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I ONLY need parts 5-8 answered please. Thank you! Endless Mountain Company manufactures a single product...

I ONLY need parts 5-8 answered please. Thank you!

Endless Mountain Company manufactures a single product that is popular with outdoor recreation enthusiasts. The company sells its product to retailers throughout the northeastern quadrant of the United States. It is in the process of creating a master budget for 2019 and reports a balance sheet at December 31, 2018 as follows:

Endless Mountain Company
Balance Sheet
December 31, 2018
Assets
Current assets:
Cash $ 46,200
Accounts receivable (net) 260,000
Raw materials inventory (4,500 yards) 11,250
Finished goods inventory (1,500 units) 32,250
Total current assets $ 349,700
Plant and equipment:
Buildings and equipment 900,000
Accumulated depreciation (292,000 )
Plant and equipment, net 608,000
Total assets $ 957,700
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 158,000
Stockholders’ equity:
Common stock $ 419,800
Retained earnings 379,900
Total stockholders’ equity 799,700
Total liabilities and stockholders’ equity $ 957,700

The company’s chief financial officer (CFO), in consultation with various managers across the organization has developed the following set of assumptions to help create the 2019 budget:

  1. The budgeted unit sales are 12,000 units, 37,000 units, 15,000 units, and 25,000 units for quarters 1-4, respectively. Notice that the company experiences peak sales in the second and fourth quarters. The budgeted selling price for the year is $32 per unit. The budgeted unit sales for the first quarter of 2020 is 13,000 units.
  2. All sales are on credit. Uncollectible accounts are negligible and can be ignored. Seventy-five percent of all credit sales are collected in the quarter of the sale and 25% are collected in the subsequent quarter.
  3. Each quarter’s ending finished goods inventory should equal 15% of the next quarter’s unit sales.
  4. Each unit of finished goods requires 3.5 yards of raw material that costs $3.00 per yard. Each quarter’s ending raw materials inventory should equal 10% of the next quarter’s production needs. The estimated ending raw materials inventory on December 31, 2019 is 5,000 yards.
  5. Seventy percent of each quarter’s purchases are paid for in the quarter of purchase. The remaining 30% of each quarter’s purchases are paid in the following quarter.
  6. Direct laborers are paid $18 an hour and each unit of finished goods requires 0.25 direct labor-hours to complete. All direct labor costs are paid in the quarter incurred.
  7. The budgeted variable manufacturing overhead per direct labor-hour is $3.00. The quarterly fixed manufacturing overhead is $150,000 including $20,000 of depreciation on equipment. The number of direct labor-hours is used as the allocation base for the budgeted plantwide overhead rate. All overhead costs (excluding depreciation) are paid in the quarter incurred.
  8. The budgeted variable selling and administrative expense is $1.25 per unit sold. The fixed selling and administrative expenses per quarter include advertising ($25,000), executive salaries ($64,000), insurance ($12,000), property tax ($8,000), and depreciation expense ($8,000). All selling and administrative expenses (excluding depreciation) are paid in the quarter incurred.
  9. The company plans to maintain a minimum cash balance at the end of each quarter of $30,000. Assume that any borrowings take place on the first day of the quarter. To the extent possible, the company will repay principal and interest on any borrowings on the last day of the fourth quarter. The company’s lender imposes a simple interest rate of 3% per quarter on any borrowings.
  10. Dividends of $15,000 will be declared and paid in each quarter.
  11. The company uses a last-in, first-out (LIFO) inventory flow assumption. This means that the most recently purchased raw materials are the “first-out” to production and the most recently completed finished goods are the “first-out” to customers.

Required:

The company’s CFO has asked you to prepare the 2019 master budget. To fulfill this request, prepare the following budget schedules and financial statements.

1. Quarterly sales budget including a schedule of expected cash collections.

2. Quarterly production budget.

3. Quarterly direct materials budget including a schedule of expected cash disbursements for purchases of materials.

4. Quarterly direct labor budget.

5. Quarterly manufacturing overhead budget.

6. Ending finished goods inventory budget at December 31, 2019.

7. Quarterly selling and administrative expense budget.

8. Quarterly cash budget.

9. Income statement for the year ended December 31, 2019.

10. Balance sheet at December 31, 2019.

Required:

1. Calculate the following budgeted figures for 2019:

a. The total fixed cost.

b. The variable cost per unit sold.

c. The contribution margin per unit sold.

d. The break-even point in unit sales and dollar sales.

e. The margin of safety.

f. The degree of operating leverage

2. Prepare a budgeted variable costing income statement for 2019. Stop your computations at net operating income.

Solutions

Expert Solution

Manufacturing Overhead Budget
Q1 Q2 Q3 Q4 Year
Budgdted direct labor hr               4,012.5               8,425.0               4,125.0           5,800.0            22,362.5
V. Factory OH rate 3 3 3 3 3
Variable manufacturing OH          12,037.50          25,275.00          12,375.00      17,400.00          67,087.50
Fixed manufacturing OH              150,000              150,000              150,000          150,000              600,000
Total manufacturing OH        162,037.50        175,275.00        162,375.00    167,400.00        667,087.50
Less: Depreciation                20,000                20,000                20,000            20,000                80,000
Cash Disbursement for MOH        142,037.50        155,275.00        142,375.00    147,400.00        587,087.50
Total Manufacturing OH              667,088
Budgdted Direct labor hr          22,362.50
Predetermined OH Rate                  29.83
Manufacturing Overhead Budget
Item Quantity Cost Total
Production Cost per Unit:
    Direct Material 3.5 yards                           3 per yard                  10.50
    Direct Labor 0.25 Hours 18 per hr                     4.50
    Manufacturing OH 0.25 Hours                  29.83 per hr                     7.46
    Unit Product Cost                  22.46
Budgdted Finished Goods Inventory:
   Units from prior year's production 1500
   Unit product Cost                  21.50
    Cost from prior year production          32,250.00
Units from current year productions                      450
   Unit product Cost                  22.46
   Cost from current year production                10,107
Cost of Ending finished goods inventory          42,357.00
Selling Expense Budget
Q1 Q2 Q3 Q4 Year
Budgdted Unit Sales                12,000                37,000                15,000            25,000                89,000
Variable selling and admin exp per unit                     1.25                     1.25                     1.25                 1.25                     1.25
Total variable selling expnse                15,000                46,250                18,750            31,250              111,250
Fixed selling and admin expense
Advertisement 25000                25,000                25,000            25,000              100,000
Executive Salaries 64000                64,000                64,000            64,000              256,000
Insurance 12000                12,000                12,000            12,000                48,000
Property TAXES 8000                  8,000                  8,000              8,000                32,000
Depreciation Expense 8000                  8,000                  8,000              8,000                32,000
Total fixed selling and admin exp              117,000              117,000              117,000          117,000              468,000
Total selling and admin expnese              132,000              163,250              135,750          148,250              579,250
Less: Depreciation                   8,000                  8,000                  8,000              8,000                32,000
Total Budgdted selling expense              124,000              155,250              127,750          140,250              547,250
Cash Budget
Q1 Q2 Q3 Q4 Year
Cash balance, beginning                46,200                30,000              244,649          314,337                46,200
Cash receipt from customer              548,000              984,000              656,000          720,000          2,908,000
Total cash available              594,200          1,014,000              900,649      1,034,337          2,954,200
Less: Cash Payments for
Direct Material              291,287              292,176              226,937          218,054          1,028,453

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