Question

In: Accounting

The company began operations December 1, 2018. The information provided to each candidate is as follows....

The company began operations December 1, 2018.

The information provided to each candidate is as follows.

Cost Items and Account Balances

Administrative salaries $17,500

Advertising 12,000

Cash, December 1 0

Depreciation on factory building 3,500

Depreciation on office equipment 900

Insurance on factory building 2,500

Miscellaneous expenses—factory 2,000

Office supplies expense 500

Professional fees 700

Property taxes on factory building 600

Raw materials used 90,000

Rent on production equipment 8,000

Research and development 12,000

Sales commissions 60,000

Utility costs—factory 1000

Wages—factory 90,000

Work in process, December 1 0

Work in process, December 31 0

Raw materials inventory, December 1 0

Raw materials inventory, December 31 0

Raw material purchases 90,000

Finished goods inventory, December 1 0

Production and Sales Data

Number of products produced 12,000

Expected sales in units for December

($40 unit sales price) 10,000

Expected sales in units for January 12,000

Desired ending inventory 20% of next month’s sales

Direct materials per finished unit 1 kilogram

Direct materials cost $7 per kilogram

Direct labor hours per unit .35

Direct labor hourly rate $20

Cash Flow Data

Cash collections from customers: 75% in month of sale and 25% the following month.

Cash payments to suppliers: 75% in month of purchase and 25% the following month.

Income tax rate: 45%.

Cost of proposed production equipment: $720,000.

Manufacturing overhead and selling and administrative costs are paid as incurred.

Desired ending cash balance: $30,000.

Questions:

Prepare budget for the month of December 2018.

*Sales budget, Production budget, Direct materials budget, direct labor budget, selling &administrative expense, cash budget, and Budget income statement.

*Make flexible budget for manufacturing costs for activity levels between 8,000 & 10,000 units, in 1,000-unit increments.

Solutions

Expert Solution

Sales Budget For Dec 2018	Dec-18	Flexible Budget
Sales units budgeted	10000	8000	9000
Selling price /unit	40	40	40
Sales $ budgeted	400000	320000	360000

Production budget
Sales units budgeted	10000	8000	9000
Add: Desired Ending inventory(Jan 12000*20%)	2400	2400	2400
Total units needed	12400	10400	11400
Less: Beginning inventory	0	0	0
Production units budgeted	12400	10400	11400

Direct materials budget
Production units budgeted	12400	10400	11400
Direct materials per finished unit(Kg.)	1	1	1
Total Kgs. Reqd.	12400	10400	11400
Cost/kg.	7	7	7
Total direct material cost	86800	72800	79800

Direct labor budget
Production units budgeted	12400	10400	11400
Direct labor hours per unit	0.35	0.35	0.35
Total D/L hrs.	4340	3640	3990
Direct labor hourly rate ($)	20	20	20
Total D/L cost	86800	72800	79800

Manufacturing Overheads Budget
Insurance on factory building	2500
Miscellaneous expenses—factory	2000
Property taxes on factory building	600
Rent on production equipment	8000
Utility costs—factory	1000
Wages—factory	90000
Cash mfg. OH	104100
Depreciation on factory building	3500
Total Mfg. OH	107600

Sell.&administrative expense budget
Administrative salaries $17,500	17500
Advertising	12000
Sales commissions	60000
Research and development 12,000	12000
Professional fees	700
Office supplies expense	500
Cash Sell. & Admn. OH	102700
Depreciation on office equipment	900
Total Sell. & admn. OH	103600

Cash Budget
Cash,Dec 1	0	0	0
Add: Sales collections(400000*75%)	300000	300000	300000
Total cash available	300000	300000	300000
Less:Payments for :
Raw material Purchases(86800*75%)	65100	54600	59850
Direct Labor	86800	72800	79800
Mfg. OH	104100	104100	104100
Sell.&Admn. Ohs	102700	102700	102700
Production equipment	720000	720000	720000
Total cash payments	1078700	1054200	1066450
Deficit	-778700	-754200	-766450
Add:Short-term loan	808700	784200	796450
Ending cash balance	30000	30000	30000


Budgeted Income Statement
Sales (10000 units)	400000	320000	360000
Less:COGS	226774	181419	204097
Gross profit	173226	138581	155903
Less: operating expenses:
Sell.&Admn. Ohs	103600	103600	103600
Income before tax	69626	34981	52303
Income Tax at 45%	31332	15741	23536
Net Income	38294	19240	28767

Calculation of COGS Budgeted for Income Statement
Direct material	1000017=	70000	800017=	56000	900017=	63000
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The company began operations December 1, 2018. The information provided to each candidate is as follows....

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