Accounting Assignment Directions
For this culminating activity you will create a production budget.
Excel Culminating Project Template to help you get started with your budget (attached as Excel Doc)
You are the president of Campus Sweaters, Inc. Campus Sweaters manufacturers wool pullover V-neck sweaters of various sizes and colors. You are preparing the budgets for the first quarter of 2016 (January, Fe
uary, and March). You have the following historical and projected sales in units:
Actual or Projected
Month
Units
Actual
Novembe
9,000
Actual
Decembe
8,000
Projected
January
11,000
Projected
Fe
uary
10,000
Projected
March
6,000
Projected
April
7,000
Projected
May
7,000
Projected
June
7,000
It takes ten skeins of yarn to make one sweater. Each skein costs $1.30. Past experience shows you need to have enough sweaters on-hand to fill the next month and one half of sales (approximately forty-five days). Also, you need enough yarn to manufacture the next month’s production.
You will have 12,000 sweaters in finished inventory and 80,000 skeins of yarn in raw materials inventory as of December 31, 2015. You purchased $90,000 of yarn in December that must be paid for in January. The Company incu
ed $7,500 of overhead cost during December 2015, and $13,500 of selling expenses in the last half of December. These also must be paid in January. The company policy is to pay prior month's charges on account on the tenth day of the following month unless otherwise designated.
Income Statements
Actual or Projected Sales
Actual
Actual
Projected
Projected
Projected
Month
Novembe
Decembe
January
Fe
uary
March
Sales
$240,000
$270,000
$300,000
$270,000
$210,000
Cost of sales
144,000
162,000
180,000
162,000
126,000
Gross margin
96,000
108,000
120,000
108,000
84,000
Operating Expenses:
Selling
24,000
27,000
30,000
27,000
21,000
Administration
35,000
45,000
50,000
45,000
30,000
Rent
10,000
10,000
10,000
10,000
10,000
Sales salaries
20,000
20,000
20,000
20,000
20,000
Totals
89,000
102,000
110,000
102,000
81,000
Operating Income
7,000
6,000
10,000
6,000
3,000
Interest Expense
0
0
?
?
?
Net Income
$7,000
$6,000
A worker, using a knitting machine, can make five sweaters in an hour. The cost of direct labor per hour, including fringe, is $20.00. You incu
ed $13,000 of direct labor cost between December 16 and December 31, 2015 which will be paid on January 7, 2016. The manufacturing overhead rate is $5.00 per direct labor hour. All sweaters are sold wholesale to retail outlets at $30.00 each.
Salaries and wages are paid as follows: The pay period from the first to the fifteenth of the month is paid on the twenty-second day of each month; the pay period from the sixteenth to the thirty-first is paid on the seventh day of the following month.
Rent is paid in advance on the first day of each month. Fifty percent of the selling expenses are paid in the month incu
ed, and fifty percent in the following month. All manufacturing overhead and administrative costs are paid on the tenth day of the following month.
The cash in the bank on December 31, 2015 was forecast at $30,000. There were no outstanding bo
owings. The company has a $500,000 line of credit at 12% per annum at the Old Rusty Bucket State Bank of Oreana. All bo
owings, and any subsequent repayments, must be made on the fifteenth day of the month. All loan takedowns must be repaid by December 31, XXXXXXXXXXRepayments can be made when extra cash is available, but are due on the fifteenth day of any month. The company has the policy to have at least $25,000 in the bank account at the end of each month even if they have to bo
ow it. However, more may be required depending on cash needs during the first week of the following month.
20% of the sales are collected in the month of sale. Seventy percent are collected in the next month, and five percent are collected in the third month.
01: Prepare a production budget for Campus Sweaters, Inc. for each of the following months: January, Fe
uary, March 2016.
02: Prepare a raw materials budget for each month.
03: Prepare a raw materials budget in dollars for each month.
04: Prepare a cost of goods manufactured schedule for each month.
05: Prepare a cash budget for each month.
Step 06: Review your work. Make sure your budgets are free of calculation e
ors. Have someone else review your work for spelling or grammar e
ors. Your final document should be legible and presentation-ready. Prepare the document as if you were going to present it to a cu
ent or future employe
Please see attached excel doc that is the template you will use for this assignment