Question

1. Projected unit sales: June sales 120,000, July sales 130,000, August 140,000, September 150,000 and October sales 170,000.

2. Sales price per unit, $15.00

3. Units in ending inventory each month should equal 10% of next month sales.

4. Raw material required per unit is 2 pounds; cost is $3.00 per lb.

5. Ending inventory required at the end of each month is 5% of next month needs.

6. Direct labor required to produce one units is .25 direct labor hour. The hourly rate is $10.00.

7. Sales and administrative expenses are projected to be: salaries $275, 000 per month, commissions 2% of sales dollars and other expenses are expected to be $75,000 per month plus 3% of sales dollars.

8. Forty percent of the sales are collected in the month of sales and 60 percent in the month following.

9. Thirty percent of raw materials purchases are paid in in the month of purchase and 70 percent in the month following.

10. Manufacturing overhead costs:

a. Indirect labor, $3.00 per direct labor hour,

b. Indirect materials are $1.00 per unit produced,

c. Utilities are $1.00 per direct labor hour,

d. Maintenance cost are $0.50 per direct labor hour,

e. Supervisor salaries are $40,000 per month,

f. Depreciation is $10,000 per month,

g. Property taxes are $5,000 per month,

h. Insurance is $7,000 per month, and

i. Fixed maintenance cost is $10,000 per month.

Other pertinent information:

a. Beginning cash balance is $100,000

b. Beginning accounts payable balance is $530,000.

For the quarter ending September 30th provide answers for the following:

1. Sales in units and dollars, .

2. Units produced,

3. Cost of raw material,

4. Direct labor cost,

5. Manufacturing overhead cost,

6. Sales and administration cost,

7. Cost of ending finished goods inventory,

8. Cash balance at September 30th

9. Contribution margin,

10. Net operating income,

11. Breakeven sales dollars,

12. Sales dollars needed to earn a net operating income of $400,000,

13. Ending accounts receivable balance,

.14. Predetermined manufacturing overhead rate using direct labor hours as the activity, and

15. Ending accounts payable balance for raw materials.

Answer 1

1		Sales in units and dollars
					July	Aug	September
	Projected unit sales			a	130000	140000	150000
	Sales price per unit			b	15	15	15
	Projected sales in $			a*b	1950000	2100000	2250000
2	Units produced:
					July	Aug	September
	Projected unit sales				130000	140000	150000
	Add: Ending finished goods inventory				14000	15000	17000
	(10% *Next month sales)				(140000*10%)	(150000*10%)	(170000*10%)
	Total units required				144000	155000	167000
	Less;Beginning inventory				13000	14000	15000
	(Ending inventory of previous month)				(130000*10%)
	Units produced				131000	141000	152000
3	Cost of raw material:
					July	Aug	September
	Units produced			a	131000	141000	152000
	Raw material required per unit			b	2	2	2
	Total raw materials required in pounds			c=a*b	262000	282000	304000
	Cost per pound			d	3	3	3
	Cost of raw material			e=c*d	786000	846000	912000
4	Direct labor cost:
					July	Aug	September
	Units produced			a	131000	141000	152000
	Hours required to produce 1 unit			b	0.25	0.25	0.25
	Total labor hours required			c=a*b	32750	35250	38000
	Hourly rate			d	10	10	10
	Direct labor cost			e=c*d	327500	352500	380000
5	Manufacturing overhead cost:
					July	Aug	September
	Indirect labor cost				98250	105750	114000
	(Direct labor hours*3)				(32750*3)	(35250*3)	(38000*3)
	Indirect materials				131000	141000	152000
	(Units produced*1)				(131000*1)	(141000*1)	(152000*1)
	Utilities				32750	35250	38000
	(Direct labor hours*1)				(32750*1)	(35250*1)	(38000*1)
	Maintenance cost				16375	17625	19000
	(Direct labor hours*0.50)				(32750*0.50)	(35250*0.50)	(38000*0.50)
	Supervisor salaries				40000	40000	40000
	Depreciation				10000	10000	10000
	Property taxes				5000	5000	5000
	Insurance				7000	7000	7000
	Fixed maintenance cost				10000	10000	10000
	Total				350375	371625	395000
6	Sales and administration cost:
					July	Aug	September
	Salaries				275000	275000	275000
	Commissions				39000	42000	45000
	(Sales revenue*2%)				(1950000*2%)	(2100000*2%)	(2250000*2%)
	Other expenses				133500	138000	142500
	75000+(Sales revenue*3%)				75000+(1950000*3%)	75000+(2100000*3%)	75000+(2250000*3%)
	Total				447500	455000	462500