Reference no: EM132086306
Question: Wiring Corp produces wiring used in the production trucks. The wiring is sold to various truck manufacturers around the world. The projected sales in units for the coming four months of 2017 are given below:
January 14,000
February 18,000
March 22,000
April 24,000
The following data pertain to production policies and manufacturing specifications by Wiring Corp.
Finished goods
Finished goods inventory on January 1 is 13,000 units. The desired ending inventory of finished goods for each month is 20% of the next month's sales.
Direct materials
The data on direct materials used is as follows:
Direct material type Usage per unit Unit cost
Part #A78 4 $5
Part #D22 3 6
Direct material inventory policy requires that sufficient materials be on hand at the beginning of the month to satisfy 50% of the next month's production needs. This is exactly the amount of material on hand on March 1.The Direct Material inventory for May is 26000.
Direct labour
The direct labour used per unit of output is 1.5 hours. The average direct labour cost per hour is $15.
Overhead
The estimated overhead each month is as follows:
Fixed overhead Variable overhead (per DLH)
Supplies - $1.00
Power - 0.20
Maintenance 12,500 1.10
Supervision 14,000 -
Depreciation 45,000 -
Taxes 4,300 -
Other 86,000 1.60
Selling and administrative expenses
Estimated monthly selling and administrative expenses are as follows:
Fixed costs Variable costs (per unit sold)
Salaries $30,000 -
Commissions - $1.40
Depreciation 5,000 -
Shipping - 2.60
Other 13,000 0.60
Selling price
The unit selling price of the wiring is $85.
Transactions
In April, the company plans to purchase land for future expansion. The land costs $237,000. The company will receive a dividend of $10,000 in May 2017.
Sales and purchases policy
All sales and purchases are made on cash.
Cash policy
The cash balance on January 1 equals $62,900. If the firm develops a cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage. Any cash borrowed plus interest due is repaid one month later (depending on cash availability). The interest rate is 10% per annum.
Instructions:
This group project requires the use of EXCEL spreadsheets to prepare various budgets for a manufacturing company.
The group should PREPARE the following documents for the first quarter (January, February & March) of 2017 by using a MS EXCEL spreadsheet. The budgets must be linked so that change in one affects the others:
1. Production Budget
2. Direct Materials Purchase Budget
3. Ending finished goods inventory budget
4. Cost of goods sold budget
5. Budgeted income statement
6. A Cash Budget.