Jamdown & Associates Ltd produces two products, Glam120 and Glam220. The followi
ID: 2430568 • Letter: J
Question
Jamdown & Associates Ltd produces two products, Glam120 and Glam220. The following table provides information on budgeted production for 2018:
Production Forecast
Product
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Total
Glam120
5,000
6,000
4,800
5,500
21,300
Glam220
6,500
4,600
5,400
6,200
22,700
Notes:
It is the company’s policy to have stock on hand at the end of each quarter equaling to 10% of production for the next quarter.
Budgeted production for the first quarter of 2019 were: Glam120, 7,000 units and Glam220, 5,800 units.
During 2018, the company plans to sell one unit of Glam120 for $600 and one unit of Glam220 for $700.
Management has forecasted that variable overhead cost per unit for Glam120 and Glam200 would be $100 and $120 respectively during 2018, while fixed overheads for the same period were estimated to be $2,400,000 and would be incurred in equal amounts quarterly.
Required:
Calculate the number of units to be sold for both products during each quarter of 2018. (10 marks)
Prepare the sales budget for 2018. (5 marks)
Prepare the overhead cost budget for the four quarters in 2018. (5 marks)
Explain what is meant by a limiting budget factor. (2 marks)
Describe two limiting factors that could influence the achievement of Jamdown & Associates profit objectives for 2018. (3 marks)
Product
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Total
Glam120
5,000
6,000
4,800
5,500
21,300
Glam220
6,500
4,600
5,400
6,200
22,700
Explanation / Answer
Product Glam120 Quarter 1,2018 Quarter 2,2018 Quarter 3,2018 Quarter 4,2018 Quarter 1 of 2019 TOTAL OF 2018 A Production during the Quarter 5,000 6,000 4,800 5,500 7,000 21,300 B=0.1*A Beginning of Quarter Inventory(10%) 500 600 480 550 700 C=A+B Quantity Available 5,500 6,600 5,280 6,050 D End of Quarter Inventory 600 480 550 700 E=C-D Sales During the Quarter 4,900 6,120 4,730 5,350 21,100 Product Glam220 F Prodction during the Quarter 6,500 4,600 5,400 6,200 5,800 22,700 G=F*0.1 Beginning of Quarter Inventory(10%) 650 460 540 620 580 H=F+G Quantity Available 7,150 5,060 5,940 6,820 I End of Quarter Inventory 460 540 620 580 J=H-I Sales During the Quarter 6,690 4,520 5,320 6,240 22,770 SALES BUDGET FOR 2018 Product Glam120 Quarter 1,2018 Quarter 2,2018 Quarter 3,2018 Quarter 4,2018 Total of the year 2018 A Unit Sales 4,900 6,120 4,730 5,350 21,100 B Sales Price per unit $ 600 $ 600 $ 600 $ 600 C=A*B Sales Revenue $ 2,940,000 $ 3,672,000 $ 2,838,000 $ 3,210,000 $ 12,660,000 Product Glam220 0 D Unit Sales 6,690 4,520 5,320 6,240 22,770 E Sales Price per unit $700 $700 $700 $700 F=D*E Sales Revenue $4,683,000 $3,164,000 $3,724,000 $4,368,000 $ 15,939,000 G=C+F TOTAL SALES REVENUE $ 7,623,000 $ 6,836,000 $ 6,562,000 $ 7,578,000 $ 28,599,000 OVERHEAD COSTBUDGET Product Glam120 Quarter 1,2018 Quarter 2,2018 Quarter 3,2018 Quarter 4,2018 Total of the year 2018 A Unit Production 5,000 6,000 4,800 5,500 21,300 B Variable overhead cost per unit $ 100 $ 100 $ 100 $ 100 C=A*B Quarterly Variable overhead cost $ 500,000 $ 600,000 $ 480,000 $ 550,000 $ 2,130,000 Product Glam220 0 D Unit Production 6,500 4,600 5,400 6,200 22,700 E Variable overhead cost per unit $120 $120 $120 $120 F=D*E Quarterly Variable overhead cost $780,000 $552,000 $648,000 $744,000 $ 2,724,000 G=C+F TOTAL VARIABLE OVERHEAD COST $ 1,280,000 $ 1,152,000 $ 1,128,000 $ 1,294,000 $ 4,854,000 H TOTAL FIXED OVERHEAD COSTS $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 2,400,000 I=G+H TOTAL OVERHEAD COSTS $ 1,880,000 $ 1,752,000 $ 1,728,000 $ 1,894,000 $ 7,254,000 LIMITING BUDGET FACTORS Limiting budget factors are the constraints that limits the growth of business or prevents the business to expand further Limiting Budget factors may be : Availability of machines Availability of skilled labor Limitation of sales demand Availability of raw materials
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