Question
In: Accounting
DATE: June 1, 2020 TO: CCSU Consulting FROM: Mark Swain, President, Tommy’s Box Cars SUBJECT: Master...
DATE: June 1, 2020
TO: CCSU Consulting
FROM: Mark Swain, President, Tommy’s Box Cars
SUBJECT: Master Budget for the fiscal year July 1, 2020 – June
30, 2021
----------------------------------------------------------------------------------------------------------------------------------
Our controller, Tommy Swain is negotiating with potential new
Wood suppliers in Kentucky. We need the Large Box Car Division’s
Master Budget for the fiscal year ended (36) June 30, 2021 for our
corporate strategic planning process, and we cannot wait for
Tommy’s return from Kentucky. We would like you to prepare the
Large Box Car Division’s Master Budget for the fiscal year ended
June 30, 2021.
The deliverables are as follows:
1. Sales budget, including a schedule of expected cash
collections.
2. Production budget.
3. Direct materials budget, including a schedule of expected
cash disbursements for materials.
4. Direct labor budget.
5. Manufacturing overhead budget.
6. Ending finished goods inventory budget calculating the
expected value of the finished goods inventory as of (36) June 30,
2021. *
7. Selling and administrative expense budget.
8. Cash budget.
9. Budgeted income statement for the year ended (36) June 30,
2021. *
10. Budgeted balance sheet for (36) June 30, 2021. *
All the Master Budget schedules except those marked with an
asterisk for the Large Box Car Division should include a column for
each quarter and a total column for the fiscal year. We only need
annual totals for the budgeted financial statements (schedules 9
and 10) and we only need a year-end total for the value of finished
goods inventory (schedule 6).
The hard copies of these budget schedules should be delivered
by the company deadline. You can print more than one schedule per
page, but do not have a page break in the middle of a budget
schedule. I like to be able to view an entire budget schedule
without flipping back and forth between pages. Please also use a
type font of between 10-12 points for printing. We also need you to
submit (via e-mail) the Excel spreadsheet that you used to create
the budget schedules you print so we can use the spreadsheet as a
starting point for future budgets. Upload the Excel spreadsheet on
Blackboard. We need that spreadsheet file the night before the
meeting.
I’ve attached a brief description of the Large Box Car
Division to the budget data Tommy gave me before he left for
Kentucky. We eagerly await your results.
Sincerely,
Mark
Mark Swain
During 2019-20 fiscal year, the average selling price for
large box cars is expected to be (1) $130 per car. The Large Box
Car Division forecasts the following units of sales.
Quarter First Second Third Fourth
Box Car UNIT Sales (2-5) 65,000 70,000 55,000 60,000
The collection pattern for Accounts Receivable is as
follows:
o (6) 30 percent of all sales are collected within the quarter
in which they are sold
o (7) 70 percent of all sales are collected in the following
quarter.
o There are no bad debts/uncollectible accounts.
Due to high demand last year, the Large Box Car Division
expects to have (8) zero finished box cars in inventory on (35)
July 1, 2020, the beginning of the first quarter of the new fiscal
year (i.e. Beginning Finished Goods Inventory is (8) Zero). To
avoid having that problem in the coming fiscal year, the Large Box
Car Division would like to have the ending inventory of Box Car at
the end of each of the first three quarters equal to (9) 30% of the
budgeted sales for the next quarter. They would like to have (10)
35,000 finished Box Cars on hand on (36) June 30, 2021.
Quarter First Second Third Fourth
Ending FG inventory of Box Cars as a
% of the next quarter’s budgeted
sales (9) 30% 30% 30% ?
Ending FG inventory of Box Cars (10) ? ? ? 35,000
Each large box car requires an average of (11) 5.0 feet of
wood. The Large Box Car Division buys wood for (13) $4.00 per foot
and they expect the price to remain constant throughout the year.
They expect to have (12) 50,000 feet of wood (RAW MATERIALS) on
hand as of July 1, 2019 ((12) 50,000 * ((13) $4.00 = (14) $200,000
- This is beginning Direct Material Inventory), the beginning of
the first quarter of the fiscal year. At the end of each of the
first three quarters, the Large Box Car Division would like to have
their direct materials inventory quantity to equal (15) 25 percent
of the amount required for the following quarter’s planned
production. On (33) June 30, 2020, the end of the fiscal year,
Large Box Car Division would like to have (16) 60,000 feet of wood
on hand (This is ending Direct Material Inventory)..
Quarter First Second Third Fourth
Ending DM inventory as a % of the
next quarter’s production
requirement (15) 25% 25% 25% ?
