Question

Part 2 Computer Accessories assembles a computer

Beginning-of-year balances
	Cash			$50,000
	Accounts receivables (previous quarter's sales)			$61,200
	Raw materials			653	Kits
	Finished Goods			510	Units
	Accounts payable			$33,255
Desired end-of-year inventory balances
	Raw materials			500	kits
	Finished goods			270	units
Desired end-of-quarter balances
	Raw materials as a portions of the following quarter's production			20%
	Finished goods as a portion of the following quarter's sales			15%
Manufacturing costs other than raw materials are paid in month incurred unless it is an noncash expense
	Variable Standard cost per unit	Unit of input		Unit price per input	Total cost per unit
	Raw materials	1	kit	$50	$50
	Direct labor hours at rate	0.8	hour	$25	$20
	Variable overhead/labor hour	0.8	hour	$10	$8
	Total Variable Standard cost per unit				$78
	Fixed overhead cost per quarter used cash			$50,000
	Manufacturing Depreciation per quarter			$10,000
Selling and administrative costs are paid in month incurred unless it is an noncash expense
	Variable cost per unit			$6
	Fixed selling and administrative cost per quarter used cash			$25,000
	Selling and administrative depreciation per quarter			$5,000
Additional information:   All cash payments except purchases are made quarterly as incurred.
Portion of sales collected
	Collected in the quarter of sale			75%
	Subsequent quarter			24%
	Bad debts			1%
Portion of purchases paid
	Paid in the quarter of purchases			70%
	Subsequent quarter			30%
Unit selling price				$150
Sales forecast
	Quarter	First	Second	Third	Fourth
	Unit sales	3,400	2,500	3,000	4,100

Required: Prepare and answer the following.                                                                                                            

1. A sales budget for each quarter and the year.                                                                                                        

2. A production budget for finished goods of units each quarter and the year.                                                                                                              

3. A purchases budget for raw material of kits each quarter and the year.                                                                                                                     

4. A manufacturing cost budget for each quarter and the year.                                                                                                           

5. A selling and administrative expense budget for each quarter and the year.                                                                                                             

6. A cash budget for each quarter and the year.                                                                                                         

7. A pro-forma contribution income statement for each quarter and the year.                                                                                                             

Hint: You will need to compute Variable Cost of Goods Sold for each quarter, which is unit sold times total Variable Standard cost per unit.                                                                                                         

8. Using your information from #7, compute the Breakeven in dollars for the year.

Hint: Compute the annual contribution margin ratio.                                                                                                              

9. What if the company is able to lower the fixed Manufacturing overhead costs that uses cash per quarter from $50,000 to $45,000. Which budgets will change and what will be the new annual income?                                                                                                               

You should only have to change the fixed manufacturing overhead costs that uses cash on this worksheet and all the appropriate budgets will change on the solution worksheet if you have                                                                                                                        

set up your cell references correctly. Please make sure you return the Fixed manufacturing overhead costs that uses cash back to the original number before you submit your solution.                                                                                                                       

Answer 1

1. Sales Budget:

Particulars	Quarter-1	Quarter-2	Quarter-3	Quarter-4	Yearly
Sales Unit	3,400	2,500	3,000	4,100	13,000
Selling Price per unit	$ 150	$ 150	$ 150	$ 150	$ 150
Total Sales Revenue	510,000	375,000	450,000	615,000	1,950,000

2. Production Budget:

Particulars	Quarter-1	Quarter-2	Quarter-3	Quarter-4	Yearly
Opening Stock of Finished Goods (A)	510	375	450	615	510
Closing Stock of Finished Goods (B)	375	450	615	270	270
Sales Unit (C)	3,400	2,500	3,000	4,100	13,000
Production Unit (C+B-A)	3,265	2,575	3,165	3,755	12,760

Calculation of Closing Unit:

