Question

Please provide a

1) Budgeted income statement for the year ending June 30, 2019.

2) Budgeted balance sheet for June 30, 2019.

We only need annual totals for the budgeted financial statements

Kimmel Gnomes, located in South Dakota, may be the only other manufacturer of high quality clay garden gnomes that are hand finished. Kimmel Gnomes are stoneware, rather than terracotta. Stoneware uses higher-quality clay than terracotta and the gnomes are fired at higher temperature, yielding a stronger, more durable gnome. The gnomes are fired inside and out and are colored with glaze before firing, rather than being painted after firing. As a result Kimmel gnomes retain their color when exposed to the elements and they are not affected by moisture or freezing. The Large Gnome Division manufactures and sells gnomes between 12 and 15 inches in length or height (the "Hedgerow Gnome" model is shown in the picture to the left). Many different styles are made, but each large gnome requires virtually the same amount of time and materials. During 2018-19fiscal year, the average selling price for large gnomes is expected to be $107 per gnome. The Large Gnome Division forecasts the following number gnome sales. Quarter Gnome sales First 44,000 Second 82,000 Third 42,000 Fourth 76,000 The collection pattern for Accounts Receivable is as follows: o o o 75 percent of all sales are collected within the quarter in which they are sold 25 percent of all sales are collected in the following quarter. There are no bad debts/uncollectables. Due to higher than expected demand this year, the Large Gnome Division expects to have no finished gnomes in inventory on July 1, 2018, the beginning of the first quarter of the new fiscal year. To avoid having that problem in the coming fiscal year, the Large Gnome Division would like to have the ending inventory of Gnomes at the end of each of the first three quarters equal to 26% of the budgeted sales for the next quarter. They would like to have 23,000 finished gnomes on hand on June 30, 2019.

Answer 1

LARGE GNOME DIVISION - KIMMEL GNOMES
Budgeted Income Statement
for the year ending June 30,2019
	Total
Sales	$26,108,000
Variable Costs
Opening Inventory of Finished Goods	-
Direct Materials	961,200
Direct Labor	12,015,000
Variable Manufacturing Overheads	8,811,000
Total Variable Costs	21,787,200
Less: Closing Inventory of Finished Goods	1,876,800
Cost of Goods Sold	19,910,400
Contribution	6,197,600
Fixed Manufacturing Overheads	330,000
Variable Selling Overheads	3,416,000
Fixed Selling Overheads	360,000
Total Fixed Overheads	4,106,000
Net Operating Income	2,091,600

Budgeted Balance Sheet for the year ending June 30,2019
ASSETS		LIABILITY & EQUITY
Cash	$65,332	Accounts Payable	$156,432
Accounts receivable	2,033,000	Notes Payable	1,615,000
Raw Material Inventory	99,000	Liberty Bank Borrowings	550,000
Finished Goods Inventory	1,876,800
		Capital Stock	4,000,000
Plant and Equipment		Retained Earnings
Opening Balance	14,500,000	Opening Balance	11,905,000
Add: Additions	1,900,000	Add: Operating Profits	2,091,600
Less: Depreciation	(290,000)	Less: Interest	(33,900)
	16,110,000	Less: Dividend	(100,000)
			13,862,700
TOTAL ASSETS	$20,184,132	TOTAL LIAB. & SE	$20,184,132

Computation of Cash Balance
	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Opening Balance	$208,000	$68,124	$65,158	$207,935
Receipts
Sales Receipts	3,531,000	6,580,500	3,370,500	6,099,000
Receipts from Accounts Receivable	1,230,000	1,177,000	2,193,500	1,123,500
Receipts against Borrowings	1,160,000			550,000
Total Receipts	6,129,000	7,825,624	5,629,158	7,980,435
Payments
Payments against Accounts Payables	214,066	248,523	225,845	248,334
Payment of Wages	2,939,400	3,222,000	2,287,800	3,565,800
Payment of Variable Manufacturing Overheads	2,155,560	2,362,800	1,677,720	2,614,920
Payment of Variable Selling Overheads	616,000	1,148,000	588,000	1,064,000
Payment of Fixed Manufacturing Overheads	34,250	37,543	26,658	41,549
Payment of Fixed Selling Overheads	65,000	65,000	65,000	65,000
Payment of Dividend	25,000	25,000	25,000	25,000
Payment of Interest	11,600	11,600	5,200	5,500
Repayment of Borrowings	-	640,000	520,000	-
15% Down Payment on Machinery	-	-	-	285,000
Total Payments	6,060,876	7,760,467	5,421,223	7,915,103
Closing Balance	$68,124	$65,158	$207,935	$65,332
Desired Closing Balance	60,000	60,000	60,000	60,000

