Question

The Jarrad Corporation's management team is getting ready to prepare its master budget for one its product lines for the year 2019. The company produces caramel lollipops which are basically cooked down sugar on a stick, a diabetics nightmare along with many other sweet treats.

Budgeted sales of the lollipops for each quarter of 2019 are as follows:

1st Quarter-12,500 cases , 2nd Quarter-14,000 cases , 3rd Quarter-25,500 cases , 4th Quarter-34,900 cases

There are 100 lollipops in a case and each sells for $200. Jarrad is budgeting a 5% sales price increase effective July 1,2019

The 4th Quarter 2018 sales have been budgeted at 32,000 cases and Jarrad wants to have an ending inventory carried over into 2019 of 2,000 cases.

At the end of 2019 they desire an ending inventory of 2,250 cases. Each quarter an additional 10% of that quarter's sales is to be produced as an ending inventoy to be carried over into the following quarter.

Budget amount of sales revenue for 2019:

1^st Quarter $2,500,000 , 2^nd Quarter $2,800,000 , 3^rd Quarter $5,100,000 , 4^th Quarter $6,980,000

Budget sales for 2019: $17,380,000

Cases of lollipop produced in 2019:

1st Quarter $1,175,000 ,  2nd Quarter $1,415,000 , 3rd Quarter $2,665,000 , 4th Quarter $3,460,000

Budget cost of the sugar which is required to produce the total number of lollipops to be produced in 2019: $3,486,000

Budget cost of the chocolate which is required to produce the total number of lollipops budgeted in 2019: $305,025

Budget cost of the lollipop sticks which are required to produce the lollipop in 2019: $261,450

Budget direct labor hours required to produce the total number of cases of lollipops for 2019: $21,787.50

Budget direct labor cost for 2019: $239,662.50

Manufacturing Overhead Costs:

Budget amount of machine-maintenance and operational cost for 2019: $39,375

The other budgeted overhead costs include

Supervisors salaries are $40,000 per quarter (there are 2 plant supervisors)

Insurance on the factory-$22,700 annually

Rent on the warehouse-$2,000 per month

Quality Control Inspections-$5 per each case produced

Depreciation of factory equipment=$6,000 per year

Janitorial and Maintenance staff wages are budgeted at $15,000 per quarter

Total budget overhead cost for 2019: $44,047,075

Total budget manufacturing cost for the units to be produced in 2019: $48,339,212.50

Budget cost per unit to be produced:   $5.55

Budget cost of goods to be sold in 2019:   $4,695,162.5

Selling and Administrative Expenses:

Sales Salaries are budgeted at $50,000 per quarter

Sales Commissions are budgeted at 7% of sales

Advertising is budgeted at 5% of sales

Officers and Administrative Salaries are budgeted at $110,000 per quarter

Rent on the corporate and sales offices is $2,700 per month

Depreciation on selling and office furniture and equipment=$4,200 per year

Other corporate expenses are budgeted at $7,500 per quarter

Other Nonoperating Income, Expenses, Gains and Losses:

Jarrad has an outstanding banl loan of $500,000 and it pays 8% interest each year with the principal coming due in 2020.

Jarrad is planning to replace some outdated equipment which has an estimated residual value of $32,000 in 2019. Another cpompany has offered to purchase it for $45,000 in March after all depreciation will have been taken.

Jarrad budgets income taxes based on its income before taxes at the rate of 35%.

Budget selling and administrative expenses of 2019: $2,791,600

Budget Income from Operations for the Jarrad Corporation for 2019: $10,493,237

Jarrad forescasted 13,700 cases of lollipop to be sold in the 4th quarter of 2018 at $185 per case. All of its sales are on account with 75% collected in the same quarter the sales are made and the other 25% in the following quarter.

-Question : Based on this how much cash will be collected from customers in

1st Quarter 2019? .................................

2nd Quarter 2019?..................................

3rd Quarter 2019?..................................

4th Quarter 2019?.................................

Question: Total cash collections from Customers in 2019?...................................

The materials are all purchased on account and 80% of the purchases are paid for in the quarter they are made, with 20% being paid in the following quarter. The accounts payable forecasted for 12-31-18 is $109,500.

