Sheet1
O'Leary Corporation manufactures industrial dye. The company is preparing its 2021 Master Budget and
has presented you with the following information:
a. The projected December 31, 2020, balance sheet for the company is as follows:
Cash $5,080 Notes Payable $25,000
Accounts Receivable 26,500 Accounts Payable 2,148
Raw Material Inventory 800 Dividends Payable 10,000
Finished Goods Inventory 2,104 Total Liabilities $37,148
Prepaid Insurance 1,200 Common Stock $100,000
Building $300,000 Paid-in-Capital 50,000
Accum. Deprectiation (20,000) 280,000 Retained Earnings 128,536 278,536
Total Assets $315,684 Total Liabilities and Stockholder's Equity $315,684
b. The Accounts Receivable balance at December 31, 2020 represents the remaining balances of Novembe
and December credit sales. Sales were $70,000 and $65,000, respectively in those two months.
c. Estimated sales in gallons of dye for January through May 2021 are as follows:
January 8,000
Fe
uary 10,000
March 15,000
April 12,000
May 11,000
Each gallon of dye sells for $12
d. The collection pattern for accounts receivable is as follows: 70 percent in the month of sale, 20 percent in the first
month after the sale, and 10 percent in the second month after the sale. No bad debts are expected and they
do not offer a cash discount.
e. Each gallon of dye has the following standard quantities and costs for direct material and direct labor:
1.2 gallons of direct material x $0.80 per gallon …................................$0.96
.5 hours of direct labor x $6 per hour ….............................................$3.00
f. Variable overhead is applied to the product on a machine-hour basis. Processing one gallon of dye takes
5 hours of machine time. The variable overhead rate is $0.06 per machine hour. VOH consists entirely of
of utility costs. The annual fixed overhead is $120,000; it is applied at $1 per gallon based on an expected
annual capacity of 120,000 gallons. Fixed overhead per year is composed of the following costs:
Salaries $78,000
Utilities 12,000
Insurance - factory 2,400
Deprecitation - factory 27,600
Fixed overhead is incu
ed evenly throughout the year.
g. There is no beginning Work in Process Inventory. All work in process is completed in the period in which it is started.
Raw Material Inventory at the beginning of the year consists of 1,000 gallons of direct material at a standard cost of $0.80
per gallon. There are 400 gallons of dye in Finished Goods Inventory at the beginning of the year ca
ied at a standard cost
of $5.26 per gallon; direct material, $0.96; direct labor, $3.00; variable overhead $0.30; and fixed overhead $1.00
h. Accounts Payable relates solely to raw material and is paid 60 percent in the month of purchase and 40 percent in the
month after purchase. No discounts are received for prompt payment
i. The ending Finished Goods Inventory should include 5 percent of next month's sales. The ending inventory of raw materials
also should be 5 percent of next month's needs.
j. Selling and administrative costs per month are as follows: salaries, $25,000; rent, $7,000; and utilites, $800. These costs
are paid in cash as incu
ed.
Prepare the following:
Sales budget
Production budget
Purchases budget
Direct Labor budget
Variable OH budget
Schedule of Cash Receipts
Schedule of Cash Payments