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 | 10000*1*7= | 70000 | 8000*1*7= | 56000 | 9000*1*7= | 63000 |
| Direct labor | 10000*0.35*20= | 70000 | 8000*0.35*20= | 56000 | 9000*0.35*20= |
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replacement. The company has decided to test the knowledge and
ability of all candidates interviewing for the position. Each
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week of operations, and the company is searching for a replacement.
The company has decided to test the knowledge and ability of all
candidates interviewing for the position. Each candidate will be
provided with the information below and then asked to prepare a
series of reports, schedules, budgets, and recommendations based on
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began operations December 1, 2018. Its accountant quit the second
week of operations, and the company is searching for a replacement.
The company has decided to test the knowledge and ability of all
candidates interviewing for the position. Each candidate will be
provided with the information below and then asked to prepare a
series of reports, schedules, budgets, and recommendations based on
that information. The information provided to each candidate is...
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began operations December 1, 2018. Its accountant quit the second
week of operations, and the company is searching for a replacement.
The company has decided to test the knowledge and ability of all
candidates interviewing for the position. Each candidate will be
provided with the information below and then asked to prepare a
series of reports, schedules, budgets, and recommendations based on
that information. The information provided to each candidate is...
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began operations December 1, 2018. Its accountant quit the second
week of operations, and the company is searching for a replacement.
The company has decided to test the knowledge and ability of all
candidates interviewing for the position. Each candidate will be
provided with the information below and then asked to prepare a
series of reports, schedules, budgets, and recommendations based on
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began operations December 1, 2018. Its accountant quit the second
week of operations, and the company is searching for a replacement.
The company has decided to test the knowledge and ability of all
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provided with the information below and then asked to prepare a
series of reports, schedules, budgets, and recommendations based on
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The company has decided to test the knowledge and ability of all
candidates interviewing for the position. Each candidate will be
provided with the information below and then asked to prepare a
series of reports, schedules, budgets, and recommendations based on
that information. The information provided to each candidate is...
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