Question

In: Accounting

Works Accessories assembles a computer networking device from kits of imported components. You have been asked...

Works Accessories 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 2016. You have obtained the following information:

Beginning-of-year balances

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$40,000.00

Accounts receivable (previous quarter’s sales) . . . . . . . . . . .

$15,000.00

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

300 kits

Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

400 units

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$40,000.00

Borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,000.00

Desired end-of-year inventory balances

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

500 kits

Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200 units

Desired end-of-quarter balances

   Standard cost per unit

     Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . .

Units

1 kit

Unit price

    $40.00

Total

$40.00

Direct labor hours at rate. . . . . . . . . . . . . . . . . . . . . . . . . . .

0.8 hour

$20.00

16.00

Variable overhead/labor hour . . . . . . . . . . . . . . . . . . . . . . .

0.8 hour

$10.00

8.00

Total standard variable cost . . . . . . . . . . . . . . . . . . . . . . .

$64.00

Fixed cost per quarter

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             $40,000.00

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              10,000.00

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            $50,000.00

Selling and administrative costs

Variable cost per unit. . . . . . . . . . . . . . . . . . . . . . .. . . . . . .

Fixed costs per quarter:

$6.00

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,000.00

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   5,000.00

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,000.00

Interest rate per quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.04

Portion of sales collected

Quarter of sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.75

Subsequent quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.24

Bad debts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.01

Portion of purchases paid

Quarter of purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.7

Subsequent quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.3

Unit selling price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$115.00

Sales Forecast

Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     First      Second       Third        Fourth

Unit sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         2,400      1,500             2,000         3,100

Additional information

All cash payments except purchases are made quarterly as incurred.

All borrowings occur at the start of the quarter.

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

All interest on borrowed funds is paid at the end of each quarter.

Borrowings and repayments may be made in any amount.

(a) A sales budget for each quarter and the year.

(b) A production budget for each quarter and the year.

c.   A purchases budget for each quarter and the year.

d.   A manufacturing cost budget for each quarter and the year.

e.   A selling and administrative expense budget for each quarter and the year.

f.    A cash budget for each quarter and the year.

g.   A pro-forma contribution income statement for each quarter and the year.

Solutions

Expert Solution

Budget #1
Work Accessories
Sales Budget
For the year ending December 31, 2016
First Second Third Fourth Total
Quarter Quarter Quarter Quarter
Units 2400 1500 2000 3100 9000
Sales price($) 115 115 115 115 115
Sales Budget 276000 172500 230000 356500 1035000
Budget #2:
Work Accessories
Production Budget
For the year ending December 31, 2016
First Second Third Fourth Total
Quarter Quarter Quarter Quarter
Sales units 2400 1500 2000 3100 9000
Ending inventory of units 200 200 200 200 200
Units required 2600 1700 2200 3300 9200
Less: Beginning inventory 400 200 200 200 400
Budgeted production in units 2200 1500 2000 3100 8800
Budget #3:
Work Accessories
Purchase Budget
For the year ending December 31, 2016
First Second Third Fourth Total
Quarter Quarter Quarter Quarter
Budgeted production in units 2200 1500 2000 3100 8800
Desired ending inventory of kits 500 500 500 500 500
Kits required 2700 3208 3916 4255 13260
Less: Beginning inventory 300 515 633 751 653
Budgeted production in units 2400 2693 3283 3504 12607
Cost per kit 40 40 40 40 40
Total purchase of kits in dollars 96000 107720 131320 140160 504280
Budget #4:
Work Accessories
Manufacturing cost Budget
For the year ending December 31, 2016
First Second Third Fourth Total
Quarter Quarter Quarter Quarter
Direct materials:
Budgeted production units 2200 1500 2000 3100 8800
Cost per kit 40 40 40 40 40
Direct material cost 88000 60000 80000 124000 352000
Direct labor:
Budgeted production units 2200 1500 2000 3100 8800
Budgeted labor cost per unit 16 16 16 16 16
Direct labor cost 35200 24000 32000 49600 140800
Variable manufacturing cost:
Budgeted production units 2200 1500 2000 3100 8800
Variable overhead cost per unit 8 8 8 8 8
Total variable overhead cost 17600 12000 16000 24800 70400
Fixed manufacturing overhead
Cash 40000 40000 40000 40000 160000
Depreciation 10000 10000 10000 10000 40000
Total fixed manufacturing overhead 50000 50000 50000 50000 200000
Total manufacturing overhead 67600 62000 66000 74800 270400
Total manufacturing cost 190800 146000 178000 248400 763200
Budget #5:
Work Accessories
Selling and administrative expenses budget
For the year ending December 31, 2016
First Second Third Fourth Total
Quarter Quarter Quarter Quarter
Budgeted sales units from budget#1 2400 1500 2000 3100 9000
Budgeted sales dollars from budget#1 276000 172500 230000 356500 1035000
Variable selling and administration expenses:
Bad debts (1% of sales dollars) 2760 1725 2300 3565 10350
Variable cost (@$6 per unit of sales) 14400 9000 12000 18600 54000
Total variable selling and administrative exp. 17160 10725 14300 22165 64350
Fixed selling and administration expenses:
Cash expenses 20000 20000 20000 20000 80000
Depreciation 5000 5000 5000 5000 20000
Total fixed selling and administrative exp. 25000 25000 25000 25000 100000
Total selling and administrative expenses 42160 35725 39300 47165 164350

ekkarill92 answered 2 years ago
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