Question

Please help!!!

The Diesel Dynamo Company is a high-tech diesel subsystem production business that produces technology accessories for trucks and other transport. The design of Diesel Dynamo products are unique and represent a breakthrough in the industry. The units Diesel Dynamo produces claim to provide for greater dependability, quality and longevity. The company is completing its third year of operations and is preparing to create a master budget for next year, 2017. The budget will detail each quarter’s activities and the activity for the year in total. Through connections at the Rotary Club, the CEO was able obtain a template for use in creating a master budget and has provided it to you along with financial information from the corporate controller. Your job is to create the following (This is all of the information that I was given. I would greatly appreciate any assistance, even if you can't answer everything!)

Flexible Budget- Production Costs

Create the flexible budget results for production costs as if actual production were 43,000 units in the first quarter of 2017.

Add flexible budget results for slightly higher and slightly lower production at 45,000 units and 40,000 units, respectively.

	Unit costs	Actual production/ assumed actual level	Flexible budget Level 1	Flexible budget Level 2
Units of production	XXXXXXXX
Direct materials
Direct labor
Variable overhead
Total variable production cost
Fixed cost	XXX
Total budgeted production cost	XXX

DATA

Input	4th quarter 2017	1st Quarter 2018	2nd quarter 2018	3rd quarter 2018	4th quarter 2018
Budgeted sales in units	43,000	37,900	34,500	31,000	43,000

Budgeted Selling Price: $530 per production unit (finished good)

Receivables:

     Receivables Collection Schedule: 91.5% quarter of sale; 5.5% Quarter following sale; 3.0% Uncollectible (entire projected uncollectible receivables are written off each quarter

Inventory Costs:

     Direct Labor 4.5 hours; $19.25 per direct labor hour

    

     Raw materials: 3 direct material units per finished good production unit; $85.00 per raw material unit

     Variable Overhead: $9.50 per direct labor hour

    

Fixed overhead:

           Depreciation: $320,000 per quarter

          Other fixed overhead: $950,000 per quarter

Fixed overhead Application Rate: Calculate from production budget

Inventory Accounts

Ending finished goods inventory in units	4th Quarter	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
	0	15,000	19,000	20,000	15,000

Raw Materials Inventory

     Beginning Inventory (1/1/2018): 28,436 units

    Ending inventory of finished goods (1st quarter): 15,000 units

     Planned Ending Inventory: 26,000 units

     Policy: 25% of next quarters' needs for production is in ending raw materials inventory

Work In Progress Inventory

     Beginning Inventory (1/1/2018): $2,850

     Planned Ending Inventory: $2,850

Payment for Raw Materials

     Payment Policy: 85% Quarter of Purchase; 15% quarter following purchase

Operating Expenses

    Wages and Salaries Payment Policy: two times monthly on the 15th and 30th; fully paid each month

    Variable selling & Administrative Expenses: 3.50% of selling price

    Fixed selling & Administrative expenses

          Depreciation: $55,000 per quarter

          Other Selling & Admin. Exp. $180,000 per quarter

Capital Expenditures

     Equipment purchases: $5,450,000 end of 4th quarter

Treasury Activities

     Dividends to be declared: $400,000 per quarter

     Minimum cash balance: $250,000 required at end of every quarter

     Interest rate for investing (short-term): 4.0% annually; Interest policy- All of the ending cash balance for the quarter earns interest

     for the entire quarter. All of the ending cash balance for the quarter remains in Cash at the beginning of the next quarter.

     Interest rate for borrowing: 12% annually; interest policy- $10,000 increments are used in borrowing and repayment, maintaining

     the minimum cash balance. Borrowing occurs at the end of each quarter. Repayments occur at the end of the quarter.

Flexible Budget

    Actual Units Produced: First quarter: 43,000 units (use for flexible budget tab only)

    Flexible Budget: Production level 1: 45,000 units; Production level 2: 40,000 units

Diesel Dynamo Balance Sheet: Prior Year Results (12/31//17)

    Assets (Total: $44,348,000)

        Cash: $6,150,000

        Inventory: $3,748,000

        Accounts receivable (Net): $5,050,000

        Plant and equipment: $29,400,000

   Liabilities and Equity (Total: $44,348,000)

        Accounts Payable: $8,100,000

        Common Stock: $26,234,500

        Retained Earnings: $10,013,500

Answer 1

						Unit costs	Actual production/assumed actual level	Flexible budget level 1	Flexible budget level 2
	Units of production						43000	45000	40000
	Direct materials					255	10965000	11475000	10200000
						(3*85)	(43000*255)	(45000*255)	(40000*255)
	Direct labor					86.625	3724875	3898125	3465000
						(4.5*19.25)	(43000*86.625)	(45000*86.625)	(40000*86.625)
	Variable overhead					42.75	1838250	1923750	1710000
						(4.5*9.50)	(43000*42.75)	(45000*42.75)	(40000*42.75)
	Total variable production cost					384.375	16528125	17296875	15375000
	Fixed cost		(320000+950000)				1270000	1270000	1270000
	Total budgeted production cost						17798125	18566875	16645000