You have just been hired into a management position which requires the application of your budgeting skills. You find out that budgeting has not been a priority of the company. You have contacted various areas on the organization and have accumulated the information below to assist you in preparing a comprehensive budget. Manufacturing Inc. produces a part used in the production of engines. Actual Sales and Projected sales in units: March (Actual) 38,000 April 40,000 May 42,000 June 45,000 July 44,000 Sales are the following type: 51% Cash sales collected in month of sale 49% Credit sales collected in the following month of sale The following data pertains to the manufacturing process. 1. Finished goods inventory March 31st 32,000 units $148.71 budgeted cost to make a unit Desired ending finished goods for each month 80% of next month's sales volume 2. Direct materials used: Direct Material Per-Unit Usage Cost per Pound Metal 8 pounds $7 The beginning balance of each month needs to be able to produce 48% of that month's estimated sales volume Beginning material in pounds as of April 1st 153,600 Direct materials paid in month purchased. 3. The direct labor used per unit 4 hours $14.00 per hour Direct labor paid in month incurred. 4. Overhead each month is estimated based on direct labor hours per variable cost. All costs that use cash are paid in month incurred. Fixed cost Variable cost Supplies $0.80 Power 0.60 Maintenance $20,000 0.40 Supervision 15,000 Depreciation 19,000 Taxes 11,000 Total $65,000 $1.80 5. Monthly selling and administrative expenses are based on units sold per variable cost. All costs that use cash are paid in month incurred. Fixed cost Variable cost Salaries $30,000 Commissions $1 Depreciation 10,000 Shipping 0.7 Total $40,000 $1.70 6. Unit selling price $200 per unit 7. Cash balance as of April 1st $60,000 Required: You must use cell references on the BudgetSolution worksheet, by referencing this worksheet that contains the data. Prepare the following second quarter budgets and answer the questions listed on the template provided on the BudgetSolution Worksheet. I have adapted the budget model to meet the needs of this company. If I bolded a line item, that is a header and does not need computation on that row. Please note the quarter column is for the quarter so not all lines should be added across in the quarter column. When you have beginning and ending inventory or cash balances this is for the quarter and should be brought over to the quarter column. 1. Sales Budget per month and quarter. 2. Production Budget per month and quarter. 3. Direct materials purchase budget per month and quarter. 4. Manufacturing Cost budget per month and quarter. 5. Selling and administrative expenses budget per month and quarter. 6. Cash budget per month and quarter. 7. Budgeted income statement (ignore income tax) for the quarter. 8. What if the company decides to lay off one of the part-time administrative staff. The monthly salaries will be reduced by $5,000, list all budgets that will change? Why? What is the New Net income(Loss) for the quarter?

You have just been hired into a management position which requires the application of your budgeting skills. You find out that budgeting has not been a priority of the company. You have contacted various areas on the organization and have accumulated the information below to assist you in preparing a comprehensive budget. Manufacturing Inc. produces a part used in the production of engines. Actual Sales and Projected sales in units: March (Actual) 38,000 April 40,000 May 42,000 June 45,000 July 44,000 Sales are the following type: 51% Cash sales collected in month of sale 49% Credit sales collected in the following month of sale The following data pertains to the manufacturing process. 1. Finished goods inventory March 31st 32,000 units $148.71 budgeted cost to make a unit Desired ending finished goods for each month 80% of next month's sales volume 2. Direct materials used: Direct Material Per-Unit Usage Cost per Pound Metal 8 pounds $7 The beginning balance of each month needs to be able to produce 48% of that month's estimated sales volume Beginning material in pounds as of April 1st 153,600 Direct materials paid in month purchased. 3. The direct labor used per unit 4 hours $14.00 per hour Direct labor paid in month incurred. 4. Overhead each month is estimated based on direct labor hours per variable cost. All costs that use cash are paid in month incurred. Fixed cost Variable cost Supplies $0.80 Power 0.60 Maintenance $20,000 0.40 Supervision 15,000 Depreciation 19,000 Taxes 11,000 Total $65,000 $1.80 5. Monthly selling and administrative expenses are based on units sold per variable cost. All costs that use cash are paid in month incurred. Fixed cost Variable cost Salaries $30,000 Commissions $1 Depreciation 10,000 Shipping 0.7 Total $40,000 $1.70 6. Unit selling price $200 per unit 7. Cash balance as of April 1st $60,000 Required: You must use cell references on the BudgetSolution worksheet, by referencing this worksheet that contains the data. Prepare the following second quarter budgets and answer the questions listed on the template provided on the BudgetSolution Worksheet. I have adapted the budget model to meet the needs of this company. If I bolded a line item, that is a header and does not need computation on that row. Please note the quarter column is for the quarter so not all lines should be added across in the quarter column. When you have beginning and ending inventory or cash balances this is for the quarter and should be brought over to the quarter column. 1. Sales Budget per month and quarter. 2. Production Budget per month and quarter. 3. Direct materials purchase budget per month and quarter. 4. Manufacturing Cost budget per month and quarter. 5. Selling and administrative expenses budget per month and quarter. 6. Cash budget per month and quarter. 7. Budgeted income statement (ignore income tax) for the quarter. 8. What if the company decides to lay off one of the part-time administrative staff. The monthly salaries will be reduced by $5,000, list all budgets that will change? Why? What is the New Net income(Loss) for the quarter?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

