Question

You are an managerial accountant for Blackmore Industries, and you are preparing the 2018
budget. Consider the following information, and prepare the required budgets according to
the instructions that follow:
Sales Information
November 2017 unit sales (actual)		118,729
December 2017 unit sales (actual)		120,896
January 2018 unit sales (planned)		121,000
Sales price per unit		$13.00
For all months in 2018, unit sales are expected to increase 1.2% over the previous month with the
exception of March, when a planned unit price increase to $13.75 is expected to decrease March
unit sales (compared to February) by 1.8%. The price increase will remain in effect for the rest of
the year.
Finished Goods Inventory Planning
Blackmore plans to keep 15% of the following month's unit sales on hand in finished goods
inventory at the end of any given month. Blackmore has that percentage of January's planned
sales (above) on hand at December 31, 2017.
Accounts Receivable and Collections
All sales are on account. Generally, 44% of each month's sales are collected in the month after
the sale, while 1.4% are never collected, and eventually written off. All other sales are collected
in the month of the sale.
Net (collectible) accounts receivable balance at December 31, 2017:				$691,525.00
Material Inventory Costs and Planning
Each unit of finished product is made from 2 pounds of a metallic raw material that costs $3.68
per pound. Blackmore plans to keep 5% of the following month's raw materials production
needs in inventory at the end of any given month, and has 9,600 pounds of raw material on
hand at December 31, 2017.
Accounts Payable and Disbursements
All material purchases are on account. 32% of purchases are paid for in the month following the
purchase, with the remainder paid for in the month of purchase.
Accounts payable balance at December 31, 2017:				$358,500.00
Direct Labor and Costs
Direct labor time per unit of finished goods			12	minutes
Direct labor cost			$12.45	per hour
Manufacturing Overhead Costs
Indirect materials			$0.25	per direct labor hour
Indirect labor			0.49	per direct labor hour
Maintenance			0.27	per direct labor hour
Utilities			0.39	per direct labor hour
Depreciation			$9,700	per month
Insurance			4,800	per month
Property taxes			2,100	per month
All items except depreciation are paid in the month incurred.
Selling and Administrative Costs
Advertising			$8,900	per month
Insurance			4,800	per month
Salaries			74,200	per month
Depreciation			5,400	per month
Other fixed costs			3,200	per month
All items except depreciation are paid in the month incurred.
Other Budgeting Items
Income tax expense is recorded at 25% of pretax net income. The company makes estimated
payments monthly for these amounts.
A budgeted purchase of fixed assets in the amount of $475,000 is planned for February, 2017.
Because the company uses a mid-year convention for depreciation calculations, this purchase
will not affect budgeted depreciation expense in the first quarter.
At December 31, 2017, Blackmore has $297,500 in cash. Hendrix maintains a minimum balance of
$250,000 in cash at all times, and any projected cash shortfall will be covered via a borrowing on
a line of credit. The line of credit accrues interest at 6% annualy (0.5% per month), and is repaid
as soon as Hendrix has sufficient cash to repay it while staying above the $250,000 minimum.
For the first quarter of 2018, 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%

Answer 1

	jan	feb	mar	total for quarter		apr	may
sales budget (a)
sales units	121000	121145	120927			121072	121217
price	13	13	13.75
total sales	1573000	1574885	1662746	4810631
production budget (b)
budgeted sales units	121000	121145	120927			121072	121217
add: planned ending units	18172	18139	18161			18183
less: beginning units	-18150	-18172	-18139			-18161
planned production in units	121022	121112	120949	363083		121094
Direct Materials budget [c]
planned production in units	121022	121112	120949			121094
direct material required (lbs) /unit	2	2	2			2
DM required for production in (lbs)	242044	242224	241898			242188
add: budgeted ending DM (lbs)	12111.2	12094.9	12109.4
less: budgeted beginning DM (lbs)	-9600	-12111.2	-12094.9
budgeted DM purchase (lbs)	244555.2	242207.7	241912.5
cost per lb	3.68	3.68	3.68
budgeted DM purchase $	899963	891324	890238	2681525
Direct labour budget (d)
planned production in units	121022	121112	120949
* Direct labor hours/unit (hrs)	0.2	0.2	0.2
budgeted direct labor hours	24204	24222	24190
cost/ diirect labor hr $	12.45	12.45	12.45
budgeted direct labor cost	301340	301564	301166	904070

Excel Formulas

	jan	feb	mar	total for quarter		apr	may
sales budget (a)
sales units	121000	=ROUND(B3+B3*0.0012,0)	=ROUND(C3-C3*0.0018,0)			=ROUND(D3+D3*0.0012,0)	=ROUND(G3+G3*0.0012,0)
price	13	13	13.75
total sales	=B3*B4	=C3*C4	=ROUND(D3*D4,0)	=B5+C5+D5
production budget (b)
budgeted sales units	121000	121145	120927			121072	121217
add: planned ending units	=ROUND(C8*0.15,0)	=ROUND(D8*0.15,0)	=ROUND(G3*0.15,0)			=ROUND(H3*0.15,0)
less: beginning units	=-ROUND(B8*0.15,0)	-18172	-18139			-18161
planned production in units	=SUM(B8:B10)	=SUM(C8:C10)	=SUM(D8:D10)	=B11+C11+D11		=SUM(G8:G10)
Direct Materials budget [c]
planned production in units	121022	121112	120949			=G11
direct material required (lbs) /unit	2	2	2			2
DM required for production in (lbs)	=B14*B15	=C14*C15	=D14*D15			=G14*G15
add: budgeted ending DM (lbs)	=0.05*C16	=0.05*D16	=0.05*G16
less: budgeted beginning DM (lbs)	-9600	=-B17	=-C17
budgeted DM purchase (lbs)	=SUM(B16:B18)	=SUM(C16:C18)	=SUM(D16:D18)
cost per lb	3.68	3.68	3.68
budgeted DM purchase $	=ROUND(B19*B20,0)	=ROUND(C19*C20,0)	=ROUND(D19*D20,0)	=B21+C21+D21
Direct labour budget (d)
planned production in units	121022	121112	120949
* Direct labor hours/unit (hrs)	=12/60	=12/60	=12/60
budgeted direct labor hours	=ROUND(B24*B25,0)	=ROUND(C24*C25,0)	=ROUND(D24*D25,0)
cost/ diirect labor hr $	12.45	12.45	12.45
budgeted direct labor cost	=ROUND(B26*B27,0)	=ROUND(C26*C27,0)	=ROUND(D26*D27,0)	=B28+C28+D28