Question

Grant Ltd

Grant Ltd operates at capacity and makes glass-topped dining tables. At the end of 2018, Grant Ltd.’s management accountant gathered the following data to prepare budgets for the first six months 2019:

1. Units sales per quarter and the selling price per unit are estimated as follows:

                                                  Unit sales                      Price per unit

January                                   2,500                                 $450

February                                 2,800                                 $450

March                                     2,750                                 $480

April                                       2,750                                 $480

May                                        2,800                                 $500         

June                                        2,800                                 $500

July                                         3,000                                 $500

August                                    3,000                                 $500

Sales on November 2018 were 2,200 units and on December 2,400 units at a selling price of $450.

20% of sales are cash sales and 80% are credit sales. From past experience, Grant Ltd collected 40% of credit sales within the month of sale, 30% in the following month and 25% in two months after the month of sale. Allowance for doubtful debts is 5% of credit sales (uncollectible). (bad debt)

  The beginning inventories (BI) on 1 January 2019 and the desired ending inventories (EI) at the end of each month are as follows:

            BI (1/1/19)            EI (end of each month)

Tables:500 (at $300/unit) 20% of following month estimated sales

Wood: 1,400 b.m.            25% b.m. needed for next month’s budgeted production (units)

Glass      500 sheets       20% sheets needed for next month’s budgeted production (units)    

2. Materials and labour requirements

Direct materials:

Wood: 2 board meters (b.m.) per table

Glass: 1 sheet per table

Direct manufacturing labour: 4 hours per table

3. Costs of direct materials and labour:

Wood: $16 per b.m.

Glass: $22 per sheet

Direct labour: $20 per labour-hour       

4. Direct materials are purchased in the month of production and are paid 50% in the month of purchase and 50% in the following month. Wages and salaries are paid monthly.
5. Variable manufacturing overhead is $28 per direct manufacturing labour-hour. There is also $209,000 in fixed manufacturing overhead costs per month. Fixed costs include $40,000 depreciation of factory equipment. The fixed manufacturing overhead rate is based on the number of units produced budgeted every six months, at the beginning of each semester, calculated dividing the budgeted fixed overhead costs by the budgeted number of units produced for the semester. Variable and fixed costs are paid in the month incurred.
6. Sales commissions are paid monthly at the rate of 10% of month’s sales revenue. There is $160,000 in fixed non-manufacturing costs (administrative expenses) budgeted per month including $20,000 depreciation costs of office equipment. Variable and fixed non-manufacturing costs are paid in the month incurred.
7. Grant Ltd has estimated the following payments in the first semester 2019:

January: Loan for $40,000 plus interest payable at 31 December 2018 for $2,000 were paid on 2 January 2019.

March: Dividends $100,000

May: Purchase of land $200,000

June: Purchase of equipment for $300,000

8. Grant Ltd maintain a 18% open line of credit for $80,000. Interests are paid at the end of each month. Grant Ltd maintains a minimum cash balance of $20,000. The company borrows on the first day of the month and repays loans on the last day of the month, both in multiples of $1,000.
9. Grant Ltd’s balance sheet at 31 December 2018 is as follows:

ASSETS		LIABILITIES
Cash	32,000	Accounts payable (*)	64,000
Accounts receivable, net	673,200	Interest payable	2,000
Inventory: Wood	22,400	Loan payable	40,000
Inventory: Glass	11,000	SHAREHOLDER’S EQUITY
Inventory: Finished goods	150,000	Share capital	846,600
Plant and equipment, net	450,000	Retained earnings	386,000
Total assets	1,338,600	Total Liabilities and Shareholder’s equity	1,338,600

(*): Accounts payable are 50% of direct materials purchased on December 2018.

Required:

Prepare a monthly master budget for Grant Ltd.’s for the first semester 2019. The following component budgets must be included:

1. Sales revenue budget
2. Production budget (in units)
3. Direct materials usage and purchases budget for each direct materials and total direct materials (in units and dollars)
4. Direct manufacturing labour budget
5. Manufacturing overhead budget
6. Manufacturing overhead rate for the semester
7. Ending finished goods inventory budget (unit cost and total cost) at June 2019.
8. Selling and administrative expenses budget
9. Cash budget
10. Cost of goods sold at 30 June 2019
11. Budgeted income statement for the first semester 2019
12. Budgeted balance sheet as of 30 June 2019 (including separately the two direct materials inventory)

Note. There is no beginning and ending balance of WIP in each month.

