Question

You have recently been hired by Forty Company as a managerial accountant. It has not used budgets in the past but is expecting large growth in the next year and needs to get a loan to pay for the expansion. In order to determine the loan amount, your manager asks you to prepare the following budgets:

• sales budget,
• production budget,
• direct materials purchases budget,
• direct labor budget, and
• overhead budget.

Directions

Prepare each budget of this assignment in one Excel file. Be sure to show your calculations and label your work for full credit.

The Forty Company estimates for the next year are as follows:

• Quarter 1 sales: 525,000 units
• Quarter 2 sales: 775,000 units
• Quarter 3 sales: 1,050,000 units
• Quarter 4 sales: 825,000 units
• Quarter 1 of the following year sales: 600,000 units
• Price of the product: $22
• Beginning finished goods inventory: 50,000 units
• The company policy is to have 10% of next quarter’s sales in ending inventory.
• The product contains only two materials (Material A and Material B).
• The product requires four units of Material A costing $2.
• The product requires two units of Material B costing $1.
• The beginning materials inventory for Material A is 315,000.
• The beginning materials inventory for Material B is 157,500.
• Company policy is to have 15% of next quarter's material needs in ending inventory.
• Desired ending inventory for the year in Material A is 450,000.
• Desired ending inventory for Material B is 240,000.
• The direct labor required for each product is .25 hours at an average rate of $9 per hour.
• The variable overhead rate is $5 per direct labor hour.
• Fixed overhead is expected to be $50,000 per quarter.

Answer 1

0 sakes budgeti 01 02 03 Oy sales cunits) 5,25000 7,75,000 10, Sopoo 8,25,000 puce por unit 92 $22 $22 $ Sales (1) 115,50,000 170,50,000 2310000 181,50,000 @ production budget: Sales 5,25,000 7,75,000 10,50pco 8,25,000 ending invenbry 77,500 105,000 $2,500 60,000 (10%x175.000) (10,5xoco (8,25,000 (aco x104.) +10%) X106) 602500 8,80,000 11,32,500 8,85,000 -ppening inventory (50000) (77,500) (105000) (82, Sos units to be 5,52,500 802,500 10,27,500 8,02,500! produced B Durct materials purchases budgets Material A Material B Material A: 02 03 04 production (fan) 5,52,500 802500 10,27,500 302500 Material Arequired 4 4 Per unit 4 - Tolol needs 22,10,000 32,10,000 4110,000 3210000 Erding inventory 4,81500 6,46,500 4,81,500 4500 - opening ren (32,10.000X15%) (UL 10,000x15x) (32,10 ) Cuiven) ang inventory 0,15,000) (4,54,500) (6,16,S60) (43150 4 Material A purchases 23,76,500 33 3,45,00 50

Tolal Material A a, a, Ora ay Price p.uCS) 2 2 2 2 Material purchasers) 47,53,000 66,90,000 79,50ao 63,57,000 Materia B $257,50,000 production (FG) 5,52,500 802500 10,24500 802500 Mat B Mequined 2 2 2 2 - Piu Total needs 11,05,000 £6,05,000 20,55,000 16,05,000 ending inventary 2,40,750 308250 2,40,750 2,40,000 (16.05.000X15%) (20,55,000 (16,05,000 (Given) x15%) x 15%) (-) opening inventory (157500) (240750) (308250) (240750) Mat B purchases 11,98,250 16,72,500 19,87,500 16,04,250 Price put $1 $1 $1 $1 Mato purchases($) 0,88,250 16,72500 19,89,500 16,04,250 Total (8) $64,52,500 9 Direct Labour budget: o a2 03 04 production (fa) 562,500 802500 10250 802500 His required pol 0.25 0.25 0.25 0.25 Total has needed 138125 200625 256875 200625 Rate perts $9 $9 $9 $9. Labor cost ($) 1243125 1805625 23,11,175 180SCUS $ 71,66,250 Cunits) Total

5 overhead budget: Qi Q2 03 Q4 Total Variable OH: Total hrs Mequired 138125 200625 256875 200625 796250 (from (4) variable Oh rate $5 $5 $5 $5 $5 Total variable oH ($) 690625 1003,125 12,84375 (0,03,125 39,81,250 fired OH($) 50,000 30,000 50,000 500000 200000 Total OH 740625 10,53,125 13,34,375 10,53,125 41,81,250