Question

SelfKlin Company is a high-technology organisation that produces Robotic Vacuum. The company is completing its tenth year of operations and is preparing to build its master budget for the coming year (2019). The budget will detail each quarter’s activity and the activity for the year in total. The master budget will be based on the following information: a Fourth-quarter sales for 2018 are 65 000 units. b Unit sales by quarter (for 2019) are projected as follows: First quarter 65 000 Second quarter 70 000 Third quarter 75 000 Fourth quarter 90 000 The selling price is $500 per unit. All sales are credit sales. SelfKlin collects 85% of all sales within the quarter in which they are realised; the other 13% is collected in the following quarter. Allowance for bad debts is 2% of sales. There is no beginning inventory of finished goods. SelfKlin is planning the following ending finished goods inventories for each quarter: First quarter 13 000 units Second quarter 15 000 units Third quarter 20 000 units Fourth quarter 10 000 units c Each vaccum unit uses four hours of direct labour and three units of direct materials. Workers are paid $25 per hour, and one unit of direct materials costs $80. d There are 65 700 units of direct materials in beginning inventory as at 1 January 2019. At the end of each quarter, SelfKlin plans to have 30% of the direct materials needed for next quarter’s unit sales. SelfKlin will end the year with the same amount of direct materials found in this year’s beginning inventory. e SelfKlin buys direct materials on account. Half of the purchases are paid for in the quarter of acquisition and the remaining half are paid for in the following quarter. Wages and salaries are paid on the 15th and 30th of each month. f Fixed overhead totals $1 million each quarter. Of this total, $350 000 represents depreciation. All other fixed expenses are paid for in cash in the quarter incurred. The fixed overhead rate is computed by dividing the year’s total fixed overhead by the year’s budgeted production in units. g Variable overhead is budgeted at $8 per direct labour hour. All variable overhead expenses are paid for in the quarter incurred. h Fixed selling and administrative expenses total $250 000 per quarter, including $50 000 depreciation. i Variable selling and administrative expenses are budgeted at $10 per unit sold. All selling and administrative expenses are paid for in the quarter incurred. j The balance sheet as at 31 December 2018 is as follows: ASSETS Cash $ 250 000 Direct materials inventory 5 256 000 Accounts receivable, net 4 225 000 Plant and equipment, net 33 500 000 Total assets $43 231 000 LIABILITIES AND SHAREHOLDERS’ EQUITY Accounts payable $ 7 248 000* Capital share 27 925 000 Retained earnings 8 058 000 Total liabilities and shareholders’ equity $43 231 000 * For purchase of direct materials only. k SelfKlin will pay quarterly dividends of $300 000. At the end of the fourth quarter, $2 million of equipment will be purchased. Prepare cash budget, income statement and balance sheet statement Please make sure the answer is visible if you posting image

Answer 1

Sales Budget Full vear 4 Budgeted number of units Selling price per unit Budgeted Total Sales 65,000 70,000 75,00090,000 3,00,000 S500 32,500 35,000 37,500 45,000 150,000 S500$500 S500 Production Budget Full vear 4 Budgeted number of units Add: Desired ending invento Total need Less: Beginning invento Budgeted production 65,000 70,00075,00090,000 3,00,000 13.000 15,000 20,000 10,000 78,00085,000 95,000 1,00,000 -13,000 15,000 20,000 80,000 78,000 72.000 80,000 Direct Material purchases Budget Full vear 4 Budgeted production 78,000 72,000 80,000 80,000 310,000 er unit usage Total material required Add: Desired ending inventory 30% Total need Less: Beginning invento Budgeted purchases of raw material units 234,000 216,000 240,000 240,000 930,000 67,500 283,500 -63,000 81,000 321,000 67,500 65,700 305,700 -81,000 63,000 297,000 -65,700 995,700 253,500 S80 231,300 $80 220,500 $80 224,700 $80 ice per unit Budgeted purchase of raw materials in $ $18,504,000 17,640,00020,280,000 17,976,00074,400,000