Ending DM inventory in feet (16) ? ? ? 60,000
The Large Box Car Division buys its wood on account. It pays
for (17) 35% of its purchases of direct materials in the quarter in
which they were purchased and (18) 65% in the quarter after they
were purchased.
Each large box car requires (19) 5 hours of direct labor.
Employees engaged in direct labor will be paid an estimated (20)
$10.00 per labor hour. Wages and salaries are paid on the 15th and
30th of each month.
Variable manufacturing overhead is estimated to be (21) $4.50
per direct labor hour for the coming fiscal year. All variable
manufacturing overhead expenses are paid for in the quarter
incurred.
Fixed manufacturing overhead is estimated to total (22)
$120,000 each quarter, with (23) $40,000 out of the total amount of
(22) $120,000 representing depreciation on machinery, equipment and
the factory. All other fixed manufacturing overhead expenses are
paid in cash in the quarter they occur. The fixed manufacturing
overhead rate will be computed by dividing the year’s total fixed
manufacturing overhead by the year’s budgeted direct labor hours.
Round the fixed overhead rate to the nearest penny.
Variable selling and administrative expenses are estimated to
be (24) $12.00 per box car sold. Fixed selling and administrative
expenses are expected to total (25) $95,000 each quarter, with (26)
$30,000 out of the total amount of (25) $95,000 representing
depreciation on the office space, furniture and equipment. Other
than depreciation, all selling and administrative expenses are paid
for in the quarter they occur.
On (33) June 30, 2020 the Large Box Car Division plans to buy
new machinery and equipment for (27) $1,000,000. The new machinery
and equipment will be acquired at the very end of the fiscal year,
so it will not be used in production and sales during the coming
year and it will not be depreciated until the following year. The
Large Box Car Division expects to pay (28) 40% down in cash and
finance the remaining (29) 60% of the equipment cost with a note
payable from a local bank with whom they do business with. No
interest payable will accrue on the equipment note payable until
after (33) June 30, 2020.
The Division must maintain a minimum cash balance of (30)
$100,000. If after accounting for cash receipts and disbursements
(including dividends) in the cash budget, the budgeted cash
available cash falls below (30) $100,000 in any quarter, the
Division will need to borrow cash. They have arranged a line of
credit allowing it to borrow in $10,000 increments (i.e. they can
borrow $10,000 or $20,000 etc. but not an odd amount). Assume
borrowing will take place at the beginning of any quarter in which
the available cash would otherwise be below (30) $100,000 so that
at no time during the quarter will the cash balance fall below (30)
$100,000 (after payment of interest). If there is extra cash at the
end of the quarter and there is borrowing outstanding, the division
should pay down principal (also in increments of $10,000). The bank
charges the Division interest at the rate of (31) 3% per quarter.
Interest accrued in the quarter will be paid the first day of the
next quarter (e.g. Q1’s interest is not paid in cash until Q2 and
Q2’s Interest will be paid in Q3).
As a fully owned subsidiary, the Large Box Car Division does
not pay income taxes. All income taxes are charged to Tommy’s Box
Car’s, the parent company. Large Box Car Division will pay
dividends of (32) $50,000 each quarter to its corporate parent,
Tommy’s Box Car’s. The dividends must be paid, even if the Large
Box Car Division has to borrow on its line of credit to make the
payment
The budgeted balance sheet for the Large Box Car Division on
(34) June 30, 2020 (which is the same as the budgeted balance sheet
at the beginning of business (35) July 1, 2020) is presented below.
Tommy’s Box Cars owns 100% of the Capital Stock of the Large Box
Car Division.
