Tina’s Fine Juices is a bottler of orange juice located in the Northeast. The co
ID: 2792573 • Letter: T
Question
Tina’s Fine Juices is a bottler of orange juice located in the Northeast. The company produces bottled orange juice from fruit concentrate purchased from suppliers in Florida, Arizona, and California. The only ingredients in the juice are water and concentrate. The juice is blended , pasteurized, and bottled for sale in 12-ounce plastic bottles. The process is heavily automated and is centered on five machines that control the mixing and bottling of the juice. The amount of labor required is very small per bottle of juice. The average worker can process 10 bottles of juice per minute, or 600 bottles per hour. The juice is sold by a number of grocery stores under their store brand name and in smaller restaurants, delis, and bagel shops under the name Tina’s Fine Juices. Tina has been in business for several years and uses a sophisticated sales forecasting model based on previous sales, expected changes in demand and economic factors affecting the industry. Sales of the juice are highly seasonal, peaking in the first quarter of the calendar year.
Forecasted sales for the last two months of 2012 and all of 2013 are as follows:
2012
Bottles
November
375,000
December
370,000
2013
Bottles
January
350,000
February
425,000
March
400,000
April
395,000
May
375,000
June
350,000
July
375,000
August
385,000
September
395,000
October
405,000
November
400,000
December
365,000
Following in some other information that relates to Tina’s Fine Juices:
A. Juice sold for $1.05 per 12-ounce bottle, in cartons that hold 50 bottles each.
B. Tina’s Fine Juices tried to maintain at least 10 percent of the next month’s estimated sales in inventory at the end of each month.
C. The company needs to prepare two purchase budgets: one for the concentrate used in its orange juice and one for the bottles that are purchased from an outside supplier. Tina has determined that it takes one gallon of orange concentrate for every 32 bottles of finished product. Each gallon of concentrate costs $4.80. Tina’s also requires 20 percent of next month’s direct materials needs to be on hand at the end of the budget period. Bottles can be purchased from an outside supplier for $0.10 each.
D. Factory workers are paid an average of $15 per hour, including fringe benefits and payroll taxes. If the production schedule doesn’t allow for for utilization of the workers and machines, one or more workers a temporary move to another department.
E. Most of the production process is automated, the juice is mixed by a machine, and the machines do the bottling and packing. Overhead cost are almost incurred almost entirely in the mixing and bottling process. Consequently, Tina’s has chosen to use a plantwide cost driver (machine hour) to apply manufacturing overhead to products.
F. Variable overhead costs will be in direct proportion to the number of bottles of juice produced, but fixed overhead costs will remain constant, regardless of production. For budgeting purposes, Tina’s separates variable overhead from fixed overhead and calculates a predetermined overhead rate for variable manufacturing overhead costs.
G. Variable overhead is estimated to be $438,000 for the year, and the production machines will run approximately 8,000 hours at the projected production volume for year (4,775,000 bottles). Therefore, Tina’s predetermined rate for variable overhead is $54.74 per machine hour ($438,000 ÷ 8,000 machine hours).
Tina’s has also estimated fixed overhead to be $1,480,000 per year ($123,333 per month), of which, $1,240,000 per year ($103,333 per month) is depreciation on existing property, plant, and equipment.
H. All of the company’s sales are on account. On the basis of the company’s experience in previous years, the company estimates that 50 percent of the sales each month will be paid for in the month of the sale. The company also estimates that 35 percent of the month’s sales will be collected in the month following sale and that 15 percent of each month’s sales will be collected in the second month following sale.
I. Tina’s has a policy of paying 50 percent of the direct material purchases in the month of the purchase and the balance in the month after the purchase. Overhead costs are also paid 50 percent in the next month.
