Question

Developing a Master Budget
for a Manufacturing Organization
Jacobs Incorporated manufactures a product with a selling price of $50 per unit. Units and monthly cost data follow:

Variable:
Selling and administrative	$5 per unit sold
Direct materials	10 per unit manufactured
Direct labor	10 per unit manufactured
Variable manufacturing overhead	5 per unit manufactured
Fixed:
Selling and administrative	$20,000 per month
Manufacturing (including depreciation of $10,000)	30,000 per month

Jacobs pays all bills in the month incurred. All sales are on account with 50 percent collected the month of sale and the balance collected the following month. There are no sales discounts or bad debts. Jacobs desires to maintain an ending finished goods inventory equal to 20 percent of the following month's sales and a raw materials inventory equal to 10 percent of the following month's production. January 1, 2011, inventories are in line with these policies. Actual unit sales for December and budgeted unit sales for January, February, and March of 2011 are as follows:

JACOBS INCORPORATED Sales Budget For the Months of January, February, and March 2011
Month	December	January	February	March
Sales - Units	5,250	6,000	9,000	9,000
Sales - Dollars	$262,500	$300,000	$450,000	$450,000

Additional information:

• The January 1 beginning cash is projected as $3,000.
• For the purpose of operational budgeting, units in the January 1 inventory of finished goods are valued at variable manufacturing cost.
• Each unit of finished product requires one unit of raw materials.
• Jacobs intends to pay a cash dividend of $7,000 in January.

(a) A production budget for January and February.

JACOBS INCORPORATED Production Budget For the Months of January and February 2011
	January	February	March
Requirements for current sales	Answer	Answer	Answer
Desired ending inventory	Answer	Answer
Total requirements	Answer	Answer
Less beginning inventory	Answer	Answer
Production requirements	Answer	Answer

(b) A purchases budget in units for January.

JACOBS INCORPORATED Purchases Budget For the Month of January 2011
	January	February
Current requirements (units)	Answer	Answer
Desired ending inventory	Answer
Total requirements	Answer
Less beginning inventory	Answer
Purchases (units)	Answer
Purchases (dollars at $10 each)	Answer

(c) A manufacturing cost budget for January.

JACOBS INCORPORATED Manufacturing Cost Budget For the Month of January 2011
Variable costs
Direct materials	Answer
Direct labor	Answer
Variable manufacturing overhead	Answer
Total variable costs	Answer
Fixed manufacturing overhead	Answer
Total manufacturing overhead	Answer

(d) A cash budget for January.

JACOBS INCORPORATED Cash Budget For the Month of January 2011
Beginning balance		Answer
Receipts:
December sales	Answer
January sales	Answer	Answer
Total cash available		Answer
Disbursements:
Purchases	Answer
Direct labor	Answer
Variable manufacturing overhead	Answer
Fixed manufacturing overhead (exclude depreciation)	Answer
Variable selling and administrative	Answer
Fixed selling and administrative	Answer
Dividend	Answer	Answer
Ending Balance		Answer

Answer 1