Question

For the first quarter of 2017, do the following.

(a) Prepare a sales budget. This is similar to Illustration 21-3 on page 1088 of your textbook.

(b) Prepare a production budget. This is similar to Illustration 21-5 on page 1089 of your textbook.

(c) Prepare a direct materials budget. (Round to nearest dollar) This is similar to Illustration 21-7 on page 1091 of your textbook.

(d) Prepare a direct labor budget. (For calculations, round to the nearest hour.) This is similar to Illustration 21-9 on page 1094 of your textbook.

(e) Prepare a manufacturing overhead budget. (Round intermediate amounts to the nearest dollar.) This is similar to Illustration 21-10 on page 1094 of your textbook.

(f) Prepare a selling and administrative budget. This is similar to Illustration 21-11 on page 1095 of your textbook.

(g) Prepare a budgeted income statement. (Round intermediate calculations to the nearest dollar.) This is similar to Illustration 21-13 on page 1096 of your textbook.

(h) Prepare a cash budget. This is similar to Illustration 21-17 on page 1100 of your textbook.

(You will need to prepare schedules for expected collections from customers and expected payments to vendors first. See Illustrations 21-15 and 21-16 on page 1099 of your textbook for guidance.)

Rules:

* Use Excel's functionality to your benefit. Points are lost for lack of formula.

* Use proper formats for schedules, following the referenced textbook examples.

* Use dollar-signs and underscores where appropriate.

* Double-check your work! Verify your formula and logic!

Grading Guidelines:

Effective Use of Excel

40%

Facts, Logic

20%

Completeness

30%

Spelling, Punctuation, Value Format

10%

Serious Business, Inc.
The company is preparing its budget for the coming year, 2017. The first step is to plan for the first quarter of that coming year. The following information has been gathered from their managers.
Sales Information
Period	Units
November	108,000	Actual	Grading guidelines are on the instructions tab.
December	97,000	Actual
January	106,000	Planned
February	107,000	Planned
March	109,000	Planned
April	119,000	Planned
May	130,000	Planned
Unit selling price	$                    12.00
Finished Goods Inventory Planning
The company likes to keep 10% of the next month’s unit sales in finished goods ending inventory.
Accounts Receivable & Collections
Sales on Account	100%
Collections Activity
Month of Sale	75%
Month after Sale	25%
Balance at 12/31/16	$         185,000.00
Materials Inventory Costs & Planning
Direct Materials	Amount Used per Unit		Cost
Metal	2	lb	$         1.00	lb
The company likes to keep 5% of the material needed for the next month's production in raw materials ending inventory.
Accounts Payable & Disbursements
Purchases on Account	100%
Payment Activity
Month of Purchase	45%
Month after Purchase	55%
Balance at 12/31/16	$               120,000
Direct Labor & Costs
Time per Unit Production	15	minutes
Pay Rate/Hour	$                      6.00
Manufacturing Overhead Costs
Variable costs per direct labor hour
Indirect materials	$                      0.20
Indirect labor	0.40
Utilities	0.45
Maintenance	0.25
Fixed costs per month
Salaries	$                 42,000
Depreciation	16,800
Property taxes	2,675
Insurance	1,200
Janitorial	1,300
Selling and Administrative Costs
Variable costs per unit sold	$                      1.30
Fixed costs per month
Advertising	$                 15,000
Insurance	14,000
Salaries	72,000
Depreciation	25,000
Other fixed costs	3,000
Income Taxes
Accrued on Monthly Net Income	45%	rounded to nearest dollar
Amounts Accrued Q4 2016 paid January 2017	$               200,000
Cash and Financing Matters
Cash Balance, 12/31/2016	$                 82,000
2017 Minimum Balance Required	640,000
Monthly Dividends	$                      1.90	per share
Outstanding Shares	5,000
Line of Credit
Limit	None
Borrowing Increment Required	$                    1,000
Interest Rate	9%
Draws	First of Month
Repayments	Last of Month
Interest accumulates to the loan balance and is paid in full with each repayment.
Additional Item
Fixed Asset Purchase	$               400,000
Month	February

Answer 1

a) Sales budget

Sales Budget
	January	Feruary	March	Quarter
Sales units	1,06,000	1,07,000	1,09,000	3,22,000
Selling price	$12	$12	$12
Budgeted sales revenue	$12,72,000	$12,84,000	$13,08,000	$38,64,000

b) Production budget

b) Production Budget
Production Budget January Feruary March Quarter Sales units        1,06,000        1,07,000        1,09,000        3,22,000 Add: closing inventory            10,700            10,900            11,900 Add: opening inventory 10600            10,700            10,900 Budgeted production in units        1,06,100        1,07,200        1,10,000        3,23,300 c) Direct materials budget

Direct Materials Budget
	January	Feruary	March	Quarter
Budgeted production in units	1,06,100	1,07,200	1,10,000	3,23,300
DM required per unit	2	2	2
Total DM required for prod	2,12,200	2,14,400	2,20,000	$6,46,600
Add: closing inventory of DM	10,720	11,000	12,010
Less: beginning inventory DM	10,610	10,720	11,000
Budgeted purchase of DM units	2,12,310	2,14,680	2,21,010
Cost per IB	$1	$1	$1
Budgeted purchases of DM	$2,12,310	$2,14,680	$2,21,010	$6,48,000

d) Direct labour budget

Direct Labor Budget
	January	Feruary	March	Quarter
Budgeted production in units	1,06,100	1,07,200	1,10,000	3,23,300
Direct labor hours per unit	0.25	0.25	0.25
Total DL hours required	26,525	26,800	27,500	80,825
Rate of DL	$6	$6	$6
Budgeted DL	$1,59,150	$1,60,800	$1,65,000	$4,84,950