( CAan you help me requiment from

1. Cash budget
2. Cost of goods sold at 30 June 2019
3. Budgeted income statement for the first semester 2019
4. Budgeted balance sheet as of 30 June 2019 (including separately the two direct materials inventory), please)

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. 1. Sales Revenue Budget February March Ma Au Budgeted Selling price Budgeted Sale 450 S 480 $ $1,125,000$1,260,000 $ 1,320,000 1,320,000 $1,400,000 $1,400,000 $ 7,825,000 Cash Receipt Schedule Credit Sale November Sale December Sale Jan Sale Feb Sale Accounts Receivable Credit Sale 792,000 198,000 864,000 259,200 S S475,200 5 855,000 $ 957,600 1,003,200 $422,400 $ 316,800 $ 264,000 1,003,200 448,000 336,000784,000 216,000 270,000 225,000 900,000 360,000 S 1,008,000 1,056,000 1,056,000 1,120,000 1,120,000 403,200 $ 302,400 252,000 422,400 316,800 264,000 Apr Sale May Sale 280,000 616,000 $ 448,000 448,000 S Cash Sale(20%) Total Cash Collection 252,000 $264,000 264,000 $ 280,000 $280,000 $ 1,565,000 $1,042,2001,141,200 $1,213,800$ 1,255,200 $1,308,800 $1,328,000 $ 7,289,200 $ 896,000 2. Production Budget Au Budgeted Sales in units Add: Desired endine invent Total Needs Less: Beginning Invento Budgeted Production 16.400 3,000 20% 17,000 500 2,750 3. Direct Material Budget Wood February April Budgeted Productiorn Materlal needed per unit Total Material Needed Add: Desired ending inventory Total Needs Less: Beginning Invent Budgeted Purchases Per unit Cost Budgeted Purchase in dollars-woods 2,560 5,680 1,395 6,515 6,955 1,395 6,880 7,020 34,500 1,380 5,115 5,620 33,100 529,600 88,960 88,640 92,160 3. Direct Material Budget May Budgeted Productiorn Material needed per unit Total Material Needed Add: Desired ending inverntory 2,790 2,560 558 16,500 600 568 600 3,302 S52 2,768 Less: BeginningI Budgeted Purchases Per unit Cost Budgeted Purchase in dollars-Glass 500 560 2,618 2,782 2,752 2,872 16,600 $57,596 63,184 365,200 61,204 60,544 61,776 Payment Schedule for Material Accounts Payable E Accounts Payab $64,000 69,718 $ 64,000 74,31274,768 $75,848 $77,672 447,400 75,082 69,718 Paid Same month Paid Next Month 75,082 74,312 74,768 75,848 S369,728 S 144,800 $149,394$ 149,080 $ 150,616 153,520$ 881,128 $ Total Payment for Material $133,718 $