Direct Labour budget as shown below: Full vear 4 Budgeted production hours required per unit total hours required Price per hour Budgeted Direct Labor Cost $7,800,000 $7,200,000 $8,000,000 $8,000,000 $31,000,000 78.000 72,000 80,000 80,000 3,10,000 3,12,0002,88,0003,20.0003,20,00012,40,000 $25 $25 $25 $25 Factory Overhead budget as shown below: Full vear 4 Total direct labor hours needed Predetermined overhead rate Total Variable overhead Fixed overhead cash Fixed overhead - Depreciation Total overheads Less: Depreciation Cash payment for overheads 312,000 288,000 320,000 320,0001,240,000 2.496,000 2.304,000 2.560,000 2.560,000 9,920,000 650,000 650,000650,000 650,0002,600,000 350,000 350,000350,000 350,000 1,400,000 3,496,0003,304,0003,560,0003,560,000 13,920,000 -350,000-350,000-350,000-350,000-1,400,000 3,146,000|2,954,000 3,210,000|3,210,00012,520.000 Fixed overhead Rate (1 million - roduction units 12.82 13.89 12.5 12.5 12.9032 Selling Expenses Budget Full vear 4 Variable selling and admins expense $10 per unit Fixed selling and admin expenses - Cash Fixed selling and admin expenses - De Total budgeted selling expense Less: Depreciation Cash pavment for selling and admin 650,000 700,000 750,000 900,000 3.000,000 200,000 200,000 200,000 200,000 800,000 50,000 900,000 950,000 1,000,000 1,150,000 4.000,000 50,00050,000-50,00050,000-2,00,000 850.000 900,000 950,000 1,100,000 3,800,000 50,000 50,000 50,000200,000

Cost of Goods Sold Budget Hours/units Rate er Finished goods cost $240 $100 32 12.9 $384.9 Material Labor Variable overhead Fixed overhead Cost of Goods Sold per unit 3 $80.00 4 $25 4 $8.00 $12.90 Budgeted Income Statement Sales revenue Less: Cost of Goods Sold (300000x384.90 Gross Profit Less: Selling and administrative expense Less : Allowance for bad debts (2% of receivables Income before tax $150,000,000 $115,470,000 S34,530,000 40,00,000 30,00,000 2,75,30,000 Net income $27,530,000 CASH BUDGET Total 4 Beginning balance Add: Cash collection against sales Total available cash Less: Cash disbursement for 250,000 3,504,0006,053,00011,058,000 31,850,000 33,975.000 36,425.000 43,125,000 145,375,000 32,100,00037,479,00042,478,00054,183,000145,625,000 Material purchases Direct labor Manufacturing overheads Selling expense Dividend payment equipment Total cash payments Ending balance 16,500,00018,072,000 18,960,00019,128,00072,660,000 7,800,0007,200,0008,000,0008,000,00031,000,000 3,146,0002,954,0003,210,0003,210,00012,520,000 3,800,000 1,200,000 2,000,000 28,596,00031,426,00031,420,00031,738,000123,180,000 3,504,000 6,053,000 11,058,000 22,445,000 22,445,000 950,000 1,100,000 300,000 850,000 300,000 900,000 300,000 2,000,000 300,000

Balance sheet as shown below: Assets Cash Accounts Receivable Raw materials invento Finished goods inventory (1.000 x385 total current assets Equipment, net 22,445,000 5,850,000 5,256,000 3,850,000 37,401,000 33,900,000 71,301,000 Total Assets Liabilities and Equi Accounts Pavable 8,988,000 total current Liabilities Total liabilities Common stock Retained earnings 8,058,000-1,200,000+27,530,000 total stockholders' equit Total liabilities and equit 8,988.000 27,925,000 34,388,000 62,313,000 71,301,000