LO22-2, 3 P22-45. Developing a Master Budget for a Manufacturing Organization: Challenge Problem
Computer Accessories Inc. assembles a computer networking device from kits of imported components.
You have been asked to develop a quarterly and annual operating budget and pro forma income statements for next year. You have obtained the following information.
Beginning-of-year balances
Cash
$ 75.000
Accounts receivable (previous quarter's sales).
$245.000
Raw materials.
950 kits
Finished goods.
1,500 kits
Accounts payable (materials)
$125,000
Borrowed funds.
$ 30,000
Desired end-of-year inventory balances
Raw materials
1,000 kits
Finished goods..
1,600 kits
Desired end-of-quarter balances
Cash
$ 30,000
Raw materials as a portion of the following
quarter's production
0.20
Finished goods as a portion of the following
quarter's sales.
0.30
Manufacturing costs
Standard cost per unit
Units
Unit price
Total
Raw materials
1 kit
$75.00
$75.00
Direct labor hours at rate.
0.50 hour
$30.00
15.00
Variable overhead/labor hour.
0.50 hour
$ 5.00
2.50
Total standard variable cost.
$92.50
Fixed cost per quarter
Cash
Depreciation
Total
Selling and administrative costs
Variable cost per unit..
Fixed costs per quarter
Cash
Depreciation
Total.
Interest rate per quarter.
Portion of sales collected
Quarter of sale
Subsequent quarter
Bad debts
Portion of purchases paid
Quarter of purchase
Subsequent quarter
Unit selling price...
Sales forecast
Quarter
Unit sales
Additional information
$110,000
15,000
$125,000
$8.00
$150,000
7,500
$157,500
0.015
0.70
0.29
0.01
0.60
0.40
$225.00
First
4,400
Second
Third Fourth
4,600
4,500 4,800
All cash payments except purchases are made quarterly as incurred.
All borrowings occur at the start of a quarter.
All repayments on borrowings occur at the end of a quarter.
At the time the principal is repaid, interest is paid on the portion of principal that is repaid.
Borrowings and repayments may be made in any amount.
Required
a. A sales budget for each quarter and the year.
b. A production budget for each quarter and the year.
c. A purchases budget for each quarter and the year.
d. A manufacturing cost budget for each quarter and the year.
e. A selling and administrative expense budget for each quarter and the year.
f. A cash budget for each quarter and the year.
g. A pro forma contribution income statement for each quarter and the year.
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