In: Accounting
Managerial accountants and the budget committee for
the FMI corporation is meeting in November to prepare the 2019
budget. Your task, as a member of the budget committee, is to
prepare the 2019 budget given the following data:
Sales: The company expects to sell 40% more units in 2019 than in
each quarter of 2018. During 2018, sales were Q1: 40,000; Q2:
30,000; Q3: 60,000 and Q4: 50,000 units. The selling price per unit
is expected to be $50 in the first three quarters, but only $40 per
unit in Q4 because substantial competition is expected beginning in
Q4 of 2019. Sales are expected to be 40,000 units in Q1 of
2020.
The company wants to maintain ending finished goods inventory at
25% of the next quarter’s expected unit sales. Assume
that this will hold to start Q1 of 2019 so that beginning finished
goods inventory is (.25) (40,000 x 1.4) = (.25)(56,000) =14,000
units.
Each unit of final goods produced requires 1.5 hours of direct
labor time at $12 per hour.
Variable overhead costs are calculated per unit of direct labor
hours as follows: indirect labor $0.2, indirect materials $0.1,
maintenance $0.5.
ANNUAL fixed overhead costs are: supervisory salaries $200,000,
maintenance $60,000, depreciation $80,000. They are allocated
equally across quarters.
Direct raw material requirements are 5 kilograms per unit of output
produced and the cost is $1.5 per kilogram of materials. At the end
of each quarter, the company maintains enough raw materials to
produce 10,000 units for the next quarter.
Instructions:
Prepare the following budgets by quarter for the year 2019 (also
show the cumulative or annual totals):
[Use the format shown in the textbook/slides to prepare each
quarter’s budget. Your work and calculations MUST be done using a
Microsoft excel spreadsheet].
* (a)Sales budget
* (b)Production budget
* (c)Direct materials budget
* (d)Direct labor budget
* (e)Manufacturing overhead budget
Calculation of sales budget, production budget, direct materials budget, direct labor budget, and manufacturing overhead budget is as follows. Note the question is solved in two ways reason opening stock for production given by some calculations is 14000 units for the first qtr 2019 but it should come 4000 units for the first qtr 2019. so once the sum is calculated by taking 4000 units as opening stock and second by 14000 units as opening stock please check the question and choose the solution accordingly. and if you want to ask anything you can ask.
When the opening stock in production in the first qtr is taken as 3000units.
How the above amounts were derived are as follows.
When the opening stock in production in the first qtr is taken as 14000units.
How the above amounts were derived are as follows.