the year). (Round your answer to the nearest cent Requirement 10. Prepare a budgeted income statement for the quarter ending March 31. (Hint: Cost of goods sold = Budgeted cost of manufacturing one unit x Number of units sold.) (Round your answers to the nearest whole dollar.)

Answer 1

CASH SALES
	January	February	March	Total
Total Sales	$    99,600.00	$ 118,800.00	$ 115,200.00	$ 333,600.00
Percentage Cash Sales	0.35	0.35	0.35	0.35
Cash Sales	$    34,860.00	$    41,580.00	$    40,320.00	$ 116,760.00
CREDIT SALES RECEIPTS
Total Sales of Previous Month	$    71,000.00	$    99,600.00	$ 118,800.00	$ 289,400.00
Percentage Cash Sales	0.65	0.65	0.65	0.65
Cash Sales	$    46,150.00	$    64,740.00	$    77,220.00	$ 188,110.00
Total Cash Receipts	$    81,010.00	$ 106,320.00	$ 117,540.00	$ 304,870.00	QUESTION 1
Production Budget
	January	February	March	Total
Unit Sales	8300	9900	9600	27800
Plus: Desired Ending Inventory	990	960	900	900
Total Needed	9290	10860	10500	28700
Less: Beginning Inventory	830	990	960	830
Number of Units to Produce	8460	9870	9540	27870	QUESTION 2
Direct Materials Budget
	January	February	March	Total
Units to be produced (from Production Budget)	8460	9870	9540	27870
Multiply by: Quantity (pounds) of DM needed per unit	3	3	3	3
Quantity (pounds) needed for production	25380	29610	28620	83610
Plus: Desired ending inventory of DM	5922	5724	5376	5376
Total quantity (pounds) needed	31302	35334	33996	88986
Less: Beginning inventory of DM	5076	5922	5724	5076
Quantity (pounds) to purchase	26226	29412	28272	83910
Multiply by: Cost per pound	$               2.00	$               2.00	$               2.00	$               2.00
Total Cost of DM purchases	52452	58824	56544	167820	QUESTION 3
Cash Payments for Direct Materials Budget
	January	February	March	Total
December Purchases from Accounts Payable	43000			43000
January Purchases	10490	41962		52452
February Purchases		11765	47059	58824
March Purchases			11309	11309
Total Cash Payments of Material	$    53,490.40	$    53,726.40	$    58,368.00	$ 165,584.80	QUESTION 4
Budgeted Cash Payments for Direct Labor
	January	February	March	Total
Cost of Direct Labor	$      3,807.00	$      4,442.00	$      4,293.00	$    12,542.00	QUESTION 5
Budget Cash Payments for Manufacturing Overhead
	January	February	March	Total
Variable Manufacturing Overhead Costs	$      9,306.00	$    10,857.00	$    10,494.00	$    30,657.00
Rent (Fixed)	$      5,500.00	$      5,500.00	$      5,500.00	$    16,500.00
Other fixed MOH	$      2,900.00	$      2,900.00	$      2,900.00	$      8,700.00
Total Cash Payments	$    17,706.00	$    19,257.00	$    18,894.00	$    55,857.00	QUESTION 6
Budget Cash Payments for Operating Expenses
	January	February	March	Total
Variable Operating Expenses	$    10,375.00	$    12,375.00	$    12,000.00	$    34,750.00
Fixed Operating Expenses	$      1,800.00	$      1,800.00	$      1,800.00	$      5,400.00
Total Cash Payments of Operating Expenses	$    12,175.00	$    14,175.00	$    13,800.00	$    40,150.00	QUESTION 7
Combined Cash Budget
	January	February	March	Total
Beginning Cash Balance	$      4,600.00	$      4,431.60	$      4,951.20	$      4,600.00
Plus: Cash Collections	$    81,010.00	$ 106,320.00	$ 117,540.00	$ 304,870.00
Total Cash Available	$    85,610.00	$ 110,751.60	$ 122,491.20	$ 309,470.00
Less Cash Payments:
Direct Material Purchases	$    53,490.40	$    53,726.40	$    58,368.00	$ 165,584.80
Direct Labor	$      3,807.00	$      4,442.00	$      4,293.00	$    12,542.00
Manufacturing Overhead Costs	$    17,706.00	$    19,257.00	$    18,894.00	$    55,857.00
Operating Expenses	$    12,175.00	$    14,175.00	$    13,800.00	$    40,150.00
Tax Payment		$    10,000.00	$                   -	$    10,000.00
Equipment Purchases	$      5,000.00	$    12,200.00	$    16,600.00	$    33,800.00
Total Cash Payments	$    92,178.40	$ 113,800.40	$ 111,955.00	$ 317,933.80
Ending Cash Balance Before Financing	$    (6,568.40)	$    (3,048.80)	$    10,536.20	$    (8,463.80)
Financing:
Plus: New borrowings	$    11,000.00	$      8,000.00	$                   -	$    19,000.00
Less: Debt repayments			$    (6,000.00)	$    (6,000.00)
Less: Interest Payments			$        (490.00)	$        (490.00)
Total Financing	$    11,000.00	$      8,000.00	$    (6,490.00)	$    12,510.00
Ending Cash Balance	$      4,431.60	$      4,951.20	$      4,046.20	$      4,046.20	QUESTION 8
Budgeted Manufacturing Cost Per Unit
				Total
Direct Materials Cost Per Unit				$               6.00
Direct Labor Cost Per Unit				0.45
Variable Manufacturing Overhead Costs Per Unit				$               1.10
Fixed Manufacturing Overhead Costs Per Unit				0.8
Budgeted Cost of Manufacturing Per Unit				$               8.35	QUESTION 9
Budgeted Income Statement
				Total
Sales Revenue				$ 333,600.00
Less: Cost of Goods Sold				$ 232,130.00
Gross Profit				$ 101,470.00
Less: Operating Expenses				$    40,150.00
Less: Depreciation Expense				$      4,600.00
Operating Income				$    56,720.00
Less: Interest Expense				$          490.00
Less: Income Tax Expense				$    16,869.00
Net Income				$    39,361.00	QUESTION 10