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:
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)
Direct materials:
Wood: 2 board meters (b.m.) per table
Glass: 1 sheet per table
Direct manufacturing labour: 4 hours per table
Wood: $16 per b.m.
Glass: $22 per sheet
Direct labour: $20 per labour-hour
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
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:
Note. There is no beginning and ending balance of WIP in each month.
END OF ASSIGNMENT
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1. Sales Revenue Budget | ||||||||||
January | February | March | April | May | June | Total | Jul | Aug | ||
Budgeted units sale | 2,500 | 2,800 | 2,750 | 2,750 | 2,800 | 2,800 | 16,400 | 3,000 | 3,000 | |
Budgeted Selling price | $ 450 | $ 450 | $ 480 | $ 480 | $ 500 | $ 500 | ||||
Budgeted Sale | $1,125,000 | $1,260,000 | $1,320,000 | $1,320,000 | $1,400,000 | $1,400,000 | $7,825,000 | |||
2. Production Budget | ||||||||||
January | February | March | April | May | June | Total | Jul | Aug | ||
Budgeted Sales in units | 2,500 | 2,800 | 2,750 | 2,750 | 2,800 | 2,800 | 16,400 | 3,000 | 3,000 | |
Add: Desired ending inventory | 20% | 560 | 550 | 550 | 560 | 560 | 600 | 600 | 600 | |
Total Needs | 3,060 | 3,350 | 3,300 | 3,310 | 3,360 | 3,400 | 17,000 | 3,600 | ||
Less: Beginning Inventory | -500 | -560 | -550 | -550 | -560 | -560 | -500 | -600 | ||
Budgeted Production | 2,560 | 2,790 | 2,750 | 2,760 | 2,800 | 2,840 | 16,500 | 3,000 | ||
3. Direct Material Budget | Wood | |||||||||
January | February | March | April | May | June | Total | Jul | |||
Budgeted Production | 2,560 | 2,790 | 2,750 | 2,760 | 2,800 | 2,840 | 16,500 | 3,000 | ||
Material needed per unit | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | ||
Total Material Needed | 5,120 | 5,580 | 5,500 | 5,520 | 5,600 | 5,680 | 33,000 | 6,000 | ||
Add: Desired ending inventory | 25% | 1,395 | 1,375 | 1,380 | 1,400 | 1,420 | 1,500 | 1,500 | ||
Total Needs | 6,515 | 6,955 | 6,880 | 6,920 | 7,020 | 7,180 | 34,500 | |||
Less: Beginning Inventory | -1,400 | -1,395 | -1,375 | -1,380 | -1,400 | -1,420 | -1,400 | |||
Budgeted Purchases | 5,115 | 5,560 | 5,505 | 5,540 | 5,620 | 5,760 | 33,100 | |||
Per unit Cost | $ 16 | $ 16 | $ 16 | $ 16 | $ 16 | $ 16 | $ 16 | |||
Budgeted Purchase in dollars-woods | $ 81,840 | $ 88,960 | $ 88,080 | $ 88,640 | $ 89,920 | $ 92,160 | $ 529,600 | |||
3. Direct Material Budget | Glass | |||||||||
January | February | March | April | May | June | Total | Jul | |||
Budgeted Production | 2,560 | 2,790 | 2,750 | 2,760 | 2,800 | 2,840 | 16,500 | 3,000 | ||
Material needed per unit | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | ||
Total Material Needed | 2,560 | 2,790 | 2,750 | 2,760 | 2,800 | 2,840 | 16,500 | 3,000 | ||
Add: Desired ending inventory | 20% | 558 | 550 | 552 | 560 | 568 | 600 | 600 | ||
Total Needs | 3,118 | 3,340 | 3,302 | 3,320 | 3,368 | 3,440 | 17,100 | |||
Less: Beginning Inventory | -500 | -558 | -550 | -552 | -560 | -568 | -500 | |||
Budgeted Purchases | 2,618 | 2,782 | 2,752 | 2,768 | 2,808 | 2,872 | 16,600 | |||
Per unit Cost | $ 22 | $ 22 | $ 22 | $ 22 | $ 22 | $ 22 | $ 22 | |||
Budgeted Purchase in dollars-Glass | $ 57,596 | $ 61,204 | $ 60,544 | $ 60,896 | $ 61,776 | $ 63,184 | $ 365,200 | |||
4. Direct Manufacturing Labor Budget | ||||||||||
January | February | March | April | May | June | Total | ||||
Budgetd Production | 2,560 | 2,790 | 2,750 | 2,760 | 2,800 | 2,840 | 16,500 | |||
Hours needed per unit | 4 | 4 | 4 | 4 | 4 | 4 | 4 | |||
Total Hours Needed | 10,240 | 11,160 | 11,000 | 11,040 | 11,200 | 11,360 | 66,000 | |||
Per Hour cost | $ 20 | $ 20 | $ 20 | $ 20 | $ 20 | $ 20 | $ 20 | |||
Budgeted Labor Cost | $ 204,800 | $ 223,200 | $ 220,000 | $ 220,800 | $ 224,000 | $ 227,200 | $1,320,000 |
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