Question

LBL Corporation is preparing its master budget for the first quarter of the upcoming year. The following contains detail on LBL’s operations necessary for their master budget:

LBL Corporation is preparing its master budget for the first quarter of the upcoming year. The following contains detail on LBL's operations necessary for their master budget: Sales Information Actual Projected Sales are as follows: December (Prior Year; Actual): $75,000 January (Estimated) $85,000 February (Estimated): $91,000 March (Estimated): $96,000 April (Estimated): $112,000 May (Estimated): $120,000 Units are sold at $11 each Sales in a month are paid in cash for 40 % and on credit for the remainder with credit collection occurring in the month following the sale. HINT: To help you with several budgets, you will need sales in UNITS (not total dollars as listed above). You can calculate the number of sales units by taking the total sales / sales price per unit. Partial balance sheet as of 12/31 of the prior year Cash $5,050 A/R, net $112,000 $37,600 Inventory PP&E $145,000 A/P $35,700 Capital Stock $140,900 Retained Earnings $29,000 HINT: You may not need all this information LBL plans to produce enough units for sales expected in the period as well as have a cushion in ending finished goods inventory of 20% of the following month's sales units expected. Direct Materials: Three pounds of materials are needed to create each unit. When LBL purchases raw materials, they pay 30% in the month of purchase and the rest the following month. The cost is $1.50 per pound of material Management wants ending inventory to be equal to 20% of next month's production needs HINT: Direct materials are the only thing that LBL pays for, in part, in the following month. All other expenses are paid for in the month they occur. Therefore, the balance for A/P is for raw materials

Answer 1

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1. Sales Budget						Working
		Jan	Feb	Mar	Total	Apr	May
Budgeted Units		7,727	8,273	8,727	24,727	10,182	10,909
Budgeted Selling Price		$                                11	$                        11	$                                  11	$                               11	$                11	$                11
Budgeted Sale		$                        85,000	$               91,000	$                          96,000	$                       24,738	$      112,000	$      120,000
2. Production Budget
		Jan	Feb	Mar	Total	Apr	May
Budgeted No of Units		7,727	8,273	8,727	24,727	10,182	10,909
Add: Desired ending inventory	20%	1,655	1,745	2,036	2,036	2,182
Units available		9,382	10,018	10,764	26,764	12,364
Less: Beginning Inventory		-1,545	-1,655	-1,745	-1,545	-2,036
Budgeted Production units		7,836	8,364	9,018	25,218	10,327
3. Direct Material Budget
		Jan	Feb	Mar	Total	Apr
Budgeted Production Units		7,836	8,364	9,018	25,218	10,327
Material needed per unit		3	3	3	3	3
Total Material needed		23,509	25,091	27,055	75,655	30,982
Add: Desired ending inventory	20%	5,018	5,411	6,196	6,196
Units available		28,527	30,502	33,251	81,851
Less: Beginning Inventory		-4,702	-5,018	-5,411	-4,702
Budgeted Purchases Units		23,825	25,484	27,840	77,149
Unit price of Material		$                            1.50	$                    1.50	$                              1.50	$                            1.50
Total Budgeted Purchase		$                        35,738	$               38,225	$                          41,760	$                     115,724
4. Schedule of cash collection
		Jan	Feb	Mar	Total
Same month Sale 40%		$                        34,000	$               36,400	$                          38,400	$                     108,800
Following month 60%		$                     112,000	$               51,000	$                          54,600	$                     217,600
Total		$                     146,000	$               87,400	$                          93,000	$                     326,400
Cash Payment for Direct Material Purchase:
		Jan	Feb	Mar	Total	Payable
December Purchase		$                        35,700			$                       35,700
January Pur			$               35,738		$                       35,738
Feb Pur				$                          38,225	$                       38,225
Mar Pur					$                                -	$        41,760
Total payment for Material		$                        35,700	$               35,738	$                          38,225	$                     109,664	$        41,760
Cash Payment for Direct Labor		$                          3,526	$                  3,764	$                            4,058	$                       11,348
Cash Payment for Manufacturing overheads	$1.10per unit+$10,000	$                        18,500	$               19,100	$                          19,600	$                       57,200
Cash Payment for Operating Expense	$1.25 per unit+$2,000	$                        11,659	$               12,341	$                          12,909	$                       36,909