4. Direct Manufacturing Labor Budget March May Total rua Budgetd Productiorn Hours needed per unit Total Hours Needed Per Hour cast Budgeted Labor Cost 2,560 2,800 2,840 16,500 11,000 20 11,040 20 11,200 20 10,240 11,160 20 66,000 204,800 $ 223,200 $ 220,000 $ 220,800 $ 224,000$ 227,200 1,320,000 5. Manufacturing overhead budget February May April Total Hours Needed Variable Manufacturing overhead rate per hour Total Variable manufacturing overhead Total Fixed Manufacturing Overhead Total Budgeted Overheads 10,240 11,000 11,040 11,200 66,000 286,720312,480 308,000 309,120 313,600 318,080 1,848,000 209,000 $209,000 $ 209,000 $ 209,000 $ 209,000 1,254,000 521,480 5517,000 518,120 $ 522,600 527,080 3,102,000 40,000 $-40,000 $-40,000 $ -40,000-40,000 $ -240,000 487,080 $ 2,862,000 S 209,000S $ 495,720 $ $-40,000 455,720 $ preciation Cash payment for overheads 481,480 477,000 478,120 482,600 6. Manufacturing overhead Rate for semester 1,254,000 16,500 Fixed Manufacturing overhead Budgeted Production in units Manufacturing overhead rate a/b 7. Ending finished goods Inventory budget Quantity/Hours Per Unit/Hour Cost per unit Wood 22.00 22.00 20.00 $ 80.00 28.00 $ 112.00 ass Fixed Overheads Unit Cost Total Cost of ending Inventory Total Cost of Woods Tatal Cost of Glass $ 322.00 $193,200 524,000 13,200 600 $322 1,500 $16 600 $22 8. Selling and Admin Expense budget March ay 1,125,0001,260,000 1,320,000 1,320,000 $1,400,000 $1,400,000$ 7,825,000 Sales Revenue Variable S&A Rate Total Variable Selling and Admin Expense Total Fixed Selling and Admin Ex Total Budgeted S&A Expense 10% 10% 10% 10% 10% 10% $ 112,500 $ $160,000 $ 272,500 S 126,000 132,000 $ 132,000 $ 140,000 140,000 $ 782,500 160,000 160,000 $160,000 $ 160,000 160,000 $ 960,000 286,000 292,000 $ 292,000 300,000 300,000 S 1,742,500 20,000 20,000 $ 20,000$ 20.000$ -120,000 266,000 272,000 $ 272,000 $ 280,000 $ 280,000 1,622,500 20,000 Cash payment for S&A $252,500$

9. Cash Budget ril anuary February March May Beginning Cash Balance Add: Cash Collection trom customers 20,922 20,102 20,358 140,408 111,992 32,000 1,042,200 1,141,200 S1,213,800 S 1,255,200 $1,308,800 $1,328,000 7,289,200 Total Cash Available Less: Cash Disbursment for $1,074,200 1,162,122 1,233,902 1,275,558 $1,449,208 $1,439,992$ 7,321,200 S 133,718 S 5 204,800 144,800 149,394 S 149,080 150,616 153,520 881,128 223,200 5 220,000 $ 220,800 5 224,000 227,200 1,320,000 481,480 477,000 478,120 $ 482,600 $ 487,080 S 2,862,000 1,622,500 Direct Labor Selling and Admin Expense Interest Payable 5 252,500 266,000 72,000 272,000 5 280,000 280,000 40,000 $2,000 2,000 S 100,000 5200,000 300,000 300,000 5100,000 5 200,000 Total cash payment Excess/(Deficit) Financing: Borrowing Repayment Interest Payment Total Financing Ending Balance $1,088,738 $1,115,480 1,218,394$ 1,120,000 $1,337,216 $1,447,800 7,327,628 46,64215,508 155,558 5 111,992 7,808$ 5,428 $14,538 $ 5 36,000 29,000$ 70,000 26,000 35,460$ $20,922 -$ 28,565 27,185 20,102 $20,358 140,408 111,992 20,757$20,757 4,850 $- 15,150$ 10. Cost of Goods sold budget Beginning I Direct Material-Waod Direct Material-Glass Direct Labor Variable Overheads Fixed Overheads Cost of Goods Manufactured Cost of Goads available tor sale Less: Ending Inventory Cost of Goods Sold 150,000 $528,000 5 363,000 $1,320,000 $1,848,000 $1,254,000 33,000 $16 16,500 $22 66,000 Hours $28 $5,313,000 5,463,000 193,200 5,269,800 From part-7 11. Budgeted Income Statement $7,825,000 $5,269,800 $2,555,200 Less: Cost of Goods Sold Gross Margin Less: Selling and Admin Expense Less: Bad debt expense Less: Interest Expense 313,000 5% of Credit Sale 1,815 2,057,315 Net Income 497,885 12. Balance Sheet Cash Accounts Receivable Inventory: Woods 896,000 ntory Glass 13,200 193,200 590,000 Inventory: Finished Goods Plant and Equipment, Net 450,000+S500,000-$360,000 Total Assets 1,737,157 77,672 29,000 106,672 Total Liabilities Common Stock Retained earning Total Stockholder's Equit Total Liabilities and Equity S 846,600 5 783,885 1,630,485 1,737,157