Question

Jacobs Incorporated manufactures a product with a selling price of $55 per unit. Units and monthly cost data follow:

Variable:

• Selling and administrative: $4.60 per unit

• Direct materials: $15.25 per unit manufactured

• Direct labor: $12.50 per unit manufactured

• Variable manufacturing overhead: $7.00 per unit manufactured

Fixed:

• Selling and administrative: $60,000 per month

• Manufacturing (including depreciation of $10,000): 45,000 per month

Jacobs Incorporated pays all bills in the month incurred. All sales are on account with 60 percent collected the month of sale and the balance collected the following month. There are no sales discounts or bad debts.

Jacobs Incorporated desires to maintain an ending finished goods inventory equal to 25 percent of the following month’s sales and a raw materials inventory equal to 16 percent of the following month’s production. January 1, 2018 inventories are in line with these policies.

Actual unit sales for December 2017 and budgeted unit sales for January, February and March of 2018 are as follows:

month	december	january	february	march
Sales-units	9600	8100	9925	12125
Sales dollars	$ 528,000.00	$ 445,500.00	$ 545,875.00	$ 666,875.00

Additional Information:

• The January 1 beginning cash is projected as $5,125.

• The company requires a minimum cash balance of $5,000 and may borrow any amount needed from a local bank at a monthly interest rate of 4%. The company borrows money at the beginning of the month and repayments are made at the end of the month. Interest payments are due monthly.

• For the purpose of operational budgeting, units in the January 1 inventory of finished goods are valued at variable manufacturing cost.

• Each unit of finished product requires one unit of raw materials.

• Jacobs Inc intends to pay a cash dividend of $30,000 in January.

Complete the following budgets (each should be on a separate tab in excel):

Please double check my work for questions a, b, c and need help to fill in the blanks on questions d & e. Thanks!

a. A production budget for January and February.

Production Budget
For the Months of January and February of 2018
Particulars	January	February	March
Requirements for current sales (Unit)	8100	9925	12125
Desired ending inventory	2481	3031
Total Requirements	10581	12956	12125
Less: Beginning Inventory	2025	2481	3031
Production Requirements (units)	8556	10475	9094

b. A purchases budget in units for January.

Purchases Budget
For the month of January 2018
Particulars	January	February
Current Requirements (units)	8100	9925
Desired Ending Inventory	1676	1455
Total Requirements	9776	11380
Less: Beginning Inventory	1296	1588
Purchases (units)	8480	9792
Purchases (dollars at $10 each)	$84,800.00	$97,920.00

c. A manufacturing cost budget for January.

Manufacturing Cost Budget
For the month of January 2018
Particulars	January
Direct Materials	$130,482.81
Direct Labor	$106,953.13
Variable Manufacturing Overhead	$59,893.75
Total Variable Cost	$297,329.69
Fixed Manufacturing Overhead	$45,000.00
Total Manufacturing Overhead	$342,329.69

d. A cash budget for January.

Cash Budget
For the month of January 2018
Particulars	January
Beginning Balance	$5,125.00
Receipts:
December Sales	$290,400.00
January Sales	$245,025.00
Total Cash Available	$535,425.00
Disbursements:
Purchases
Direct Labor
Variable Manufacturing Overhead
Fixed Manufacturing Overhead (exclude depreciation)
Variable Selling and Administrative
Fixed Selling and Administrative
Dividend
Ending Balance

e. A budgeted contribution income statement for January.

Budgeted Contribution Income Statement
For the month of January 2018
Particulars		Amount
Sales
Less: Variable Cost
Cost of Goods Sold
Selling and Administrative
Contribution
Less Fixed Costs
Manufacturing Overhead
Selling and Administrative
Net Income

Answer 1

a. A production budget for January and February.
Production Budget
For the Months of January and February of 2018
Particulars	January	February	March
Requirements for current sales (Unit)	8100	9925	12125
Desired ending inventory	2481	3031
Total Requirements	10581	12956	12125
Less: Beginning Inventory	2025	2481	3031
Production Requirements (units)	8556	10475	9094

b. A purchases budget in units for January.
Raw materials Purchases Budget
For the month of January 2018
Particulars	January	February
Production Requirements (units)	8556	10475	9094
Raw material Requirements ( 1 unit/I unit of prodn.)	8556	10475	9094
Desired Ending Inventory(16% * next mth.need)	1676	1455
Total Requirements	10232	11930
Less: Beginning Inventory	1369	1676
Purchases Required (units)	8863	10254
Purchases ( $ 15.25 each)	135161	156374

c. A manufacturing cost budget for January.
Manufacturing Cost Budget
For the month of January 2018
Particulars	January
Direct Materials (8556*15.25)	130479
Direct Labor (8556* 12.50)	106950
Variable Manufacturing Overhead (8556*7)	59892
Total Variable Cost	297321
Fixed Manufacturing Overhead	45000
Total Manufacturing cost	342321

d. A cash budget for January.
Cash Budget
For the month of January 2018
Particulars	January
Beginning Balance	5125
Receipts:
December Sales (528000*60%)	211200
January Sales (445500*60%)	267300
Total Cash Available	483625
Disbursements:
Purchases	135161
Direct Labor	106950
Variable Manufacturing Overhead	59892
Fixed Manufacturing Overhead (exclude depreciation)	35000
Variable Selling and Administrative (8100*4.60)	37260
Fixed Selling and Administrative	60000
Dividend	30000
Total disbursements	464263
Ending Balance	19362

e. A budgeted contribution income statement for January.
Budgeted Contribution Income Statement
For the month of January 2018
Particulars	Per unit	Total Amount
Sales (8100*55)	55	445500
Less: Variable Cost (15.25+12.5+7)*8100	34.75	281475
Cost of Goods Sold	20.25	164025
Selling and Administrative (8100*4.6)	4.6	37260
Contribution	15.65	126765
Less Fixed Costs
Manufacturing Overhead		45000
Selling and Administrative		60000
Net Income		21765