-Question: Based on this how much cash is to be paid out for costs and expenses in 2019? Assume all of the labor, overhead (excluding depreciation) and selling and administrative expenses (excluding depreciation) are paid during 2019. 75% of the budgeted income taxes for 2019 will be paid in 2019 in April, August and December and $112,000 of income taxes remaining from 2018 are to be paid when the 2018 corporate tax return in filed in March 2019.

$.....................................................................

Jarrad is plannning to have a $80,000 cash balance at the beginning 2019 and should its cash balance fall bellow $50,000 at any time during 2019, it has a bank line of credit which it can borrow on to restore the balance to the minimum $50,000. In the 3rd quarter old equipment is budgeted for replacement at a cost of $275,000. The company is also planning to acquire real estate for use as a factory, warehouse and office facility. The property is 9,100 square feet and a pending offer of $5,250,000 has been made. A cash down payment of 40% of the purchase price will be made during June. Interest only payments on the borrowed funds (60%) will be made on a monthly basis beginning 8-1-19 at an annual rate of 6.5%.

-Question: Based on the info above, what is the budgeted amount of cash to be on hand at the end of the 1st quarter of 2019? If borrowing on the line of credit is required the interest rate is 3% per quarter until the funds are repaid? $...........................................................

-Question: Based on the above info, what is the budgeted about of cash on hand at the end of the year 2019?..................

-Question: What will be the budgeted Non-Operating Income for Jarrad Corporation for 2019?......................

-Question: What will be the budgeted Income after taxes for the Jarrad Corporation for 2019?......................

Answer 1

Sales Budget--2019
	1st Qtr	2nd Qtr	3rd Qtr	4th Qtr	Total
In units	12500	14000	25500	34900	86900
Price/case	200	200	210	210
Total $ sales	2500000	2800000	5355000	7329000	17984000
NOTE: Jarrad is budgeting a 5% sales price increase effective July 1,2019
Collections:
75%Collecns	1875000	2100000	4016250	5496750	13488000
25% collecns.	633625	625000	700000	1338750	3297375
Total cash collections	2508625	2725000	4716250	6835500	16785375
Production Budget---2019
sales budgeted -units	12500	14000	25500	34900	86900
Add: DesiredEnd.Inv.	1250	1400	2550	2250	2250
Total units needed	13750	15400	28050	37150	89150
Less: Beg.Inv.	2000	1250	1400	2550	2000
Production Reqd.(cases)	11750	14150	26650	34600	87150
Prodn. (lollipops)	1175000	1415000	2665000	3460000	8715000
						Per Lollipop	Per case
Cost of sugar	470000	566000	1066000	1384000	3486000	0.4	40
Cost of chocolate	41125	49525	93275	121100	305025	0.035	3.5
Cost of lollipop stick	35250	42450	79950	103800	261450	0.03	3
Total cost of materials for prodn.	546375	657975	1239225	1608900	4052475	0.465	46.5

Direct labor hrs.	2937.5	3537.5	6662.5	8650	21787.5	0.0025	0.25
Payment for direct Labor
Direct labor cost	32312.5	38912.5	73287.5	95150	239662.5	0.0275	2.75

Mfg. OH Costs
M/c. maint.&opl.costs	9843.75	9843.75	9843.75	9843.75	39375
Supervisor salaries	40000	40000	40000	40000	160000
Insurance -Factory	5675	5675	5675	5675	22700
Rent-warehouse	6000	6000	6000	6000	24000
Quality control inspns.($5/case produced)	58750	70750	133250	173000	435750
Janitorial &maint. Wages	15000	15000	15000	15000	60000
Total cash mfg. Oh costs	135268.8	147268.8	209768.8	249518.8	741825
Depreciation-Fac.eqp.					6000
Sell.& admn. Exp.
Sales salaries	50000	50000	50000	50000	200000
Sales commissions	175000	196000	374850	513030	1258880
Advertsing exp.	125000	140000	267750	366450	899200
Officers& admn. Salaries	110000	110000	110000	110000	440000
Rent-corporate& sales office	8100	8100	8100	8100	32400
Other corporate expense	7500	7500	7500	7500	30000
Total cash sell.& admn. Exp.	475600	511600	818200	1055080	2860480
Depn. Selling eqpt.					4200