Exercise

Warrier Gear manufactures clothing. A flannel shirt requires the following:

Standard Direct Materials 2 square yards at $15 per yard

Standard Manufacturing Labor 1.5 hours at $25 per hour

During the third quarter, the company made 1,500 shirts and used 3,200 square yards of fabric costing $44,800. Direct labor totaled 2,100 hours for $56,700.

Required: (A) Compute the direct materials price and efficiency variances for the quarter. (B) Compute the direct manufacturing labor price and efficiency variances for the quarter. (c) Describe 2 possible reasons for each variance. Show all computations.

The following table shows the quarterly demand in thousands of cases, for a national beer distributor over the past four years. This data is also available in an Excel spreadsheet on Blackboard.

Forecast the demand for each quarter of 2019 by using the multiplicative decomposition model and using overall average to calculate seasonal indices.. Show:

- the MAD and MAPE

- a plot of the actuals and seasonalized forecast on a properly labeled chart.

- the forecast for each quarter of 2019

Florida State University produces hats and sells them in the Book Store. On March 31, 2019, the Book Store has 1,000 hats in inventory. The hats are sold for $8.00. The Book Store’s policy is to maintain enough hats in inventory equal to 10% of next month’s sales. The Book Store anticipates the following sales activity for the second quarter of the year:

In addition, July’s sales are expected to be 9,000 units.

Required:

(use excel)

Direct Materials Purchases Budget: Direct Labor Budget

Crescent Company produces stuffed toy animals; one of these is “Arabeau the Cow.” Each Arabeau takes 0.20 yard of fabric (white with irregular black splotches) and 10 ounces of polyfiberfill. Fabric costs $3.40 per yard and polyfiberfill is $0.05 per ounce. Crescent has budgeted production of Arabeaus for the next four months as follows:

Inventory policy requires that sufficient fabric be in ending monthly inventory to satisfy 20 percent of the following month’s production needs and sufficient polyfiberfill be in inventory to satisfy 40 percent of the following month’s production needs. Inventory of fabric and polyfiberfill at the beginning of October equals exactly the amount needed to satisfy the inventory policy.

Each Arabeau produced requires (on average) 0.10 direct labor hour. The average cost of direct labor is $15 per hour.

Required:

1. Prepare a direct materials purchases budget of fabric for the last quarter of the year showing purchases in units and in dollars for each month and for the quarter in total. Round your answers to the nearest cent, if required.

2. Prepare a direct materials purchases budget of polyfiberfill for the last quarter of the year showing purchases in units and in dollars for each month and for the quarter in total. Round your answers to the nearest cent, if required.

3. Prepare a direct labor budget for the last quarter of the year showing the hours needed and the direct labor cost for each month and for the quarter in total. Round your answers to the nearest cent, if required.

Consider the following time series data.

Please show steps to solve using Excel.

Direct Materials Purchases Budget: Direct Labor Budget

Crescent Company produces stuffed toy animals; one of these is “Arabeau the Cow.” Each Arabeau takes 0.20 yard of fabric (white with irregular black splotches) and 10 ounces of polyfiberfill. Fabric costs $3.40 per yard and polyfiberfill is $0.05 per ounce. Crescent has budgeted production of Arabeaus for the next four months as follows:

Inventory policy requires that sufficient fabric be in ending monthly inventory to satisfy 20 percent of the following month’s production needs and sufficient polyfiberfill be in inventory to satisfy 40 percent of the following month’s production needs. Inventory of fabric and polyfiberfill at the beginning of October equals exactly the amount needed to satisfy the inventory policy.

Each Arabeau produced requires (on average) 0.10 direct labor hour. The average cost of direct labor is $15 per hour.

Required:

1. Prepare a direct materials purchases budget of fabric for the last quarter of the year showing purchases in units and in dollars for each month and for the quarter in total. Round your answers to the nearest cent, if required.

Feedback

The purchases amount can be determined by considering beginning and ending (desired) inventory amounts. Also, consider expected usage.

2. Prepare a direct materials purchases budget of polyfiberfill for the last quarter of the year showing purchases in units and in dollars for each month and for the quarter in total. Round your answers to the nearest cent, if required.

Feedback

See Cornerstone 8.3

3. Prepare a direct labor budget for the last quarter of the year showing the hours needed and the direct labor cost for each month and for the quarter in total. Round your answers to the nearest cent, if required.

