Apex Company manufactures and sells executive writing desks. The following infor

Question

Apex Company manufactures and sells executive writing desks. The following information gathered by the company’s accountant is for the 2017 budget:

The company expects to sell 1,000 executive writing desks during 2017 at an estimated price of $450 per desk.

Materials and labor per desk:

   Direct materials (wood)   5 board feet (b.f) per desk

   Direct manufacturing labor    6 hours per desk

Costs:                   2016 Unit price       2017 Unit Price

Wood               $28 per b.f.        $30.00 per b.f.

Direct manufacturing labor   $24.00 per hour       $25.00 per hour

                       Beginning    Ending

                       Inventory   Inventory

Inventories:                   1/1/2017   12/31/2017

Finished goods (executive writing desks)   100 units   200 units

Direct materials (wood)               2,000 b.f.   1,500 b.f.

Other costs:

Budgeted variable manufacturing overhead:

Indirect manufacturing labor       $28,000

Indirect materials           13,200

Utilities                5,000

Budgeted fixed manufacturing overhead:

   Depreciation – factory equipment       5,060

   Factory rent                  12,000

   Factory manager’s salary           30,000

   Factory security               13,000

Apex uses direct manufacturing labor-hours as the cost allocation base (denominator level) to allocate variable and fixed manufacturing costs to production.

Budgeted variable marketing expense is 30 sales visits at $250 per visit.

Budgeted fixed non-manufacturing costs are:

   Selling expense,       $17,000

   Administrative expense, 13,000

The company plans to declare a common stock cash dividend of $5,000 in December 2017.

The inventoriable unit cost for ending finished goods inventory on December 31, 2016, is $375. The company uses FIFO inventory method for both direct materials and finished goods.

   Budgeted balances at December 31, 2017, in the selected accounts are:

   Cash……………………………………………………………    $10,000

   Accounts receivable……………………………………………       36,000          

Factory equipment (net) ……………………………………….    750,000

Office furniture and fixtures (net)……………………………...    300,000

   Accounts payable………………………………………………      10,000

   Note payable (due 02/01/2018)…………………………………… 7,000

   Accumulated depreciation – factory equipment………………   150,000

   Accumulated depreciation – office furniture and fixtures……. 50,000

   Allowance for doubtful accounts……………………………… 1,740

   Note payable (due 09/30/2020) ……………………………….. 78,000

   Bonds payable (maturing 12/31/2030) ……………………….. 100,000

   Common stock ($1 par value) ………………………………… 100,000

   Additional paid in capital……………………………………… 600,000

   Retained earnings (balance at 1/1/17) ………………………… 101,520

The company’s income tax rate is 20%.

Required:

Prepare the 2017 revenue budget

Prepare the 2017 production budget

Prepare the direct materials usage and purchases budget

Prepare a direct manufacturing labor budget

Prepare a manufacturing overhead budget

Calculate the budgeted manufacturing overhead rate

Calculate the budgeted manufacturing overhead cost per output unit

Calculate the cost of a writing desk manufactured in 2017

Prepare an ending inventory budget for both direct materials and finished goods

Prepare a cost of goods manufactured budget

Prepare a cost of goods sold budget

Prepare a budgeted multiple-income statement for the year ended December 31, 2017

Prepare a budgeted classified balance sheet as of December 31, 2017

Explanation / Answer

Answer 1. Revenue Budget 2017 Sales in Units                  1,000 Sp Per Unit                450.00 Total Sales in $              450,000 Answer 2. Merchandise Production Budget 2017 Sales In units                  1,000 Add: Closing Inventory in units                      200 Total Needs                  1,200 Less: Beginning Inventory in units                    (100) Required Units Produced                  1,100 Answer 3. Direct Material Usage & Purchase Budget 2017 Required Units Produced                  1,100 Wood required per Unit - in feet                     5.00 Total Raw Material Required in feet                  5,500 Add: Ending Inventory                  1,500 Total Needs                  7,000 Less: Beginning Inventory                (2,000) Total Raw Material Purchased                  5,000 Cost per Feet - Board                        30 Cost of Raw Material Purchased              150,000 Answer 4. Direct Manufacturing Labor Budget April Required Units Produced                  1,100 Direct Labor Hour per Unit                     6.00 Total Direct Labor Hours Required                  6,600 Cost per Direct Labor Hour                        25 Direct Labor Cost              165,000

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