CONT 4125 BUDGET PROBLEM Comp. Paradice manufactures a special calculator used i
ID: 2407984 • Letter: C
Question
CONT 4125 BUDGET PROBLEM
Comp. Paradice manufactures a special calculator used in a science laboratory of an recognized university. Expected pattern of sales for the next year is presented as a follows:
Each calculator sells for $25. All sales are on account and Comp. Paradise’s experience with cash collections is that 60 percent of each quarter’s sales are collected during the same quarter as the sale, except during the last quarter. Due to the Christmas activities arrival, collections down to 45% during the last quarter of each year. The remaining percent of sales is collected in the quarter after the sale, except 2% will be transferred to bad debts. Comp. Sales in the fourth quarter of previous year are expected to be $100,000 (4,000 units).
Comp. Paradise desires to have 10 percent of the following quarter’s sales needs in finished goods inventory at the end of each quarter. On December prior year, Comp. Paradise expects to have 200 units in inventory. The expected sales volume for the first quarter next year will be 7,300 units.
Each calculator requires two type of raw material. Comp. Paradise desires to have 10 percent of the next quarter’s raw material required at the end of each quarter. On December prior year, the company expects to have 480 types of ending raw material inventory.
The raw material price is $4.75 per type. The company buys its raw material on account and pays 70 percent of the resulting accounts payable during the quarter of the purchase. The remaining 30 percent is paid during the following quarter. The company needs trained employees in order to get a practical capacity. Each employee is capable to process 500 units on each quarter with a direct labor rate of $7.5 per hour. Total monthly hours required is 160 per employee. Standard manufacturing overhead rate was assigned based on 82% of total direct labor cost.
Required: Prepare the following budget schedules for the current year. Include a column for each quarter and for the year.
1. Sales budget in units and dollars.
2. Production budget
3. Direct material budget
4. Direct labor budget
5. Manufacturing Overhead budget
6. Cash receipt budget
7. Cash disbursements budget for raw material purchases.
Quaters Year 1Q 2Q 3Q 4Q Sales unit 2,000 6,000 7,500 4,000 19,500Explanation / Answer
Comp Paradise
Sales Budget
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Year Total
Units Sold
2000
6000
7500
4000
19500
Price per Unit
$ 25.00
$ 25.00
$ 25.00
$ 25.00
$ 25.00
Sales in Dollars
$ 50,000.00
$ 150,000.00
$ 187,500.00
$ 100,000.00
$ 487,500.00
Production Budget
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Year Total
Sales Units
2000
6000
7500
4000
19500
Closing Stock Needed
600
750
400
730
2480
Less: Opening Stock of Goods
200
600
750
400
1950
Units to Produce
2400
6150
7150
4330
20030
Direct Material Budget
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Year Total
Units required in Production ( production units*2)
4800
12300
14300
8660
40060
Closing Stock needed
1230
1430
866
0
3526
Less: Opening Stock of Goods
480
1230
1430
866
4006
Stock to be Purchased
5550
12500
13736
7794
39580
Note* Closing stock needed is assumed to be zero since Raw material requirement of nexy years first quarter is not given. Students can make different assumptions.
Direct Labor Budget
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Year Total
(A) Units Produced
2400
6150
7150
4330
$ 20,030.00
(B) Hours in quarter per worker
480
480
480
480
(C ) Units produced in by 1 employee in 1 Quarter
500
500
500
500
(D=B/C)Hours per unit
0.96
0.96
0.96
0.96
(E=A*D)Hours Required to produce total production in a quarter
2304
5904
6864
4156.80
$ 19,228.80
(F) Hour Rate
$ 7.50
$ 7.50
$ 7.50
$ 7.50
$ 7.50
(G=E*F) Direct Labour Wages to be paid
$ 17,280.00
$ 44,280.00
$ 51,480.00
$ 31,176.00
$ 144,216.00
Manufacturing Overheads Budget
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Year Total
Manufacturing Overheads (82% of Labour Cost)
$ 14,169.60
$ 36,309.60
$ 42,213.60
$ 25,564.32
$ 118,257.12
Cash Receipts Budget
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Year Total
(A) Cash Receipts from Current Quarter Sales
$ 30,000.00
$ 90,000.00
$ 112,500.00
$ 45,000.00
$ 277,500.00
(B) Bad Depts
$ (900.00)
$ (400.00)
$ (1,200.00)
$ (1,500.00)
$ (4,000.00)
(C )Cash Receipts from Previous quarter credit sales( After deducting Bad Depts)
44100
$ 19,600.00
$ 58,800.00
$ 73,500.00
$ 196,000.00
(D=A+C)Total Cash Receipts
$ 74,100.00
$ 109,600.00
$ 171,300.00
$ 118,500.00
$ 473,500.00
Cash Payment Budger (For Raw material purchases)
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Year Total
(A) Units Purchased
5550
12500
13736
7794
39580
(B)Cost of Raw material
$ 4.75
$ 4.75
$ 4.75
$ 4.75
(C=A*B)Purchase Value in Dollars
$ 26,362.50
$ 59,375.00
$ 65,246.00
$ 37,021.50
$ 188,005.00
(D=C*70%)Cash Paid for current quarter purchases
$ 18,453.75
$ 41,562.50
$ 45,672.20
$ 25,915.05
$ 131,603.50
(E) Cash Paid for Previous quarter purchases
$ -
$ 7,908.75
$ 17,812.50
$ 19,573.80
$ 45,295.05
(F=D+E)Total Cash Paid
$ 18,453.75
$ 49,471.25
$ 63,484.70
$ 45,488.85
$ 176,898.55
Note* Purchase of previous year is not given so it is assumed that no cash is paid for pervious year's ending quarter in this year.
Comp Paradise
Sales Budget
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Year Total
Units Sold
2000
6000
7500
4000
19500
Price per Unit
$ 25.00
$ 25.00
$ 25.00
$ 25.00
$ 25.00
Sales in Dollars
$ 50,000.00
$ 150,000.00
$ 187,500.00
$ 100,000.00
$ 487,500.00
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