MANAGERIAL ACCOUNTN CASE 2-PREPARATION OF A MASTER BUDGET 1. Sales forecast: Jan

Question

MANAGERIAL ACCOUNTN CASE 2-PREPARATION OF A MASTER BUDGET 1. Sales forecast: January: 5,000 units: February 6,500 units March: 7,100 units; April: 6,800 tions ar 30%in the month of sale and 70% the expected to be following >49. All sales are on credit and coll collected in January ecember 31 , 2017 is $15,000, this amount is ex s o month. Accounts receivable as of D 2. End of month 2017 was 1,290 units. inventory must equal 25% of next month's sales. The inventory at the end of December ing are the expected costs for direct materials, direct labor and manufacturing overhead: January s12unitsni 3. The followi DM Overhead DL $15/unit $7,500+ $2.60 per unit produced S7,500+ S2.60 per unit produced $7,500 + $2.60 per unit produced February $12/unit $15/unit March $12/unit $15/unit A. Direct materials are paid 40% in the month incurred and 60% in the following month. B. C. Account payable for materials as of December 31 is S5,000; this amount will be paid in January. Direct labor is paid in the month incurred. Overhead costs are paid in the month incurred. Fixed overhead includes depreciation of $3,500 per 4. Selling costs are sales commissions: $2.40 per unit sold; shipping costs: $0.50 per unit sold. Administrative costs per month are: salaries: S15,000;, rent: $2,000; depreciation: $1,800. All costs are paid in month incurred 5. The company plans to buy equipment costing $19,000 in January and to pay dividends of $20,000 in March. The cash balance as of December 31, 2017 is $25,000. S2,000. The company has a revolving credit with US Bank to borrow in increments of $1,000 at the beginning of each month at interest of 12% annual rate. The company may borrow at the beginning of any month and repays its loans, or any parts of its loans, at the end of any month. Interest payments are due on any principle at the time it is repaid (the amount repaid does not have to be in increments of $1,000). For simplicity, assume that interest is not compounded. As of December 31, 2017 the company has no outstanding loans. 6. The company requires a minimum cash balance of Required: Based on the information given, prepare the following budgets for each month of the first quarter of 2018 and the quarter totals. (See the Grading Rubric for more detailed instructions) 1. Sales Budget, including a schedule of expected cash collections 2. Production Budget (in units); 3. Direct materials budget, including schedule of expected cash disbursements; 4. Direct labor budget 5. Manufacturing Overhead Budget 6. Selling and Administrative Expenses Budget 7. Cash Budget.

Explanation / Answer

Solution:

Part 1 – Sales Budget with Schedule of Expected Cash Collection

Sales Budget

January

February

March

1st Quarter Total

Expected Unit Sales

5,000

6,500

7,100

18,600

Unit Selling Price

$49

$49

$49

$49

Budgeted Sales in dollars

$245,000

$318,500

$347,900

$911,400

Schedule of Expected Cash Collection:

December Accounts Receivable

$15,000

January Sales

$73,500

$171,500

February Sales

$95,550

$222,950

March Sales

$104,370

Total Expected Cash Collections

$88,500

$267,050

$327,320

$682,870

Part 2 – Production Budget in Units

Production Budget in units

January

February

March

1st Quarter Total

Next Month's Expected Unit Sales

6500

7100

6800

Ratio of inventory to future sales

25%

25%

25%

Budgeted Finished Goods Ending Inventory (units)

1625

1775

1700

Add: Budgeted Sales (units)

5000

6500

7100

Required units of available production

6625

8275

8800

Total Needs

11625

14775

15900

Less: Budgeted Beginning Inventory (Ending Finished Goods Inventory of last month)

1290

1625

1775

Units to be produced

10335

13150

14125

37610

Part 3 – Direct materials budget, including schedule of expected cash disbursements

Direct Materials Budget

January

February

March

1st Quarter Total

Units to be purchased for production (Budgeted Production Units)

10,335

13,150

14,125

Cost per unit

$12

$12

$12

Total Direct materials purchases budget

$124,020

$157,800

$169,500

$451,320

Schedule of Expected Cash Disbursements

Accounts Payable December

$5,000

January Purchases (40% in Jan and 60% in Feb)

$49,608

$74,412

February Purchases (40% in Feb and 60% in Mar)

$63,120

$94,680

March Purchases (40% in Mar and 60% in Apr)

$67,800

Total Expected Cash Disbursements for Purchases

$54,608

$137,532

$162,480

$354,620

Part 4 – Direct Labor Budget

Direct Labor Budget

January

February

March

1st Quarter Total

Units to be produced

10,335

13,150

14,125

DL cost per unit

$15

$15

$15

Budgeted Direct Labor Cost

$155,025

$197,250

$211,875

$564,150

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Pls ask separate question for remaining parts.

Sales Budget

January

February

March

1st Quarter Total

Expected Unit Sales

5,000

6,500

7,100

18,600

Unit Selling Price

$49

$49

$49

$49

Budgeted Sales in dollars

$245,000

$318,500

$347,900

$911,400

Schedule of Expected Cash Collection:

December Accounts Receivable

$15,000

January Sales

$73,500

$171,500

February Sales

$95,550

$222,950

March Sales

$104,370

Total Expected Cash Collections

$88,500

$267,050

$327,320

$682,870

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