Endless Mountain Company manufactures a single product that is popular with outd

ID: 2568331 • Letter: E

Question

Endless Mountain Company manufactures a single product that is popular with outdoor recreation enthusiasts. The company sells its product to retailers throughout the northeastern quadrant of the United States. It is in the process of creating a master budget for 2017. The company's CFO in consultation with various managers across the company is providing the latest Balance Sheet and a set of assumptions to help create the 2017 budgets.

Using the list of Assumptions and the Balance Sheet provided below do the following:

A. Create a CASH BUDGET for the year ended December 31, 2017.

B. Create a BUDGETED INCOME STATEMENT (absorption costing basis) for the year ended December 31, 2017.

C. Create a BUDGETED BALANCE SHEET as of December 31, 2017.

List of Assumptions:

**Asume there are NO Administrative and Selling expenses**

Budgeted Unit sales 01 2017 Q2 2017 Q3 2017 04 2017 Q1 2018 12,000 37,000 15,000 25,000 13,000 Budgeted Selling Price per unit 32 All sales are credit sales gnore Uncollectible Accounts. They are minimal Percentage of Sales collected in the quarter of the sale Percentage of Sales collected in the subsequent quarter 75% 25% Quarter ending finished goods inventory as a percent of next quarter's unit sales Yards of raw material required for each unit Cost per yard of raw material Quarter ending raw materials inventory as a percent of next quarter's production needs Estimated ending raw materials inventory on December 31, 2017 (in yards) Percent of purchases paid for in the quarter of the purchase Percent of purchases paid for in the quarter following the purchase 15% 3.5 3.00 10% 5,000 70% 30% Direct labor hourly rate Direct labor hours required to finish each unit of finished goods Direct labor hours are paid in the quarter incurred 18.00 0.25 Budgeted variable manufacturing overhead per direct labor-hour Quarterly fixed manufacturing overhead (including depreciation expense on equipment) Quarterly depreciation on equipment The number of direct labor hours is used as the allocation base for the budgeted plantwide overhead rate 3.00 $ 150,000 20,000

Explanation / Answer

TOTAL

OPENING BALANCE

46,200.00

73,650.50

443,549.50

640,988.00

46,200.00

CASH FLOW FROM SALES AND DEBTORS

548,000.00

984,000.00

656,000.00

720,000.00

2,908,000.00

CASH FLOW FOR RAW MATERIALS

(291,287.00)

(292,176.00)

(226,936.50)

(218,053.50)

(1,028,453.00)

CASH FLOW FOR LABOUR EXPENSE

(72,225.00)

(151,650.00)

(74,250.00)

(104,400.00)

(402,525.00)

OVERHEAD COSTS

(12,037.50)

(25,275.00)

(12,375.00)

(17,400.00)

(67,087.50)

FIXED MANUFACTURING OVERHEAD ($150000-$20000)

(130,000.00)

(520,000.00)

DIVIDENDS

(15,000.00)

(60,000.00)

CLOSING CASH BALANCE

73,650.50

443,549.50

640,988.00

876,134.50

WORKINGS

CASH FLOW FROM SALES

TOTAL

SALES UNITS

12000

37000

15000

25000

89000

PRICE

AMOUNT

384000

1184000

480000

800000

2848000

REALISATION (CURRENT QUARTER)

288000

888000

360000

600000

2136000

REALISATION (PREVIOUS QUARTER)

260000

96000

296000

120000

772000

TOTAL REALISATION

548000

984000

656000

720000

2908000

RAW MATERIALS PURCHASED

TOTAL

OPENING

4500

11795

5775

8120

30190

CONSUMED (FINISHED PRODUCED * 3.5 YARDS)

56175

117950

57750

81200

313075

CLOSING

11795

5775

8120

5000

30690

PURCHASES IN YARDS

63470

111930

60095

78080

313575

PURCHASES IN $

190410

335790

180285

234240

940725

ACCOUNTS PAYABLE

57123

100737

54085.5

70272

282217.5

CASH OUTFLOW

291287

292176

226936.5

218053.5

1028453

PRODUCTION

TOTAL

OPENING FINISHED

1500

5550

2250

3750

13050

SALES

12000

37000

15000

25000

89000

CLOSING

5550

2250

3750

1950

13500

PRODUCTION IN QUARTER

16050

33700

16500

23200

89450

LABOUR EXPENSE

TOTAL

PRODUCTION

16050

33700

16500

23200

89450

LABOUR HOURS (PRODUCTION *.25)

4012.5

8425

4125

5800

22362.5

COST

72225

151650

74250

104400

402525

VARIABLE MANUFACTURING OVERHEADS

TOTAL

LABOUR HOURS

4012.5

8425

4125

5800

22362.5

OVERHEAD COSTS

12037.5

25275

12375

17400

67087.5

BUDGETED INCOME STATEMENT

OPENING STOCK

SALES

2848000

RAW MATERIALS

11250

FINISHED GOODS

32250

43500

CLOSING STOCK

RAW MATERIAL

92070

PURCHASES

940725

FINISHED GOODS

32456

124526

LABOUR COST

402525

OVERHEAD COSTS (VARIABLE)

67087.5

OVERHEAD COSTS (FIXED)

520000

DEPRECIATION

80000

PROFIT

918688.5

2972526

BUDGETED BALANCE SHEET

ACCOUNTS PAYABLE

70272

CASH

876135

COMMON STOCK

419800

ACCOUNTS RECEIVABLE

200000

RETAINED EARNING

RAW MATERIALS INVENTORY

92070

OPENING

379900

FINISHED GOODS INVENTORY

32456

1200660.5

PROFIT

918688.5

DIVIDENDS

-60000

1238588.5

BUILDING AND EQUIPMENTS

900000

DEPRECIATION

-372000

528000

1728660.5

WORKINGS

CALCUATION OF VALUE OF CLOSING STOCK OF FINISHED GOODS

RAW MATERIAL CONSUMED ($)

939225

LABOUR COSTS

402525

OVERHEAD COSTS (VARIABLE)

67087

DEPRECIATION

80000

TOTAL COSTS

1488837

PRODUCTION UNITS

89450

VALUE OF CLOSING STOCK PER UNIT

16.64

CLOSING STOCK IN UNITS

1950

CLOSING STOCK IN $ (ROUDED OFF)

32456

CASH FLOW BUDGET

TOTAL

OPENING BALANCE

46,200.00

73,650.50

443,549.50

640,988.00

46,200.00

CASH FLOW FROM SALES AND DEBTORS

548,000.00

984,000.00

656,000.00

720,000.00

2,908,000.00

CASH FLOW FOR RAW MATERIALS

(291,287.00)

(292,176.00)

(226,936.50)

(218,053.50)

(1,028,453.00)

CASH FLOW FOR LABOUR EXPENSE

(72,225.00)

(151,650.00)

(74,250.00)

(104,400.00)

(402,525.00)

OVERHEAD COSTS

(12,037.50)

(25,275.00)

(12,375.00)

(17,400.00)

(67,087.50)

FIXED MANUFACTURING OVERHEAD ($150000-$20000)

(130,000.00)

(520,000.00)

DIVIDENDS

(15,000.00)

(60,000.00)

CLOSING CASH BALANCE

73,650.50

443,549.50

640,988.00

876,134.50

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