Question

Financial Information: TV tables dining Tables Chairs Selling Price per unit SAR 1,000 SAR 5,000 SAR 700 Direct Materials cost per 1 Kg of wood timber SAR 50 SAR 50 SAR 50 Kg of wood timber required per unit 10 35 5 Direct Labour hour cost SAR 30 SAR 30 SAR 30 Sales commission per item sold SAR 10 SAR 15 SAR 5 Variable manufacturing overhead per unit SAR 20 SAR 24 SAR 18 Number of labour hours per unit 3 4 2 Budgeted sales in units 300 200 450 Additional Information: Other costs: Production manager annual salary SAR 60,000 Annual marketing costs SAR 10,000- related to TV tables General Expenses SAR 5,000 Annual Fixed manufacturing overhead (excluding depreciation) SAR10,000 (20% relates to TV tables) Annual equipment depreciation SAR 10,000 The company had 8 TV tables and 100 kg of wood timber in stock at the end of September. Company policy is to maintain 20% of the following months sales level as closing inventory for finished goods. Company policy to maintain 25% of next months’ production needs as closing inventory for direct materials. Budgeted sales of TV tables for the next six months are as follows: October November December January February 40 35 20 20 20 Cash collections on sales are as follows: 30% in the month of sale 70% in the month following sale Receivables at the end of September were SAR 22,000 Cash payments on purchases are as follows: 60% in the month of purchase 40% in the following month Payables at the end of September were SAR 6,000 The closing cash balance in September 2018 was SAR 40,000 and it is company policy to maintain cash at this level at the end of each month. The company have access to a 4% bank loan of SAR 70,000 The company paid a dividend of SAR 40,000 in November Cash of SAR 50,000 was invested in the company by a private investor in December.

Using the information above, prepare the master budget for TV tables only for the quarter ending 31^th December 2018.

You are required to prepare the master budget for TV tables only, hence any costs that are shared with the other products should be ignored.

Answer 1

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1. Sales Budget
		Oct	Nov	Dec	Total	Jan	Feb
Budgeted No of Units		40	35	20	95	20	20
Selling Price		$           1,000.0	$                   1,000.0	$       1,000.0	$         1,000.0	$                          1,000.0	$      1,000.0
Budgeted Total Sale		$            40,000	$                    35,000	$        20,000	$          95,000	$                           20,000	$       20,000
2. Production Budget
		Oct	Nov	Dec	Total	Jan	Feb
Budgeted No of Units		40	35	20	95	20	20
Add: Desired Ending Inventory	20%	7	4	4	4	4
Total Need		47	39	24	99	24
Less: Beginning Inventory		-8	-7	-4	-8	-4
Budgeted Production		39	32	20	91	20
3. Direct Material Purchase Budget
		Oct	Nov	Dec	Total	Jan
Budgeted Production		39	32	20	91	20
per unit usage		10.00	10.00	10.00	10.00	10.00
Total Mat Required		390	320	200	910	200
Add: Desired Ending Inventory	25%	80	50	50	50
Total Need		470	370	250	960
Less: Beginning Inventory		-100	-80	-50	-100
Budgeted Purchase of Raw Maat Units		370	290	200	860
Per Unit Price		$                    50	$                            50	$                50	$                 50
Budgeted Purchase of Raw Mat$		$            18,500	$                    14,500	$        10,000	$          43,000
4. Direct Labor Budget
		Oct	Nov	Dec	Total
Budgeted Production		39	32	20	91
per unit Hour		3	3	3	3
Total HOurs Required		117	96	60	273
Per Hour Price		$                    30	$                            30	$                30	$                 30
Budgeted Direct Labor Cost		$               3,510	$                      2,880	$           1,800	$            8,190
5. Factory Overhead Budget:
		Oct	Nov	Dec	Total
Budgeted Sales Unit		40	35	20	95
Predetermined Overhead Rate		$                 20.0	$                        20.0	$             20.0	$              20.0
Total Overheads-Cash Expense		$                  800	$                         700	$              400	$            1,900
Fixed Overhead	10000*20%	$               2,000	$                      2,000	$           2,000	$            6,000
Total Overheads		$               2,800	$                      2,700	$           2,400	$            7,900
6.Selling Expense Budget:
		Oct	Nov	Dec	Total
Sales Representative's Commission	10*Units	$                  400	$                         350	$              200	$               950
Annual Marketing Cost		$            10,000	$                    10,000	$        10,000	$          30,000
Total Budgeted Selling Expense		$            10,400	$                    10,350	$        10,200	$          30,950

8. Cash Budget:
		Oct	Nov	Dec	Total
Beginning Balance		$            40,000	$                    40,190	$        40,000	$          40,000
Add: Cash Collected against sales		$            34,000	$                    38,500	$        30,500	$        103,000
Add: Investment				$        50,000	$          50,000
Total Available Cash		$            74,000	$                    78,690	$      120,500	$        193,000
Less: Cash disbursment for:
Raw Material Purchase		$            17,100	$                    16,100	$        11,800	$          45,000
Direct Labor		$               3,510	$                      2,880	$           1,800	$            8,190
Manufacturing Overheads		$               2,800	$                      2,700	$           2,400	$            7,900
Selling Expense		$            10,400	$                    10,350	$        10,200	$          30,950
Dividend			$                    40,000		$          40,000
					$                  -
Total Cash Payment		$            33,810	$                    72,030	$        26,200	$        132,040
Surplus/(Deficit)		$            40,190	$                      6,660	$        94,300	$          60,960
Borrowing			$                    33,340		$          33,340
Interest Payment 1%				$            -222	$              -222
Repayment				$       -20,738	$         -20,738
Ending Balance		$            40,190	$                    40,000	$        73,340	$          73,340

Schedule of Collection from customers:
	Credit Sale	Oct	Nov	Dec	Total
Sep Receivable		$            22,000			$          22,000
Oct	$                                  40,000	$            12,000	$                    28,000		$          40,000
Nov	$                                  35,000		$                    10,500	$        24,500	$          35,000
Dec	$                                  20,000			$           6,000	$            6,000
Total Collection		$            34,000	$                    38,500	$        30,500	$        103,000
Schedule of payment for pur:
	Credit Pur	Oct	Nov	Dec	Total
Sep Payable		$               6,000			$            6,000
Oct	$                                  18,500	$            11,100	$                      7,400		$          18,500
Nov	$                                  14,500		$                      8,700	$           5,800	$          14,500
Dec	$                                  10,000			$           6,000	$            6,000
Total Payment for Pur		$            17,100	$                    16,100	$        11,800	$          45,000