Question

managerial accounting

Lark corporation’s managerial accountants and the budget committee 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 15% more units in 2019 than in each quarter of 2018. During 2018, sales were Q1: 40,000; Q2: 32,000; Q3: 60,000 and Q4: 44,000 units. The selling price per unit is expected to be $50 in the first three quarters, but only $40 per unit in Q4 because the substantial competition is expected to begin in Q4 of 2019. Sales are expected to 40,000 units in Q1 of 2020. Production: The company wants to maintain the ending finished goods inventory at 30% 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 (.30) (40,000) (1.15) = (.3) (46,000) = 13,800 units. Direct Material: Direct raw material requirements are 5 kilograms per unit of output produced and the cost is $1.5 per kilogram of materials. Management desires to maintain raw materials inventories at 5% of the next quarter’s production requirements. Assume the production requirements for the first quarter of 2020 are 315,000 kilograms. 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. 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 to prepare each quarter’s budget. Your work and calculations MUST be done using a Microsoft Excel spreadsheet including formulas] (a) Sales budget (b) Productionbudget (c) Direct materials budget (d) Directlaborbudget (e) Manufacturing overhead budget

Answer 1

1) Sales Budget
		2019-Q1	2019-Q2	2019-Q3	2019-Q4	2020-Q1	Total 2019
Budgeted Sales units in 2018	a	40,000	32,000	60,000	44,000		176,000
Budgeted Sales units in 2019	b=a+(15%*a)	46,000	36,800	69,000	50,600	40,000	202,400
Selling price per unit	c	$                      50	$                       50	$                       50	$                       40
Budgeted Sales Revenue	d =b*c	$ 2,300,000.00	$   1,840,000.00	$   3,450,000.00	$   2,024,000.00	$                        -	$   9,614,000.00
2) Production Budget
		2019-Q1	2019-Q2	2019-Q3	2019-Q4	2020-Q1	Total 2019
Budgeted Sales units	a	46,000	36,800	69,000	50,600	40,000	202,400
Add: Closing stock of FG (30%*Next quarter's sales)	b=a*30%	11,040	20,700	15,180	12,000		12,000
Less: Opening stock of FG (30%*Current quarter's sales)	b=a*30%	13,800	11,040	20,700	15,180
Budgeted Production units	d=a+b-c	43,240	46,460	63,480	47,420		200,600
3) Direct Material Budget
		2019-Q1	2019-Q2	2019-Q3	2019-Q4	2020-Q1	Total 2019
Budgeted Production units	a	43,240	46,460	63,480	47,420		200,600
Direct material Required(KG)	b=a*5 KG	216,200	232,300	317,400	237,100	315,000	1,003,000
Closing stock= (5%*Next quarter's production)	c=b*5%	11,615	15,870	11,855	15,750
Opening stock= (5%*Current quarter's production)	d=b*5%	10,810	11,615	15,870	11,855
Budgeted Purchase unit	e=b+c-d	217,005	236,555	313,385	240,995		1,007,940
Budgeted Cost of Direct material purchase	f=e*$1.5	$      325,507.50	$      354,832.50	$      470,077.50	$      361,492.50	$                        -	$   1,511,910.00
4) Direct Labour Budget
		2019-Q1	2019-Q2	2019-Q3	2019-Q4	2020-Q1	Total 2019
Budgeted Production units	a	43,240	46,460	63,480	47,420		200,600
Direct labour hour required	b=a*1.5 hr	64,860	69,690	95,220	71,130	-	300,900
Budgeted Cost of Direct labour	c=b*$12	$      778,320.00	$      836,280.00	$   1,142,640.00	$      853,560.00	$                        -	$   3,610,800.00
5) Manufacturing overhead Budget
		2019-Q1	2019-Q2	2019-Q3	2019-Q4	2020-Q1	Total 2019
Direct labour hour required	a	64,860	69,690	95,220	71,130	-	300,900
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