J. Selling and administrative expenses are $100,000 per month and are paid in cash as they are incurred
Required:
A. Prepare a sales budget for the first quarter of 2013
B. Prepare a production budget for the first quarter of 2013
C. Prepare a purchase budget for the first quarter of 2013
D. Prepare a direct labor budget for the first quarter of 2013
E. Prepare an overhead budget for the first quarter of 2013
F. Prepare cash receipts and disbursements budgets for the first quarter of 2013
2012
Bottles
November
375,000
December
370,000
Comprehensive Budget Problem LO2,3,4,5,6 Tina's Fine Juices is a bottler of orange juice located in the Northeast. The company produces bottled orange juice from fruit concentrate purchased from suppliers in Florida, Arizona, and California. The only ingredients in the juice are water and concentrate. The juice is blended pasteurized, and bottled for sale in 12-ounce plastic bottles. The process is heavily automated and is centered on five machines that control the mixing and bottling of the juice. The amount of labor required is very small per bottle of juice. The average worker can process 10 bottles of uice per minute, or 600 bottles per hour. The juice is sold by a number of grocery stores under their store brand name and in smaller restaurants, delis, and bagel shops under the name of Tina's Fine Juices·Tina's has been in business for several years and uses a sophisticated sales forecasting model based on previous sales, expected changes in demand, and economic factors affecting the industry. Sales of juice are highly seasonal, peaking in the first quarter of the calendar year Forecasted sales for the last two months of 2012 and all of 2013 are as followsExplanation / Answer
1. Sales Budget For Jan Feb Mar
January: 350,000 Feb: 425,000 Mar: 400,000 Total Projected Sales: 1,175,000
Unit $ 1.05 1.05 1.05 1.05
TPS 367,500 446,250 420,000 1,233,750
2. Production Budget
Dec Jan Feb Mar
Proj. Sales: 370,000 350,000 425,000 400,000
+ Proj ending 35,000 42,500 40,000 39,500
= Proj. Need 405,000 392,500 465,000 439,500
Production: 368000 357,500 425,000 400,000
3. Materials Purchase Budget (Concentrate):
Dec Jan Feb Mar 1st Quarter:
Month December January February March
Proj Prod(bottles) 368,000 357,500 422,500 399,500
32(Bottles Per Gallon) 11,500 11,172 13,203 12484
+ Proj. Ending Inventory 2,234 2641 2497 2456
= projected needs 13,734 13,813 15700 14941
Material Purchases Budget ( Bottles):
Month December January February March
Proj. Production 368,000 357500 422,500 399,500
+ Proj. Ending Inv. 71,500 84,500 79,900 78,600
Proj. Needed 439,500 442,000 502,400 478,100
B. Inv. 73,600 71,500 84,500 79,900
Bottles Needed 365,900 370,500 417,900 398,200
X Price per bottle .10 .10 .10 .10
36590 37050 41,790 39,820
4. Direct labor Budget 368000 357500 422,500 399,500
Bottles per hour 600 600 600 600
Machine hours 613 596 704 666
Direct labor Per hour 15 15 15 15
9,195 8940 10,560 9,990
5. Overhead Budget
December January February March
Proj. Prod (Bottles 368,000 357500 422500 399,500
/Bottles Per Hour 600 600 600 600
Budgeted Machine Hrs. 613 596 704 666
X variable overhead 54.75 54.75 54.75 54.75
Proj. Variable Overhead 33562 32631 38544 36464
+ Proj. Fixed Overhead 123,333 123,333 123,333 123,333
Total Proj. O/H 156,895 155,964 161,877 159,797
Budget: Cash Outflow 53,562 52,631 58,544 56,464
Cash Receipt Budget
Cash Receipts Dec, Jan, Feb and Mar(First Quarter)
Nov Dec Jan Feb March April
Bottles 375,000 370,000 350,000 425,000 400,000 395,000
85% 318,750 314,500 297,500 361,250 340,000 335,750
Bal. Bottles 56250 55500 52500 63750 60000
Net Inflow 370750 353000 413750 403750 395750
Cartons 50 50 50 50 50
# of cartons 7415 7060 8275 8075 7915
Cost Per carton 1.05 1.05 1.05 1.05 1.05
Sales 7786.00 7413 8689.00 8479.00 8311.00
Cash Disbursements Budget
DM Purchase-concentrate 54,885 55,575 62,685 59730
DM Purchases- Bottle 36590 37050 41790 39820
Total Disbursements For DM 91475 92625 104475 99550
Manufacturing O/H Cost 53580 52622 58553 56454
Total Disbursements for S&A 145055 145247 163028 156004
Total Cash Disbursements (137269) (137834) (154339) (147526)
Add: Depreciation 103,333 103,333 103,333 103,333
Net Cash Flow (33926) (34501) (51006) (44193.00 )
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