LARGE BOX CAR DIVISION – TOMMY’S BOX CARS
BUDGETED BALANCE SHEET
(34) JUNE 30, 2020
ASSETS LIABILITIES & EQUITY
Cash $1,450,000 Accounts Payable $450,000
Accounts Receivable 3,900,000 Notes Payable 0
Raw Material Inventory (14) 200,000 Capital Stock
3,500,000
Plant and Equipment 8,900,000 Retained Earnings
10,550,000
TOTAL ASSETS $14,450,000 TOTAL LIAB. & SE
$14,550,000
Solutions
Expert Solution
| Tommy's Box Car | |||||
| Sales Budget | |||||
| 1) | First | Second | Third | Fourth | |
| Sales (Units)=(A) | 65000 | 70000 | 55000 | 60000 | |
| Selling Price per unit=(B) | $ 130.00 | $ 130.00 | $ 130.00 | $ 130.00 | |
| Sales Price=(A)*(B) | $ 84,50,000.00 | $ 91,00,000.00 | $ 71,50,000.00 | $ 78,00,000.00 | |
| Tommy's Box Car | |||||
| Schedule of Expected cash collection | |||||
| First | Second | Third | Fourth | ||
| Accounts Receivable | 3900000 | ||||
| Sales of First ($8450000*30%),($8450000*70%) | $ 25,35,000.00 | $ 59,15,000.00 | |||
| Sales of Second($9100000*30%),($9100000*70%) | $ 27,30,000.00 | $ 63,70,000.00 | |||
| Sales of Third($7150000*30%),($7150000*70%) | $ 21,45,000.00 | $ 50,05,000.00 | |||
| Sales of Fourth($7800000*30%),($7800000*70%) | $ 23,40,000.00 | ||||
| Total Collection | |||||
| Tommy's Box Car | |||||
| Production Budget | |||||
| 2) | First | Second | Third | Fourth | |
| Expected Unit Sales=(A) | 65000 | 70000 | 55000 | 60000 | |
| Finished Goods Inventory=(B) | 21000 | 16500 | 18000 | 35000 | |
| Total Units Required=(C )=(A)+(B) | 86000 | 86500 | 73000 | 95000 | |
| Beginning Finished Goods Inventory=(D ) | 0 | 21000 | 16500 | 18000 | |
| Required Production units=(C )-(D) | 86000 | 65500 | 56500 | 77000 | |
| First | Second | Third | Fourth | ||
| Finished goods Inventory | (70000*30%) | (55000*30%) | (60000*30%) | 35000 | |
| Beginning goods Inventory | 0 | (70000*30%) | (55000*30%) | (60000*30%) | |
| Tommy's Box Car | |||||
| 3) | Direct Material Budget | ||||
| First | Second | Third | Fourth | ||
| Units to be produced=(A) | 86000 | 65500 | 56500 | 77000 | |
| Direct Material required per unit in feet=(B) | 5 | 5 | 5 | 5 | |
| Total lbs required for production=(C )=(A)*(B) | 430000 | 327500 | 282500 | 385000 | |
| Ending Raw Material=(D) | 81875 | 70625 | 96250 | 60000 | |
| Total Raw Material Required=(E )=(C )+(D) | 511875 | 398125 | 378750 | 445000 | |
| Beginning Raw Material=(F ) | 50000 | 81875 | 70625 | 96250 | |
| Direct Raw Material Purchase=(G)=(E )-(F ) | 461875 | 316250 | 308125 | 348750 | |
| Cost per pound of raw material=(H) | $ 4.00 | $ 4.00 | $ 4.00 | $ 4.00 | |
| Cost of Direct Material purchase(G)*(H) | $ 18,47,500.00 | $ 12,65,000.00 | $ 12,32,500.00 | $ 13,95,000.00 | |
| First | Second | Third | Fourth | ||
| Ending Raw Material | (327500*25%) | (282500*25%) | (385000*25%) | 60000 | |
| Beginning Raw Material | 50000 | (327500*25%) | (282500*25%) | (385000*25%) | |
| Schedule of expected cash payment | |||||
| First | Second | Third | Fourth | ||
| Accounts Payable | $ 4,50,000.00 | ||||
| First($1847500*35%),($1847500*65%) | $ 6,46,625.00 | $ 12,00,875.00 | |||
| Second($1265000*35%),($1265000*65%) | $ 4,42,750.00 | $ 8,22,250.00 | |||
| Third($1232500*35%),($1232500*65%) | $ 4,31,375.00 | $ 8,01,125.00 | |||
| Fourth($1395000*35%),($1395000*65%) | $ 4,88,250.00 | ||||
| Total Cash disbursement for materials | $ 10,96,625.00 | $ 16,43,625.00 | $ 12,53,625.00 | $ 12,89,375.00 | |
| Tommy's Box Car | |||||
| 4) | Direct Labor Budget | ||||
| First | Second | Third | Fourth | ||
 ekkarill92 answered 1 year agoRelated SolutionsQuestions 9 and 10 DATE: June 1, 2020 TO: CCSU Consulting FROM: Mark Swain, President, Tommy’s...Questions 9 and 10
DATE: June 1, 2020
TO: CCSU Consulting
FROM: Mark Swain, President, Tommy’s Box Cars
SUBJECT: Master Budget for the fiscal year July 1, 2020 – June
30, 2021
----------------------------------------------------------------------------------------------------------------------------------
Our controller, Tommy Swain is negotiating with potential new
Wood suppliers in Kentucky. We need the Large Box Car Division’s
Master Budget for the fiscal year ended (36) June 30, 2021 for our
corporate strategic planning process, and we cannot wait for
Tommy’s return from Kentucky. We...
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Please show steps
Thank You
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