Prepare a production budget and sales budget

Assignment Help Managerial Accounting
Reference no: EM13709011

1. Sales were 20,000 units in June 2015. Forecasted sales in units are as follows: July, 18,000; August, 22,000; September, 20,000; October, 24,000. The sales price per unit is $18.00 and its total product cost is $14.35 per unit.

2. The June 30 finished goods inventory is 16,800 units.

3. Going forward, Company policy calls for a given month's ending finished goods inventory to equal 70% of the next month's expected unit sales

4. The June 30 raw materials inventory is 4,600 units. The budgeted September 30 raw materials inventory is 1,980 units. Raw materials cost $7.75 per unit. Each finished unit requires 0.50 units of raw materials. Company policy calls for a given month's ending raw materials inventory to equal 20% of the next month's materials requirements.

5. Each finished unit requires 0.50 hours of direct labor at a rate of $16 per hour.

6. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $1.35 per direct labor hour. Depreciation of $20,000 per month is treated as fixed factory overhead.

7. Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable.

8. Sales commissions are 12% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,750 per month.

9. The company expects 40% of sales to be for cash and the remaining 60% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of the sale).

10. All raw materials purchases are on credit, and no payables arise from any other transactions. One month's raw materials purchases are fully paid in the next month.

11. Dividends of $25,000 are to be declared and paid in August.

12. Income taxes payable at June 30 will be paid in July. Income tax expense will be assessed at 35% in the quarter and paid in October.

13. Equipment purchases of $120,000 are budgeted for the last day of September.

Peyton Approved Budgeted Balance Sheet 30-Jun-15

ASSETS

 

 

 

 

 

Cash

 

 

 

$42,000

 

Accounts receivable

 

 

 

259,900

 

Raw materials inventory

 

 

 

35,650

 

Finished goods inventory

 

 

 

241,080

 

Total current assets

 

 

 

578,630

 

Equipment

$720,000

 

 

Less accumulated depreciation

240,000

 

480,000

 

Total assets

 

 

 

$1,058,630

 

LIABILITIES AND EQUITY

 

 

 

 

 

Accounts payable

 

 

 

$63,400

 

Short-term notes payable

 

 

 

24,000

 

Taxes payable

 

 

 

10,000

 

Total current liabilities

 

 

 

97,400

 

Long-term note payable

 

 

 

300,000

 

 

 

 

 

 

 

Total Liabilities

 

 

 

397,400

 

Common stock

$600,000

 

 

Retained earnings

61,230

 

 

Total stockholders' equity

 

 

 

661,230

 

Total liabilities and equity

 

 

 

$1,058,630

 

 

 

 

 

 

 

Specifically, the following critical elements must be addressed:

  1. Operating Budget

Create an operating budget

a) Prepare a sales budget. Ensure accuracy of data.

b) Annotate your sales budget line items. Why have you made the choices you have made? What information informed your decision for eachitem?

c) Prepare a production budget. Ensure the accuracy of your data.

d) Annotate your production budget line items. Why have you made the choices you have made? What information informed your decision foreach item?

e) Prepare a manufacturing budget. Ensure the accuracy of your data.

f) Annotate your manufacturing budget line items. Why have you made the choices you have made? What information informed your decision foreach item?

g) Prepare a selling expense budget. Ensure the accuracy of your data.

h) Annotate your selling expense budget line items. Why have you made the choices you have made? What information informed your decision foreach item?

i) Prepare a general and administrative expense budget using appropriate costing methods.

j) Annotate your line items. Why have you made the choices you have made? What information informed your decision for each item?

  1. Budget Variance Analysis

The actual quantity of material used was 31,000 with an actual cost of $7.75 per unit. The actual labor hours were 33,000 with an actual rate per hour of $15.

a) Develop a variance analysis including a budget variance performance report and appropriate variances for materials, labor, and overhead.

b) Annotate each variance. What does the variance tell you?

c) What needs to be investigated to determine the reason for the variance? Why?

Reference no: EM13709011

Questions Cloud

Calculate their equivalent resistances : You have three resistors with resistance 10, 20, 30. You want to use all 3 in any kind of connection to form equivalent resistor. Calculate their equivalent resistances
An octave is defined as a doubling of the frequency : An octave is defined as a doubling of the frequency. The claim is made that a low-pass Butterworth filter of order n has a roll-off (attenuation) of 6n dB/octave. Calculate the gain in dB for a second-order filter for the cut-off frequency itself, an..
What is the truck speed at the end of the braking period : Starting from rest, a truck travels in a straight line for 7.0 s with a uniform acceleration of +2.0 m/s2. What is the truck's speed at the end of the braking period
How long does it take for the rock to hit the water : The height of a cliff relative to the ocean below is 55.0m. Someone kicks a rock horizontally off of the cliff and hears the sound of the splash 4.5 s later.  How long does it take for the rock to hit the water
Prepare a production budget and sales budget : Why have you made the choices you have made? What information informed your decision for eachitem - Why have you made the choices you have made? What information informed your decision foreach item?
What is the tangent of the angle : In a certain right triangle, the two sides that are perpendicular to each other are 3.40 m and 7.30 m long. What is the tangent of the angle for which 3.40 m is the opposite side
Discuss the two different types of negotiation : Based on your experience or readings, discuss the two different types of negotiation, along with their preparation, strategies, and tactics. In preparation for development and implementation of a strategic supplier alliance which of these types..
A voltage signal is produced by a transducer : A voltage signal is produced by a transducer.  The signal contains its strongest frequency component at 50 Hz (amplitude = 5.0 V), plus a weaker component at the second harmonic (100 Hz) with amplitude 2.0 V. In addition, there is noise at 60 Hz with..
Find at what angle does red light of wavelength appear : White light is spread out into its spectral components by a diffraction grating. At what angle does red light of wavelength 640 nm appear in first order

Reviews

Write a Review

Managerial Accounting Questions & Answers

  Manage budgets and financial plans

Explain the budgeting process and its importance to a business, identifying the components of different budgets, forecast estimates for inclusion in the budgets.

  Prepare a retained earnings statement

Prepare a retained earnings statement for the year and Prepare a stockholders' equity section of given case.

  Prepare a master budget for the three-month period

Prepare a master budget for the three-month period.

  Construct the companys direct labor budget

Construct the company's direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.

  Evaluate the predetermined overhead rate

Evaluate the Predetermined Overhead Rate

  Determine the company''s bid

Determine the company's bid if activity-based costing is used and the bid is based upon full manufacturing cost plus 30 percent.

  Compute the pool rates for the different activities

Complete the schedule to compute the pool rates for the different activities.

  Prepare Company financial statements

Prepare Company financial statements

  Prepare an analysis of terracycles

This individual assignment is based on the TerraCycle Inc.

  Discuss the ethical issues

Discuss the ethical issues

  Political resources in emerging markets

Calculate the GDP in Income Approach  and Expenditure Approach

  Management accounting - ehsan electronics company

A new plant accountant suggested that the company may be able to assign support costs to products more accurately by using an activity based costing system that relies on a separate rate for each manufacturing activity that causes support costs.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd