Question

I have completed parts 1-8, and I am looking for assistance on parts 9-10

You have just been promoted to the position of controller at the Stanley Corporation. The company is based in Moosic, PA. The company manufactures unfinished wooden book shelves. Projected sales in units for the first six months: January 20,000 February 22,000 March 26,000 April 31,000 May June 22,000 37,000 Fixed Cost Component $187,000 Variable Cost Component $ 2.00 The unit selling price is $240. Salaries Commissions Depreciation Shipping Other $40,000 $125,000 $18.00 S 1.00 The following data relates to production policies and manufacturing specifications: Finished goods inventory on January 1 is 2.200 units. The desired ending inventory for each month is 20% of the next month's sales. a b. There is only one direct material used - wood. Eight units are used for each bookcase. The unit cost is $ 7.25. Inventory policy dictates that sufficient materials be on hand at the beginning of the month to satisfy 25% of the next month's production needs. This is exactly the amount of material on hand on January 1. f. All sales and purchases are for cash. The cash balance on January 1 equals $ 85,000. The company wants to have an ending cash balance of at least $ 40,000. If a cash shortage develops, sufficient cash is borrowed to cover the shortage and provide the desired ending balance. Cash is borrowed in $1,000 increments and repaid the following month, as is the interest due. The interest rate is 8% per year. c. The direct labor used per unit of output is two hours. The average direct labor cost per hour is $32. d. Overhead each month is estimated using a flexible budget formula with activity measured in direct labor hours. Fixed Cost Component Variable Cost Component Supplies $1.00 Power 45 Maintenance $22,000 $1.00 Supervision $31,000 Depreciation $85,000 Other $90,000 $ 1.10 REQUIRED: Prepare a monthly operating budget, in good form, for each month in the first quarter of 2020 and provide a quarterly total (the company operates on a calendar year) with the following schedules: 1. Sales budget 2. Production budget 3. Direct materials purchases budget 4. Direct labor budget 5. Overhead budget 6. Selling and administrative expense budget 7. Ending finished goods inventory budget 8. Cost of goods sold budget 9. Budgeted income statement (ignore income taxes) 10. Cash budget e. Monthly selling and administrative expenses are estimated using a flexible budget formula with activity measured in units sold.

Answer 1

9		Budgeted Income statement
						$	$
	Sales revenue				(Ref 1)		16320000
	Less: Cost of goods sold				(Ref 8)		9424800
	Gross profit						6895200
	Less: Selling and administrative expenses				(Ref 6)
	(772000+814000+898000)						2484000
	Net income						4411200
10		Cash budget
						Jan	Feb	Mar	Total
	Beginning balance					85000	853617	2212237
	Add: Collection from customers				(Ref 1)	4800000	5280000	6240000	16320000
	Total cash available				A	4885000	6133617	8452237	19470854
	Less:Payment
	Purchases				(Ref 3)	1577963	1383300	1641400	4602663
	Direct labor cost				(Ref 4)	1420800	1459200	1728000	4608000
	Factory overhead				(Ref 5)	300620	304880	334700	940200
	(Excluding depreciation of $ 85000)					(385620-85000)	(389880-85000)	(419700-85000)
	Selling and administrative expenses				(Ref 6)	732000	774000	858000	2364000
	(Excluding depreciation of $ 40000)					(772000-40000)	(814000-40000)	(898000-40000)
	Total payments				B	4031383	3921380	4562100	12514863
	Preliminary cash balance				C=A-B	853617	2212237	3890137	6955991
	Financing:
	Borrowings					0	0	0	0
	repayment					0	0	0	0
	Interest					0	0	0	0
	Total financing				D	0	0	0	0
	Ending cash balance				C-D	853617	2212237	3890137
	No borrowings required since ending cash balance is always greater than desired cash balance of $40000 in every month