Really confused because the professor did not teach us on it the professor said read the book if you have questions
(Master Budget Preparation)
You have been hired by the McClosky Corporation and they
manufacture industrial dye. The company is preparing its 20X9
master budget and has presented you with the following
information:
A. The projected December 31, 2018, balance sheet for
the company is as follows:
Assets
Cash $ 6,080
Accounts Receivable 29,500
Raw Materials Inventory 1,000
Finished Goods Inventory 3,200
Prepaid Insurance 1,800
Building $ 350,000
Accum Depreciation (25,000) 325,000
Total Assets $ 366,580
Liabilities and Equity
Notes Payable $ 25,000
Accounts Payable 2,650
Dividends Payable 12,000
Total Liabilities $ 39,650
Common Stock $ 200,000
Paid-In Capital 40,000
Retained Earnings 86,930 326,930
Total Liabilities and
Stockholders’ Equity $ 366,580
Other Information that is being provided to you:
B. The Accounts Receivable balance at 12/31/2018
represents the balances of November and December credit sales.
Sales were $90,000 and $85,000 respectively.
C. Estimated sales in gallons of dye for January
through May 20X9 are as follows:
January 9,000
February 11,000
March 16,000
April 14,000
May 13,000
June 12,000
Each gallon of dye sells for $ 15
D. The collection pattern for accounts receivable is
as follows: 70 percent in the month of sale, 20 percent in the
first month after the sale, and 10 percent in the second month
after the sale. McClosky does not provide cash discounts and they
are not expecting any bad debts.
E. Each gallon of dye has the following standard
quantities and costs for direct material and direct labor:
1.4 gallons of direct material (some evaporation takes place during
processing) X $.90 per gallon $ 1.26
0.5 direct labor X $ 8 per hour 4.00
F. Variable overhead is applied to the product on a
machine-hour basis. Processing one gallon of dye takes five hours
of machine time. The variable overhead is $0.08 per machine hour.
Variable overhead consists of utility costs. Total annual fixed
overhead is $150,000; it is applied at $ 1 per gallon based on
expected annual capacity of 150,000 gallons. Fixed overhead per
year is made up of the following costs:
Salaries $ 110,000
Utilities 15,000
Insurance 1,800
Depreciation-factory 23,200
Fixed overhead is incurred evenly throughout the year.
G. There is no beginning Work-in-Process Inventory.
All work is completed in the period in which it is started. Raw
Material Inventory at the beginning of the year consists of 1,100
gallons of direct material at a standard cost of $.90 per gallon.
There are 500 gallons of dye in Finished Goods Inventory at the
beginning of the year carried at a standard cost of $6.28 per
gallon; direct material, $.98, direct labor, $4.00; variable
overhead $ .30; fixed overhead , $1,00
H. Accounts Payable relates to raw material and is paid
60 percent in the month of purchase and 40 percent in the month
after purchase. No discounts are received for prompt payment.
I. The dividend will be paid in January 2019.
J. A new piece of equipment will be purchased in March
20X9 and the cost is $12,000. Payment of 80 percent will be made in
March and 20 percent in April. The equipment has a useful life of
three years and will be placed in service on March 1.
K. The note payable has a 12 percent interest rate;
interest is paid at the end of each month. The principle of the
note is repaid as cash is available to do so.
L. The McClosky management team wishes to maintain a
minimum cash balance of $5,500. Investments and borrowing are made
in $100 amounts. (Even $100 amounts). Interest on any borrowings
are expected to be 12 percent per year, and investments will earn 4
percent per year.
M. The ending finished goods inventory should include 5
percent of next month’s sales. This will not be true at the
beginning of 20X9 due to a miscalculation in sales for the month of
December. The ending inventory of raw materials should be 5 percent
of next month’s needs.
N. Selling and administration costs per month are as
follows: salaries $25,000; rent, $7,000 and utilities, $800. These
costs are paid in cash as they are incurred.
O. The company’s tax rate is 20 percent.
Please note: You will be preparing a master budget for the first of 2019 and the supporting schedules listed below:
Requirements:
Milestone 1:
Please prepare the following budgets:
A. Sales Budget
B. Production Budget
C. Purchases Budget
Milestone 2:
Please prepare the following budgets:
D. Labor Budget
E. Variable Overhead Budget
F. Fixed Overhead Budget
G. Budgeted Cost of Goods Manufactured
H. Budgeted Income Statement
Milestone 3:
I. Budgeted Balance Sheet
J. Cash Budget
K. Budget Presentation and please address the following
questions:
(1) The sales manager would like to increase the sales
price by 10 next quarter, what will be the projected revenues be
for the 2nd quarter.
(2) The production manager would like to purchase new
equipment for next quarter due to the fact that their competitor
has purchased equipment which cost $50,000. Will the company be
able to make the purchase or will you need more information?
(3) The CEO feels that the cash budget is not
necessary, please explain to the CEO why cash budgeting is
important to the organization.
(4) Please explain the to the management team how a
competitor’s actions can affect business planning.
1.
Sales Budget | ||||
January | February | March | Total | |
Sales units | 9000 | 11000 | 16000 | 36000 |
Sales price per unit | $ 15.00 | $ 15.00 | $ 15.00 | |
Sales amount | $ 1,35,000 | $ 1,65,000 | $ 2,40,000 | $ 5,40,000 |
2.
Production Budget | |||||
January | February | March | Total | April | |
Sales units | 9000 | 11000 | 16000 | 36000 | 14000 |
Add : Closing Stock Required | 550 | 800 | 700 | 700 | 650 |
Total Goods Required | 9550 | 11800 | 16700 | 36700 | 14650 |
Less : Opening Stock | 500 | 550 | 800 | 500 | 700 |
Production Required | 9050 | 11250 | 15900 | 36200 | 13950 |
3.
Direct Material Budget | ||||
January | February | March | Total | |
Production Required | 9050 | 11250 | 15900 | 36200 |
Raw Material Per unit | 1.4 | 1.4 | 1.4 | |
Raw Material for Production | 12670 | 15750 | 22260 | 50680 |
Add : Closing Stock Required | 787.5 | 1113 | 976.5 | 976.5 |
Total Material Required | 13457.5 | 16863 | 23236.5 | 51656.5 |
Less : Opening Stock | 1100 | 787.5 | 1113 | 1100 |
Material to be purchased | 12357.5 | 16075.5 | 22123.5 | 50556.5 |
Rate per gallon | $ 0.90 | $ 0.90 | $ 0.90 | $ 0.90 |
Purchase cost | $ 11,121.75 | $14,467.95 | $ 19,911.15 | $ 45,500.85 |
4
Direct Labor Budget | ||||
January | February | March | Total | |
Production Required | 9050 | 11250 | 15900 | 36200 |
Labor hours per unit | 0.5 | 0.5 | 0.5 | 0.5 |
Total Labor Hours Required | 4525 | 5625 | 7950 | 18100 |
Labor Rate per hour | $ 8.00 | $ 8.00 | $ 8.00 | $ 8.00 |
Labor Amount | $ 36,200 | $ 45,000 | $ 63,600 | $ 1,44,800 |
.
As per HOMEWORKLIB RULES we are supposed to answer 4 parts, I have answered more than that, so kindly post others separately
Really confused because the professor did not teach us on it the professor said read the...
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