How are the following budgets calculated for the 1 st quarter? - Overhead budget

Question

How are the following budgets calculated for the 1st quarter?

-        Overhead budget

-        Cash receipts of sales revenue

-        Cash payments for material purchases

-        Overall cash budget

Master Budget Project

Congratulations! You have just been promoted to controller for a growing company that manufactures green products. It is October 1 and time for creation of the budget for the next year. The budget will be created in quarters using each month as a period of sales/production.

Your first task is to create the budget for the first quarter of 2016. This involves completing budgets for January, February, March and the first quarter in total for 2016. You seek out last year’s data, recent costing information and follow up on important assumptions.

The CFO wants to see the first quarter budget before you complete the rest of the year, as adjustments may be needed. You will need to create the following sub-budgets as part of the overall master budget.

1.     Sales Budget for the 1st quarter

2.     Production Budget for the 1st quarter

3.     Materials Purchases Budget for the 1st quarter

4.     Direct Labor Budget for the 1st quarter

5.     Overhead Budget for the 1st quarter

6.     Cash Receipts of Sales Revenue for the 1st quarter

7.     Cash Payments for Material Purchases for the 1st quarter

8.     Overall Cash Budget for the 1st quarter

9.     Income Statement for the quarter ended March 31, 2016

10. Statement of Cash Flows for the quarter ended March 31, 2016

Several assumptions are needed to work into your models for computation. These are determined as follows and have been approved by the CFO. These are summarized on the following page.

This page illustrates all assumptions needed to create the master budget, income statement and statement of cash flows. These assumptions have been approved by the CFO. You will use them to create the master budget for January, February, March and in total for the first quarter.

Jan Feb March April May Unit sales 21,000 22,000 23,000 24,000 20,000 sales price $10 deseired ending inventory for finished goods 20% of next month's sales in units desired ending inventory for material units 10% of next month's materials needed for production cost of one lb of materials (1lb = 1 unit) $0.25 units of direct materials to make one unit 4 minutes of direct labor to make one unit 12 direct labor costs per hour $15 overhead costs percentage of direct labor 150% minimum cash balance (assume you start with this) $10,000 cash collections in month of sale 65% cash collections in first month after sale 25% cash collections in second month after sale 10% cash payments in month of purchase 60% cash payments in the first month after purchase 40% selling costs per month (for cash budget) $10,000 administrative costs per month (for cash budget) $15,000 annual interest rate for letter of credit 12% abbyak ubterest rate earned on excess cash 4% sales revenue for november $300,000 sales revenue for december $250,000 material purchases for november $35,000 material purchases for december $26,000 depreciation expense for the quarter (operating expense) $5,000 Income tax rate 25%

Explanation / Answer

Note: As per Chegg Policy only 4 part can be solved.

1)Sales Budget January February March Units to be sold 21000 22000 23000 * Selling price $10 $10 $10 $210,000 $220,000 $230,000

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