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create the budgets listed below for the first three months of Year 11. 1.




Given;Company A is a high-end ceiling fan manufacturer established six years ago. It has one luxury fan model that is unique and has wide market acceptance.;Sales Data;Actual Sales Data ? Year 10 (last 2 months) Projected Sales Data ? Year 11 (first 5 months);Month Units Sold November, X6 3,000 December, X6 2,400 January, X7 3,500 February, X7 4,000 March, X7 3,500 April, X7 3,400 May, X7 4,000;Selling price is $100 per unit. All sales are on credit.;Ending Inventory Raw materials: Outlined in direct materials below Work in process: No work in process inventory, all work completed on last day of quarter Finished goods: 20% of next month?s sales projection Average unit cost in Year 10: ?$64 Inventory method used: FIFO;Direct Cost Data Direct Materials: Motors are purchased ready to use from an outside supplier at a cost of $14 each. Company A?s management desires to maintain a motor inventory based on 20% of the next month?s projected production.;Blades are produced in the plant. Each fan requires 10 blades. The material is;purchased in 4 ft. x 8 ft. sheets at $24 per sheet. Fifteen blades can be cut out of each sheet. Experience has shown that, on average, the number of defective blades produced by the cutting process is equal to 6% of the number of good blades. Defective blades must be discarded. In case of machine breakdowns, management desires an ending inventory of finished blades each month equal to 10% of the next month?s total projected blade production.;Direct Labor: Total payroll expense including benefits is $63 per hour for the production workers required to operate the blade-cutting machine, and $63 per hour for the workers required to staff the assembly/packing workstation. The standard labor allowance is 0.2 hours per fan on the blade-cutting machine and 0.2 hours per fan at the assembly/packing workstation.;Overhead: Variable manufacturing overhead and fixed overhead items are presented below.;Accounts Receivable All sales are made on credit. Historically, 26% of receivables have been collected during the month of sale, 50% collected in the month following the sale, and 20% collected two months after the sale. The company has experienced 4% bad debt on its credit sales.;Accounts Payable All materials are purchased on credit. Normally, one half of the purchases are paid during the month in which they were purchased and one half paid the following month. The accounts payable balance shown on the Year 10 balance sheet represents one half of the December purchases. The company does not receive any purchase discounts from its suppliers.;Indirect Labor Costs Company Sales Representatives;3% commission on sales each month;Sales Manager $5,000/mo. plus 50% override on sales commissions Production Supervisor $4,000/mo. Administrative Expenses (salaries) $8,000/mo.;Other Expenses Yearly Insurance Premiums;$36,000 on October 1, 80% related to factory operations;Factory Utilities January ? $15,000, February ? $17,000, March ? $15,200 Usage estimated at 90% factory and 10% administrative Advertising Expenses 7% of monthly sales Factory Building Mortgage (20 years at 8%) Building purchased four years ago for $430,000 (total cost) Down payment of $190,000 Mortgage paid at the end of each quarter Travel Expenses 4% of monthly sales Factory Maintenance 10% of monthly blade material costs Factory Janitor Services $3,000/mo.;Cash Control The cash on hand at the beginning of each month must be maintained at $60,000 for any contingencies that might arise. If the operations do not provide this balance, the company will use its preapproved line of credit at 8% and borrow sufficient funds to meet the minimum required cash balance. When there is a credit line balance due, it will be paid in the next month that generates a projected cash balance over the $60,000 minimum.;Depreciable Assets The factory building was purchased on January 1, Year 3. It is being depreciated using straight line depreciation for 20 years. Salvage value of the building is estimated at $70,000.;The blade-cutting machine was purchased on December 31, Year 10, for $240,000 cash. It is being depreciated over eight years using the double declining balance method. Depreciation is recognized on long-term assets at the end of each quarter.;Dividend Policy The company declares $58,000 annual dividend to its shareholders in the first month of the quarter. Dividends are paid in the second month of the quarter.;Task;A. Using the attached ?Budgeting Template? and the information provided in the given, create the budgets listed below for the first three months of Year 11. 1. Sales budget 2. Production budget 3. Direct materials budget 4. Direct labor budget 5. Manufacturing overhead budget;Attachment Preview;308(1).1.7-01,_03-07_Student_TemplateAugust_25_2009_Budget_Task_1.xls;Company A;Balance Sheet;December 31, Year 10;Selling price;Assets;Current Assets;100;Factory Building Amortization Table;Cash;Accounts Receivable;Inventories;Finished Goods;Raw Materials;62460;228000;Prepaid Expenses;Total Current Assets;Payment;27000;44800;16236;378496;Property, Plant, and Equipment;Factory Building;Machinery;Less Accumulated Depreciation;Total Assets;430000;240000;-72000;598000;976496;Liabilities;Current Liabilities;Accounts Payable;Mortgage Payable;41996;216906;200000;517594;Principal;258902;Stockholders' Equity;Common Stock, $1 par value;Retained Earnings;Interest;1;2;3;4;5;6;7;8;9;10;11;12;13;14;15;16;17;717594;NOTE: There are some self check numbers provided. The check;Total Liabilities and Stockholders' Equity;Total Stockholders' Equity;numbers are in comment boxes marked;976496;NOTE: Check figures have been inserted in some of the following schedules as comments. Having your results identical to the check figure does;not guarantee that the rest of your schedule is correct, but, if your results are different than a check figure, it does indicate an error;in your schedule and a high probability that ensuing schedules will not all be correct.;Company A;Sales Budget;For the Quarter Ended March 31, Year 11;January;February;March;Sales;November;December;January;February;March;April;May;Quarter;Sales in units;Selling price;Revenue From Sales;Company A;Fan Production Budget;For the Quarter Ended March 31, Year 11;January;February;March;Quarter;Expected units to be sold;Plus desired ending inventory;Less beginning inventory;Total Units to Be Produced;Company A;Raw Materials Budget--Motor Purchases;For the Quarter Ended March 31, Year 11;January;Expected fans to be produced;Plus target ending inventory motors;Less beginning inventory motors;Total motors to be purchased;Unit price;Total Costs;14;February;March;14;Quarter;14;14;Company A;Raw Materials Budget--Fan Blades;For the Quarter Ended March 31, Year 11;January;February;March;Quarter;Expected fans to be produced;Blades per fan;Total blades for production;Target ending Inventory blades;Less beginning inventory blades;Total good blades needed;Spoilage allowance;Total blades to cut;Blades per sheet;Raw material sheets needed;Unit price;Total Cost for Blade Materials;Company A;Direct Labor Budget;For the Quarter Ended March 31, Year 11;January;February;March;Quarter;Cutting machine hours per fan;Assembly/packing hours per fan;Total production hours per fan;Expected units to be produced;Total production hours required;Direct labor cost per production hour;Total Direct Labor Cost;Company A;Factory Overhead Budget--Projections;For the Quarter Ended March 31, Year 11;January;Variable Overhead;Utilities;Factory maintenance;Total Variable Overhead;Fixed Overhead;Janitorial services;Production supervisor;Insurance;Depreciation expense;Mortgage interest;Total Overhead;NOTE;February;March;Quarter;View Full Attachment


Paper#23556 | Written in 18-Jul-2015

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