You have just been hired into a management position which requires the application of your budgeting skills.

You find out that budgeting has not been a priority of the company.

You have contacted various areas on the organization and have accumulated the information below to assist you

in preparing a comprehensive budget.

Manufacturing Inc. produces a part used in the production of engines.

Actual Sales and Projected sales in units:

March (Actual)

38,000

April

40,000

May

42,000

June

45,000

July

44,000

Sales are the following type:

51%

Cash sales collected in month of sale

49%

Credit sales collected in the following month of sale

The following data pertains to the manufacturing process.

1. Finished goods inventory

March 31st

32,000

units

$148.71

budgeted cost to make a unit

Desired ending finished goods for each month

80%

of next month's sales volume

2. Direct materials used:

Direct Material

Per-Unit Usage

Cost per Pound

Metal

pounds

The beginning balance of each month needs to be able to produce

48%

of that month's estimated sales volume

Beginning material in pounds as of April 1st

153,600

Direct materials paid in month purchased.

3. The direct labor used per unit

hours

$14.00

per hour

Direct labor paid in month incurred.

4. Overhead each month is estimated based on direct labor hours per variable cost. All costs that use cash are paid in month incurred.

Fixed cost

Variable cost

Supplies

$0.80

Power

0.60

Maintenance

$20,000

0.40

Supervision

15,000

Depreciation

19,000

Taxes

11,000

Total

$65,000

$1.80

5. Monthly selling and administrative expenses are based on units sold per variable cost. All costs that use cash are paid in month incurred.

Fixed cost

Variable cost

Salaries

$30,000

Commissions

Depreciation

10,000

Shipping

0.7

Total

$40,000

$1.70

6. Unit selling price

$200

per unit

7. Cash balance as of April 1st

$60,000

Required: You must use cell references on the BudgetSolution worksheet, by referencing this worksheet that contains the data.

Prepare the following second quarter budgets and answer the questions listed on the template provided on the BudgetSolution Worksheet. I have adapted the budget model to meet the needs of this company.

If I bolded a line item, that is a header and does not need computation on that row.

Please note the quarter column is for the quarter so not all lines should be added across in the quarter column. When you have beginning and ending inventory or cash balances this is for the quarter and should be brought over to the quarter column.

1. Sales Budget per month and quarter.

2. Production Budget per month and quarter.

3. Direct materials purchase budget per month and quarter.

4. Manufacturing Cost budget per month and quarter.

5. Selling and administrative expenses budget per month and quarter.

6. Cash budget per month and quarter.

7. Budgeted income statement (ignore income tax) for the quarter.

8. What if the company decides to lay off one of the part-time administrative staff. The monthly salaries will be reduced by $5,000, list all budgets that will change? Why?

What is the New Net income(Loss) for the quarter?

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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