Barndt Manufacturing Company makes two products identified as A1 and B2. Selecte
ID: 2467604 • Letter: B
Question
Barndt Manufacturing Company makes two products identified as A1 and B2. Selected budgetary data for 2013 follow:
The average wage rate is expected to be $25 per hour in 2013. Barndt uses direct labor-hours to apply overhead. Each year the company determines the overhead application rate for the year based on budgeted output for the year. The company maintains negligible work in process inventory and expects the cost per unit for both beginning and ending finished product inventories to be identical.
All sales are made on credit and management estimates that 5% of credit sales are uncollectible. A provision for bad debt, under the allowance method, is considered an SGA expense. The collection pattern for collectible credit sales is 60% collected in the month of sale and the remainder in the month following the month of sale. Credit sales for December, 2012 and 2013 were $290000 and $360000 respectively.
All raw material purchases are made on account; 25% is paid in the month of purchase and the remainder is paid in the month following the month of purchase. Raw materials purchases fo December, 2012 and 2013 were $46000 and $42000, respectively.
The company pays direct labor, factory overheads, and selling, general and administrative expenses in the periods incurred.
Forecasted income taxes are presumed paid in December of each year.
Company policy requires that a minimum cash balance of $50000 be maintained at all times. Repayments of the company line of credit are made in $10000 increments. The company owed $750000 on the line of credit at December 31, 2012. The cash balance at December 31, 2012 was $50000.
Company plans 2013 call for the purchase of new equipment costing $200000.
Barndt's effective income tax rate is 40%.
Required: Prepare the following schedules or statements for 2013:
1) Sales Budget
2) Production Budget
3) Direct Materials purchases budget (units & dollars)
4) Direct Labor Budget
Explanation / Answer
1)
Sales Budget
A1
B2
Total
Sales (units)
12000
9000
Sale Price
$ 150.00
$ 220.00
Sales ($) = Units * Price =
$ 1,800,000.00
$ 1,980,000.00
$ 3,780,000.00
2)
Production Budget
A1
B2
Sales (units)
12000
9000
Add: Desired ending inventory (units)
300
200
Less: Estimated beginning Inventory (units)
-400
-150
Production Budget Units
11900
9050
3)
Direct Materials purchases budget (units & dollars)
RM1
RM2
RM3
Total
Units Required for Production
192600
35800
33150
(12100*10) + (8950*8)
(12100*0) + (8950*4)
(12100*2) + (8950*1)
Add: Desired ending inventory (pounds)
4000
1000
1500
Less: Estimated beginning inventory (pounds)
-3000
-1500
-1000
Purchase of Direct material (Units Pounds)
193600
35300
33650
Cost per Pounds
$ 2.00
$ 2.50
$ 0.50
Purchase of Direct material ($) = Units * Cost
$ 387,200.00
$ 88,250.00
$ 16,825.00
$492,275.00
4)
Direct Labor Budget
A1
B2
Total
Production Budget Units (A)
11900
9050
Direct Labor Hours Per unit (B)
2
3
Total Direct Labor hours Required (C)= A*B
23800
27150
50950
Average Wage Rate (D)
$ 25.00
$ 25.00
$ 25.00
Total Direct Labor Cost= C*D
$ 595,000.00
$ 678,750.00
$ 1,273,750.00
1)
Sales Budget
A1
B2
Total
Sales (units)
12000
9000
Sale Price
$ 150.00
$ 220.00
Sales ($) = Units * Price =
$ 1,800,000.00
$ 1,980,000.00
$ 3,780,000.00
2)
Production Budget
A1
B2
Sales (units)
12000
9000
Add: Desired ending inventory (units)
300
200
Less: Estimated beginning Inventory (units)
-400
-150
Production Budget Units
11900
9050
3)
Direct Materials purchases budget (units & dollars)
RM1
RM2
RM3
Total
Units Required for Production
192600
35800
33150
(12100*10) + (8950*8)
(12100*0) + (8950*4)
(12100*2) + (8950*1)
Add: Desired ending inventory (pounds)
4000
1000
1500
Less: Estimated beginning inventory (pounds)
-3000
-1500
-1000
Purchase of Direct material (Units Pounds)
193600
35300
33650
Cost per Pounds
$ 2.00
$ 2.50
$ 0.50
Purchase of Direct material ($) = Units * Cost
$ 387,200.00
$ 88,250.00
$ 16,825.00
$492,275.00
4)
Direct Labor Budget
A1
B2
Total
Production Budget Units (A)
11900
9050
Direct Labor Hours Per unit (B)
2
3
Total Direct Labor hours Required (C)= A*B
23800
27150
50950
Average Wage Rate (D)
$ 25.00
$ 25.00
$ 25.00
Total Direct Labor Cost= C*D
$ 595,000.00
$ 678,750.00
$ 1,273,750.00
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