Developing a Master Budget for a Manufacturing Organization Jacobs Incorporated
ID: 2567439 • Letter: D
Question
Developing a Master Budget
for a Manufacturing Organization
Jacobs Incorporated manufactures a product with a selling price of $50 per unit. Units and monthly cost data follow:
$5 per unit sold
$20,000 per month
30,000 per month
Jacobs pays all bills in the month incurred. All sales are on account with 50 percent collected the month of sale and the balance collected the following month. There are no sales discounts or bad debts. Jacobs desires to maintain an ending finished goods inventory equal to 20 percent of the following month's sales and a raw materials inventory equal to 10 percent of the following month's production. January 1, 2011, inventories are in line with these policies. Actual unit sales for December and budgeted unit sales for January, February, and March of 2011 are as follows:
Additional information:
The January 1 beginning cash is projected as $3,000.
For the purpose of operational budgeting, units in the January 1 inventory of finished goods are valued at variable manufacturing cost.
Each unit of finished product requires one unit of raw materials.
Jacobs intends to pay a cash dividend of $7,000 in January.
NOTE: For the entire problem - do not use any negative signs with your answers unless appropriate for net income(loss) or ending balance.
(a) A production budget for January and February.
(b) A purchases budget in units for January.
(c) A manufacturing cost budget for January.
(d) A cash budget for January.
(e) A budgeted contribution income statement for January.
Variable: Selling and administrative$5 per unit sold
Direct materials 10 per unit manufactured Direct labor 10 per unit manufactured Variable manufacturing overhead 5 per unit manufactured Fixed: Selling and administrative$20,000 per month
Manufacturing (including depreciation of $10,000)30,000 per month
Explanation / Answer
Answer
JACOBS INCORPORATED
Production Budget
For the Months of January and February 2011
January
February
March
Requirements for current sales
6000
9000
9000
Desired ending inventory
[9000 x 50%] 4500
4500
Total requirements
10500
13500
Less beginning inventory
[6000 x 50%] 3000
4500
Production requirements
7500
9000
JACOBS INCORPORATED
Purchases Budget
For the Month of January 2011
January
February
Current requirements (units)
7500
9000
Desired ending inventory
[9000 x20%] 1800
Total requirements
9300
Less beginning inventory
[7500 x 20%] 1500
Purchases (units)
7800
Purchases (dollars at $10 each)
78000
JACOBS INCORPORATED
Manufacturing Cost Budget
For the Month of January 2011
Variable costs
(For 7500 units produced)
Direct materials
75000
Direct labor
75000
Variable manufacturing overhead
37500
Total variable costs
187500
Fixed manufacturing overhead
30000
Total manufacturing overhead
217500
JACOBS INCORPORATED
Cash Budget
For the Month of January 2011
Beginning balance
3000
Receipts:
December sales
[50%] 131250
January sales
150000 [50%]
281250
Total cash available
284250
Disbursements:
Purchases
[7800 units of RMx$10] 78000
Direct labor
[7500 units produced] 75000
Variable manufacturing overhead
37500
Fixed manufacturing overhead (exclude depreciation)
20000
Variable selling and administrative
30000
Fixed selling and administrative
20000
Dividend
7000
267500
Ending Balance
16750
JACOBS INCORPORATED
Budgeted Contribution Income Statement
For the Month of January 2011
Sales
300000
Less variable costs:
Cost of goods sold [$25 per unit]
150000
Selling and administrative
30000
180000
Contribution
120000
Less fixed costs:
Manufacturing overhead
30000
Selling and administrative
20000
50000
Net income
70000
JACOBS INCORPORATED
Production Budget
For the Months of January and February 2011
January
February
March
Requirements for current sales
6000
9000
9000
Desired ending inventory
[9000 x 50%] 4500
4500
Total requirements
10500
13500
Less beginning inventory
[6000 x 50%] 3000
4500
Production requirements
7500
9000
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