Question

ACC 203-Budgetary Planning Project
Fall 2019
DIB corporation’s managerial accountants and the budget committee is meeting in November to prepare the 2019 budget. Your task, as a member of the budget committee, is to prepare the 2019 budget given

the following data:

Sales: The company expects to sell 40% more units in 2019 than in each quarter of 2018. During 2018, sales were Q1: 40,000; Q2: 30,000; Q3: 60,000 and Q4: 50,000 units. The selling price per unit is expected to be $50 in the first three quarters, but only $40 per unit in Q4 because the substantial competition is expected to begin in Q4 of 2019. Sales are expected to be 40,000 units in Q1 of 2020.

Production: The company wants to maintain the ending finished goods inventory at 25% of the next quarter’s expected unit sales. Assume that this will hold to start Q1 of 2019 so that beginning finished goods inventory is (.25) (40,000) (1.4) = (.25)(56,000) =14,000 units.

Direct Material: Direct raw material requirements are 5 kilograms per unit of output produced and the cost is $1.5 per kilogram of materials. Management desires to maintain raw materials inventories at 5% of the next quarter’s production requirements. Assume the production requirements for the first quarter of 2020 are 315,000 kilograms.

Each unit of final goods produced requires 1.5 hours of direct labor time at $12 per hour.

Variable overhead costs are calculated per unit of direct labor hours as follows: indirect labor $0.2, indirect materials $0.1, maintenance $0.5.

ANNUAL fixed overhead costs are: supervisory salaries $200,000, maintenance $60,000, depreciation $80,000. They are allocated equally across quarters.

Instructions: Prepare the following budgets by quarter for the year 2019 (also show the cumulative or annual totals):
[Use the format shown in the textbook to prepare each quarter’s budget. Your work and calculations MUST be done using a Microsoft Excel spreadsheet including formulas]

1. (a) Sales budget

2. (b) Productionbudget

3. (c) Direct materials budget

4. (d) Directlaborbudget

5. (e) Manufacturing overhead budget

The marking scheme:

• ➢ Sales budget & Production budget: 35 marks

• ➢ Direct material budget & Direct labor budget: 30 marks

• ➢ Manufacturing overhead budget& budget structure: 35 marks

  • - Correct and well-organized budget structure

  • - Complete and clear column and row labels including the accumulated column entitled “Year”

    Project individually uploaded to Blackboard Total: 100 marks

Answer 1

ANSWER

AS per the given question,

а. Sales Budget For the year ended December 31, 2019 Q1 Q2 Q3 Q4 Total Budgeted 56,000 42,000 84,000 70,000 252,000 Unit Sales $ 40 $50 $50 $50 Unit Selling Price Budgeted $2,800,000 $2,100,000 $4,200,000 S2,800,000 $11,900,000 Sales Revenue

b. Production Budget For the year ended December 31, 2019 оз Q1 Q2 Q4 Total 56,000 42,000 84,000 70,000 252,000 Budgeted Unit Sales 10,500 21,000 17,500 10,000 10,000 Add: Desired Ending Inventory 66,500 63,000 101,500 80,000 262,000 Total Needs 14,000 10,500 21,000 17,500 14,000 Less: Beginning Inventory 52,500 52,500 80,500 62,500 248,0o0 Budgeted Production in Units

c

Direct Materials Budget For the year ended December 31, 2019 Total Q1 Q2 Q3 Q4 80,500 Budgeted Production 52,500 52,500 62,500 248,000 in Units Direct Material per Unit (kg) 5 5 5 262,500 262,500 402,500 312,500 1,240,000 Direct Materials Required in Production Add: Desired Ending 50,000 50,000 50,000 50,000 50,000 Inventory 312,500 312,500 452,500 362,500 1,290,000 Total Needed Less: Beginning Inventory 50,000 50,000 50,000 50,000 50,000 Budgeted Purchases in Units 262,500 262,500 402,500 312,500 1,240,000 $1.50 $1.50 $1.50 $1.50 $1.50 Cost per Unit 393,750 393,750 603,750 468,750 1,860,000 Budgeted Cost of Direct Material Purchases LO LO

d. Direct Labor Budget For the year ended December 31, 2019 оз Q1 Q2 Q4 Total 52,500 248,000 Budgeted 52,500 80,500 62,500 Production in Units Labor Hours per 1.5 1.5 1.5 1.5 1.5 Unit Total Budgeted 78,750 372,000 78,750 120,750 93,750 Direct Labor Hours $ 12 $ 12 $12 $ 12 $12 Labor Hour Rate 945,000 945,000 1,449,000 1,125,000 4,464,000 Budgeted Cost of Direct Labor

e

MANUFACTURING OVERHEAD BUDGET FOR THE YEAR ENDED DECEMBER 31 2019

Q1 Q2 Q3 Q4 Total Total Budgeted 78,750 93,750 372,000 78,750 120,750 Direct Labor Hours $0.8 $0.8 $0.8 $0.8 $0.8 Variable Manufacturing Overhead Rate 63,000 297,600 Total Variable 63,000 96,600 75,000 Manufacturing Overhead Fixed Manufacturing Overhead Costs Supervisory 50,000 50,000 50,000 50,000 200,000 Salaries 15,000 15,000 Maintenance 15,000 15,000 60,000 20,000 20,000 Depreciation 20,000 20,000 80,000 85,000 340,000 Total Fixed 85,000 85,000 85,000 Manufacturing Overhead Costs $148,000 S148,000 $181,600 $160,000 $637,600 Budgeted Manufacturing Overhead Costs

THANK YOU FOR THE QUESTION...KINDLY RATE..IT HELPS ME A LOT