Q-1 = Sales of Unit Q2 X 15% = 2,500 X 15% = 375

Q-2 = Sales of Unit Q3 X 15% = 3,000 X 15% = 450

Q-3 = Sales of Unit Q4 X 15% = 4,100 X 15% = 615

3. Purchase Budget:

Particulars	Quarter-1	Quarter-2	Quarter-3	Quarter-4	Yearly
Opening Stock of Kit (A)	653	515	633	751	653
Closing Stock of Kit (B)	515	633	751	500	500
Production of Computer (C) Per per Table 2	3,265	2,575	3,165	3,755	12,760
Kit Required per Computer (D)	1	1	1	1	1
Kit required for Production (E=CXD)	3,265	25,75	3,165	3,755	12,760
Purchase of Kit (E+B-A)	3,127	2,693	3,283	3,504	12,607

Calculation of Closing Kit:

Q-1 = Production Unit of Q2 X 20% = 2,575 X 20% = 515

Q-2 = Production Unit of Q3 X 20% = 3,165 X 20% = 633

Q-3 = Production Unit of Q4 X 20% = 3,755 X 20% = 751

4. Manufacturing cost budget:

Particulars	Quarter-1	Quarter-2	Quarter-3	Quarter-4	Yearly
Production of Computer (A)	3265	2575	3165	3755	12760
Kit Cost per Computer	$ 50	$ 50	$ 50	$ 50	$ 50
Labor Cost per Computer	$20	$20	$20	$20	$20
Variable Overhead Per Compter	$ 8	$ 8	$ 8	$ 8	$ 8
variable Cost per Unit	$ 78	$ 78	$ 78	$ 78	$ 78
Total variable Cost	254,670	200,850	246,870	292,890	995,280
Fixed Cost	60,000	60,000	60,000	60,000	240,000
Total Man. Cost	314,670	260,850	306,870	352,890	1,235,280

5. Selling and administrative expense budget:

Particulars	Quarter-1	Quarter-2	Quarter-3	Quarter-4	Yearly
Sale of Computer	3400	2500	3000	4100	13000
variable Cost per Unit	$ 6	$ 6	$ 6	$ 6	$ 6
Total variable Cost	20,400	15,000	18,000	24,600	78,000
Fixed Cost	30,000	30,000	30,000	30,000	120,000
Total Selling Cost	50,400	45,000	48,000	54,600	198,000

6. Cash budget:

Particulars	Quarter-1	Quarter-2	Quarter-3	Quarter-4	Yearly
Opeing Cash	50,000	164180	264570	355150	50000
Cash Sales in Quarter @ 75% of Quarter Sales	382,500	281,250	337,500	461,250	1,462,500
Account Receivable Received	61,200	122,400	90,000	108,000	381,600
Total cash	493,700	567,830	692,070	924,400	1,894,100
Kit Payment in Cash	109,445	94,255	114,905	122,640	441,245
Account Payable	33,255	46,905	40,395	49,245	169,800
Variable Man. Cost	91,420	72,100	88,620	105,140	357,280
Fixed ManCost	50,000	50,000	50,000	50,000	200,000
Variable Selling Cost	20,,400	15,000	18,000	24,000	77,400
Fixed Selling Cost	25,000	250,00	25,000	25,000	100,000
Closing Cash Balance	164,180	264,570	355,150	548,375	548,375

7. Pro-forma contribution income statement:

Particulars	Quarter-1	Quarter-2	Quarter-3	Quarter-4	Yearly
Sales Revenue	510,000	375,000	450,000	615,000	1950,000
Variable Man. Cost	254670	200850	246870	292890	995280
Variable. Selling Cost	20400	15000	18000	24000	77400
Contribution	234930	159150	185130	298110	877320

8. PV Ratio = 877320/1950,000 = 45%

Total Fixed Cost = Total Fixed Cost/PV Ratio

= 360000/45%

= 800,000 $ Sales

9. Annual Income Will be Increase by 20,000 $, Cash Budget will be Changed.