Nadia Company, a merchandising company, prepares its master budget on a quarterly basis. The following data has been assembled to assist in preparation of the master budget for the second quarter.

a. As of March 31 (the end of the prior quarter), the company’s balance sheet showed the following account balances:

b. Sales for March total 10,000 units. Each month’s sales are expected to exceed the prior month’s results by 5%. The product selling price is $25.00 per unit.

c. Sales are 20% for the cash and 80% on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable at March 31 are a result of March credit sales.

d. Company’s policy calls for a given month’s ending inventory to equal 80% of the next month’s expected unit sales. The March 31 inventory is 8,400 units, which complies with the policy. The purchase price is $15.

e. Monthly selling and administrative expenses are budgeted as follows: salaries and wages, $7500 per month; shipping 6% of sales; advertising, $6,000 per month; other expenses, 4% of sales. Depreciation including depreciation on new assets acquired during the quarter, will be $6,000 for the quarter. Sales representatives’ commissions are 12.5 % of sales and are paid in the month of the sales. The sales manager’s salary will be $3,500 in April and $4,000 per month thereafter.

f. Half a month’s inventory purchases are paid in the month of purchase and half in the following month.

g. Equipment purchases during the quarter will be as follows: April, $11,500; and May, $3,000.

h. Dividends totaling $3,500 will be declared and paid in June.

j. No cash payment for income taxes are to be made during the second calendar quarter. Income taxes will be assessed at 35% for the quarter.

k. Management wants to maintain a minimum cash balance of $8,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total balance of $20,000. The interest rate of these loans is 1% per month, and for simplicity, we will assume that the interest is not compounded. The company would as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Required: Using the above data, complete the following statements and schedules for the second quarter.

1. Expected cash receipts from customers

2. Expected cash payments for purchases

3. Cash budget

Nadia Company, a merchandising company, prepares its master budget on a quarterly basis. The following data has been assembled to assist in preparation of the master budget for the second quarter.

a. As of March 31 (the end of the prior quarter), the company’s balance sheet showed the following account balances:

b. Sales for March total 10,000 units. Each month’s sales are expected to exceed the prior month’s results by 5%. The product selling price is $25.00 per unit.

c. Sales are 20% for the cash and 80% on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable at March 31 are a result of March credit sales.

d. Company’s policy calls for a given month’s ending inventory to equal 80% of the next month’s expected unit sales. The March 31 inventory is 8,400 units, which complies with the policy. The purchase price is $15.

e. Monthly selling and administrative expenses are budgeted as follows: salaries and wages, $7500 per month; shipping 6% of sales; advertising, $6,000 per month; other expenses, 4% of sales. Depreciation including depreciation on new assets acquired during the quarter, will be $6,000 for the quarter. Sales representatives’ commissions are 12.5 % of sales and are paid in the month of the sales. The sales manager’s salary will be $3,500 in April and $4,000 per month thereafter.

f. Half a month’s inventory purchases are paid in the month of purchase and half in the following month.

g. Equipment purchases during the quarter will be as follows: April, $11,500; and May, $3,000.

h. Dividends totaling $3,500 will be declared and paid in June.

j. No cash payment for income taxes are to be made during the second calendar quarter. Income taxes will be assessed at 35% for the quarter.

k. Management wants to maintain a minimum cash balance of $8,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total balance of $20,000. The interest rate of these loans is 1% per month, and for simplicity, we will assume that the interest is not compounded. The company would as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Required: Using the above data, complete the following statements and schedules for the second quarter.

1. Expected cash receipts from customers

2. Expected cash payments for purchases

3. Cash budget

Direct Materials Purchases Budget: Direct Labor Budget

Crescent Company produces stuffed toy animals; one of these is “Arabeau the Cow.” Each Arabeau takes 0.20 yard of fabric (white with irregular black splotches) and 8 ounces of polyfiberfill. Fabric costs $3.40 per yard and polyfiberfill is $0.05 per ounce. Crescent has budgeted production of Arabeaus for the next four months as follows:

Inventory policy requires that sufficient fabric be in ending monthly inventory to satisfy 20 percent of the following month’s production needs and sufficient polyfiberfill be in inventory to satisfy 40 percent of the following month’s production needs. Inventory of fabric and polyfiberfill at the beginning of October equals exactly the amount needed to satisfy the inventory policy.

Each Arabeau produced requires (on average) 0.10 direct labor hour. The average cost of direct labor is $16 per hour.

Required:

1. Prepare a direct materials purchases budget of fabric for the last quarter of the year showing purchases in units and in dollars for each month and for the quarter in total. Round your answers to the nearest cent, if required.

2. Prepare a direct materials purchases budget of polyfiberfill for the last quarter of the year showing purchases in units and in dollars for each month and for the quarter in total. Round your answers to the nearest cent, if required.

3. Prepare a direct labor budget for the last quarter of the year showing the hours needed and the direct labor cost for each month and for the quarter in total. Round your answers to the nearest cent, if required.