Working Notes
	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
(i) Computation of Finished Goods Inventory
Budgeted Sales Quantity	44,000	82,000	42,000	76,000
Required Finished Goods Inventory for first three quarters @ 26% of budgeted sales of next quarter & given value for last quarter	21,320	10,920	19,760	23,000
(ii) Computation of units produced
Units Sold	44,000	82,000	42,000	76,000
Closing Finished Goods Inventory	21,320	10,920	19,760	23,000
Opening Finished Goods Inventory	-	21,320	10,920	19,760
Units Produced = Closing FG Inventory + Units Sold - Opening FG Inventory	65,320	71,600	50,840	79,240
(iii) Cost of Direct Materials consumed
Units Produced	65,320	71,600	50,840	79,240
Quantity of clay per unit(in pounds)	4	4	4	4
Quantity of clay consumed (in pounds)	261,280	286,400	203,360	316,960
Cost of clay per pound	0.90	0.90	0.90	0.90
Cost of Direct Materials consumed	$235,152	$257,760	$183,024	$285,264
(iv) Computation of Direct Materials Purchased
Consumption	261,280	286,400	203,360	316,960
Required Closing Inventory for first three quarters @ 35% of budgeted production of next quarter	100,240	71,176	110,936	110,000
Opening Inventory	70,000	100,240	71,176	110,936
Purchases= Closing Inventory + Consumption - Opening Inventory	291,520	257,336	243,120	316,024
Cost of clay per pound	0.90	0.90	0.90	0.90
Purchase Cost	$262,368	$231,602	$218,808	$284,422
(v) Cost of Direct Labor & Variable Manufacturing Overheads
Total Direct Labor Hours(Units Produced*3)	195,960	214,800	152,520	237,720
Direct Labor cost per hour	15	15	15	15
Total Direct Labor costs	$2,939,400	$3,222,000	$2,287,800	$3,565,800
Total Direct Labor Hours	195,960	214,800	152,520	237,720
Variable Overhead per Labor Hour	11	11	11	11
Total Variable Overhead	$2,155,560	$2,362,800	$1,677,720	$2,614,920
(vi) Computation of Fixed Manufacturing Overheads per quarter
	Cash Expenses	Depreciation	Total
Fixed Manufacturing Overheads	$140,000	$190,000	$330,000
Total Direct Labor Hours	801,000	801,000	801,000
Fixed Manufacturing Overheads per Direct Labor Hour	$0.17	$0.24	$0.41
	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Total Direct Labor Hours	195,960	214,800	152,520	237,720
Cash Fixed Manufacturing Overheads	$34,250	$37,543	$26,658	$41,549
Depreciation	$46,482	$50,951	$36,178	$56,388
(vii) Computation of Variable Selling Overheads
Total Variable Overheads(Units Sold * $ 14)	$616,000	$1,148,000	$588,000	$1,064,000

Computation of Cash Receipts and Closing balance of Accounts Receivable
	Amount	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Opening Balance of Accounts Receivable and Value of Sales	$1,230,000	4,708,000	8,774,000	4,494,000	8,132,000
Cash Receipts against Op,Bal of AR		1,230,000
Cash Receipts 75% of Sales of the Current Quarter		3,531,000	6,580,500	3,370,500	6,099,000
Cash Receipts 25% of Sales of Preceeding Quarter			1,177,000	2,193,500	1,123,500
	$1,230,000	(53,000)	1,016,500	(1,070,000)	909,500
Closing Balance of Accounts Receivable as on June 30,2019 = $ 2,033,000
Computation of Cash Payments and Closing Balance of Accounts Payable
	Amount	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Opening Balance of Accounts Payable and value of Purchases	$96,000	262,368	231,602	218,808	284,422
Cash Payments against Op,Bal of AP		96,000
Cash Payments 45% of Purchases of the Current Quarter		118,066	104,221	98,464	127,990
Cash Payments 55% of Purchases of the Preceeding Quarter			144,302	127,381	120,344
	$96,000	48,302	(16,921)	(7,037)	36,087
Closing Balance of Accounts Payables as on June 30,2019 = $ 156,432