Question

Homework problem to study for quiz Friday.

1. The # of units to be produced annually: 200,000 tins
Direct labor: 1 hour per 100 tins
Variable overhead costs per direct labor hour:
Indirect materials amount to $2.05
Indirect labor $1.20
Utilities $9.25
Maintenance $3.50
Fixed overhead costs per quarter:
Insurance $3,000
Depreciation $2,000
Rent $12,000

a. Calculate the budgeted total manufacturing overhead for the year.

b. Sales are 60,000 tins per quarter
Variable costs per dollar of sales: sales commissions 5%, delivery expense .5%, and advertising 1.5%.
Fixed costs per quarter: sales salaries $40,000, office rent $1,500, utilities $1,200, and repairs expense $200.
Selling price: $10 per tin

Calculate the budgeted total selling and administrative expenses for the quarter.

c. Sales are 30% cash and 70% on credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale. Sales were December $180,000; January $220,000; February $250,000; and March $300,000.

Calculate the total cash received in March.

Answer 1

Solution a:

Budgeted production for the year = 200000 tins

Direct labor hour per 100 tins = 1 hour

budgeted direct labor hour = 200000/100 = 2000 hours

Variable manufacturing overhead per direct labor hour = $2.05 + $1.20 + $9.25 + $3.50 = $16 per hour

Fixed manufacturing overhead per quarter = $3,000 + $2,000 + $12,000 = $17,000

Annual fixed manufacturing overhead = $17000*4 = $68,000

Budgeted variable overhead for the year = 2000 * $16 = $32,000

Budgeted annual manufacturing overhead = Budgeted variable overhead + Budgeted fixed overhead

= $32,000 + $68,000 = $100,000

Solution b:

Budgeted sale for the quarter = 60000 tins

Selling price = $10 per tin

Budgeted Sale value = 60000*10 = $60,000

Budgeted variable selling cost = 5% + 0.5% + 1.5% = 7% of sales = $60,000*7% = $4,200

Budgeted fixed selling and adminstrative expenses for quarter = $40,000 + $1,500 + $1,200 + $200 = $42,900

Budgeted total selling and adminstrative expenses for quarter = $4,200 + $42,900 = $47,100

Solution c:

Cash collected in march = Cash sale of march + (10% of march credit sale) + (50% of feburary credit sale) + (36% of January credit sale)

= ($300,000*30%) + ($300,000*70%*10%) + ($250,000*70%*50%) + ($220,000*70%*36%)

= $90,000 + $21,000 + $87,500 + $55,440 = $253,940