Wilson Industries produces an assembly used in the production of various product
ID: 2471952 • Letter: W
Question
Wilson Industries produces an assembly used in the production of various products. The assembly is sold to various manufacturers throughout the United States. The unit selling price is $ 195.00. A projected sales forecast (in units) follows: January 20,000 February 25,000 March 30,000 April 40,000 May 35,000 The following information pertains to production policies and manufacturing specifications followed by Wilson Industries: Finished goods inventory on January 1st was 8,000 units. The desired ending inventory for each month is 40 percent of the next month’s sales. Materials used in the assembly are as follows: Direct Material Part # Parts Per Unit Cost per Part Widget 325, 5, $ 8.00 Whatnot 326, 3, $ 2.00 Inventory policy dictates that sufficient materials be on hand at the beginning of the month to produce 50 percent of that month’s production needs. (THINK!!) This is exactly the amount of material on hand on January 1st. The direct labor used per unit of assembly is two hours. The average direct labor cost per hour is $ 14.00. The predetermined variable overhead is allocated at the rate of $ 13.00 per direct labor hour. Fixed overhead averages $265,000 per month. The following information pertains to sales/purchases and their related cash collections/disbursements pattern: On average, credit sales are 80% of total sales. On average, 25% of credit sales are collected in the month of sale; 55% of credit sales are collected in the month following sale; 15% of credit sales are collected in the second month following sale. Cash sales for November and December were $ 700,000 and $ 950,000 respectively. (THINK!!) All material purchases are on account. On average, 30% of material purchases are paid in the month of purchase; 70% of material purchases are paid in the month following purchase. Material purchases for November and December were $ 974,300 and $ 1,158,000 respectively. Given the above information, answer the following questions. (****Hints: prepare a skeleton of the following budgets for the first quarter: sales, production, D/M, D/L, OVH, cash receipts, cash disbursements; plug in the appropriate data; complete the budgets; answer the questions; since there are 2 D/M (widgets and whatnots), you will need 2 D/M budgets – one for each part; credit will NOT be given for carry-thru errors so make sure your budgets are prepared properly;. Read the information carefully****) 1. How many assembly units should be produced in the first quarter? 2. What dollar amount of widgets needs to be purchased in January? 3. What is the total cost of Direct Materials for February? 4. How many Direct Labor hours are needed in January? 5. What is the total cost for Direct Labor for the first quarter? 6. How much is budgeted variable overhead for February? 7. How much is budgeted fixed overhead for the first quarter? 8. What is the total overhead cost for March? 9. What is the expected amount of cash receipt for February? 10. What is the estimated payment for January for material purchases?
Explanation / Answer
Sales Budget Jan Feb Mar Total Sales in Units 20,000 25,000 30,000 75,000 SP per Unit 195 195 195 195 Total Sales in $ 3,900,000 4,875,000 5,850,000 14,625,000 Credit Sales (80%) 3,120,000 3,900,000 4,680,000 11,700,000 Cash Sales (20%) 780,000 975,000 1,170,000 2,925,000 Schedule of Expected cash Collection from Sales Jan Feb Mar Total Cash sales 780,000 975,000 1,170,000 2,925,000 Collection from Accounts receivables Nov Sales 420,000 420,000 Dec Sales 2,090,000 570,000 2,660,000 Jan Sales 780,000 1,716,000 468,000 2,964,000 Feb Sales 975,000 2,145,000 3,120,000 March Sales 1,170,000 1,170,000 Total Cash Collection 4,070,000 4,236,000 4,953,000 13,259,000 Production Budget Jan Feb Mar Total Sales in Units 20,000 25,000 30,000 75,000 Add: Closing Finished Goods Inventory 10000 12000 16,000 38,000 Total Needs 30,000 37,000 46,000 113,000 Less: Opening Finished Goods Inventory (8,000) (10,000) (12,000) (30,000) Required Units to be produced 22,000 27,000 34,000 83,000 Material Purchase Budget - Widget 325 Jan Feb Mar Total Required Units to be produced 22,000 27,000 34,000 83,000 Unit require per Unit 5 5 5 5 Total unit required for Production 110,000 135,000 170,000 415,000 Add: Closing Stock 67,500 85,000 95,000 247,500 Total needs 177,500 220,000 265,000 662,500 Less: opening Stock (11,000) (13,500) (17,000) 910,000 Total Units Purchased 166,500 206,500 248,000 1,572,500 Cost per Unit 8 8 8 8 Total Purchases in $ 1,332,000 1,652,000 1,984,000 12,580,000 Material Purchase Budget - Whatnot 326 Jan Feb Mar Total Required Units to be produced 22000 27000 34000 83000 Unit require per Unit 3 3 3 3 Total unit required for Production 66,000 81,000 102,000 249,000 Add: Closing Stock 40,500 51,000 57,000 148,500 Total needs 106,500 132,000 159,000 397,500 Less: opening Stock (11,000) (13,500) (17,000) 546,000 Total Units Purchased 95,500 118,500 142,000 943,500 Cost per Unit 2 2 2 2 Total Purchases in $ 191,000 237,000 284,000 1,887,000 Schedule for Cash Payment to Suppliers Jan Feb Mar Total Total Purchases in $ - Widget 325 1,332,000 1,652,000 1,984,000 12,580,000 Total Purchases in $ - Whatnot 326 191,000 237,000 284,000 1,887,000 Total Purchases of Material 1,523,000 1,889,000 2,268,000 14,467,000 Cash Payment to Supplier Dec - Accounts Payable 810,600 810,600 Jan Purchase 456,900 1,066,100 1,523,000 Feb purchase 566,700 1,322,300 1,889,000 Mar Purchase 680,400 680,400 Total Cash Payment to Supplier 1,267,500 1,632,800 2,002,700 4,903,000 Direct Labor Budget Jan Feb Mar Total Required Units to be produced 22,000 27,000 34,000 83,000 DL required per Unit 2 2 2 2 Total DL required 44,000 54,000 68,000 166,000 DL cost per Hr. 14 14 14 14 Total Direct Labor Cost 616,000 756,000 952,000 2,324,000 Overhead Budet Jan Feb Mar Total Total DL required 44000 54000 68000 166000 Variable Ovehead per DLH 13 13 13 13 Total Variable Overhead Cost 572000 702000 884000 2158000 Fixed Overhead 265000 265000 265000 795000 Total Overhead 837000 967000 1149000 2953000 Answer 1. Assembly Units to be produced in First quarter 83,000 Answer 2. Amt. of Widgets need to Purch. In Jan 1,332,000 Answer 3. Total Cost of Direct Material For Feb 1,889,000 Answer 4. DLH needed in Jan 44,000 Answer 5. Total Cost of Direct Labor for First Qtr 2,324,000 Answer 6. Budgeted Variable Overhead for feb 702000 Answer 7. Budgeted Fixed Overhead for First Qtr 795000 Answer 8. Total Overhead Cost for March 1149000 Answer 9. Expected Amt of Cash receipt for Feb 4,236,000 Answer 10. Estimated payment for Jan for Material Purch. 1,267,500
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