Problem 1:
Required
1. Prepare each of the following for June:
a. Revenues budget
. Production budget in units
c. Direct material usage budget and direct material purchases budget in both units and dollars; round to dollars
d. Direct manufacturing labor cost budget
e. Manufacturing overhead cost budgets for setup, processing, and inspection activities
f. Budgeted unit cost of ending finished-goods inventory and ending inventories budget
g. Cost of goods sold budget
h. Marketing and general administration and shipping costs budget
i. Prepare and budgeted income statement
a.
Revenues Budget
For the Month of June, 2018
Units
Selling Price
Total Revenues
Regula
Deluxe
Total
b.
Production Budget
For the Month of June, 2018
Product
Regula
Deluxe
Budgeted unit sales
Add: target ending finished goods inventory
Total required units
Deduct: beginning finished goods inventory
Units of finished goods to be produced
c.
Direct Material Usage Budget in Quantity and Dollars
For the Month of June, 2018
Material
Cloth
Wood
Total
Physical Units Budget
Direct materials required fo
Regular (2,150 units × 1.3 yd.; 0 b.f.)
yds.
b.f.
Deluxe (2,950 units × 1.5 yds.; 2 b.f.)
yds.
b.f.
Total quantity of direct materials to be used
yds.
b.f.
Cost Budget
Available from beginning direct materials inventory
(under a FIFO cost-flow assumption)
To be purchased this period
Cloth: (7,220 yd. – 610 yd.) × $5.25 per yd.
Wood: (5,900 – 800) × $7.50 per b. f.
Direct materials to be used this period
Direct Materials Purchases Budget
For the Month of June, 2018
Material
Cloth
Wood
Total
Physical Units Budget
To be used in production
yds.
ft.
Add: Target ending direct material inventory
yds.
ft.
Total requirements
yds.
ft.
Deduct: beginning direct material inventory
yds.
ft.
Purchases to be made
yds.
ft.
Cost Budget
Cloth: (6,996 yds. × $5.25 per yd.)
Wood: (5,395 ft × $7.50 per b.f.)
Total
d.
Direct Manufacturing Labor Costs Budget
For the Month of June, 2018
Output Units
Direct Manufacturing
Total
Hourly Wage
Total
Produced
Labor-Hours per Unit
Hours
Rate
Regula
Deluxe
Total
e.
Manufacturing Overhead Costs Budget
For the Month of June 2018
Total
Machine setup
(Regular, 43 batchesa × 2 hrs.
atch + Deluxe, 59 batchesb × 3 hrs.
atch) x $18/hou
Processing (31,400 DMLH x $1.80)
Inspection [(2,150 + 2,950) pairs x $1.35 per pair]
Total
Regular: 2,150 pairs ÷ 50 pairs per batch = 43; bDeluxe: 2,950 pairs ÷ 50 pairs per batch = 59
f.
Unit Costs of Ending Finished Goods Inventory
For the Month of June, 2018
Regula
Deluxe
Cost pe
Input pe
Total
Input per
Total
Unit of Input
Unit of Output
Unit of Output
Cloth
$5.25
1.3 yd
1.5 yd
Wood
7.5
0 b.f.
2 b.f.
Direct Labo
15
5 hr.
7 hrs.
Machine setup
18
0.04 hra
0.06 h
Processing
1.8
5 hrs
7 hrs
Inspection
1.35
1 pai
1 pai
Total
2 hours per setup ÷ 50 pairs per batch = 0.04 hr. per unit
3 hours per setup ÷ 50 pairs per batch = 0.06 hr. per unit
Ending Inventories Budget
June, 2018
Quantity
Cost per unit
Total
Direct Materials
Cloth
yards
Wood
b.f
Finished goods
Regula
Deluxe
Total ending inventory
g.
Cost of Goods Sold Budget
For the Month of June, 2018
Beginning finished goods inventory, June 1 ($23,250 + $92,625)
Direct materials used (requirement c)
Direct manufacturing labor (requirement d)
Manufacturing overhead (requirement e)
Cost of goods manufactured
Cost of goods available for sale
Deduct ending finished goods inventory, June 30 (requirement f)
Cost of goods sold
h.
Nonmanufacturing Costs Budget
For the Month of June, 2018
Total
Marketing and general administration
8% × $825,000
Shipping
(5,000 pairs ÷ 40 pairs per shipment) × $15
Total
Cash Budget
June 30, 2018
Cash balance, June 1 (from Balance Sheet)
Add receipts
Collections from May accounts receivable
Collections from June accounts receivable
($825,000 x 60%)
Total collection from customers
Total cash available for needs (x)
Deduct cash disbursements
Direct material purchases in May
Direct material purchases in June
($77,192 x 80%)
Direct manufacturing labo
Manufacturing overhead
($68,139 x 70% because 30% is depreciation)
Nonmanufacturing costs
($67,875 x 90% because 10% is depreciation)
Taxes
Dividends
Total disbursements (y)
Financing
Interest at 6% ($150,000 6% 1 ÷ 12) (z)
Ending cash balance, June 30 (x) – (y) – (z)
Budgeted Income Statement
For the Month of June, 2018
Revenues
Bad debt expense ($825,000 x 2%)
Net revenues
Cost of goods sold
Gross margin
Operating (nonmanufacturing) costs
Interest expense (for June)
Net income
Budgeted Balance Sheet
June 30, 2018
Assets
Cash
Accounts receivable ($825,000 × 40%)
Less: allowance for doubtful accounts
Inventories
Direct materials
Finished goods
Fixed assets
Less: accumulated depreciation
($136,335 + $68,13930% + $67,875 × 10%))
Total assets
Liabilities and Equity
Accounts payable ($77,192 × 20%)
Interest payable
Long-term debt