1.

Operating Budget: Make an operating budget using the Final Project Part I Student Worksheet.

a)Show sales budget. Ensure accuracy of data.

b)Show a production budget. Ensure the accuracy of your data.

c)Show a manufacturing budget. Ensure the accuracy of your data.

d)Show a selling expense budget. Ensure the accuracy of your data.

e)Show a general and administrative expense budget using appropriate costing methods.

2.

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 and labor. Use the budget variance student worksheet provided.

b)In your budget variance report, discuss each variance. What does the variance tell you?

c)In addition, your budget variance report should cover the following: What needs to be investigated to determine the reason for the variance?

The Prompt:

You are a manager for Peyton Approved, a pet supplies manufacturer. This responsibility requires you to create budgets, make pricing decisions, and analyze the results of operations to determine if changes need to be made to make the company more efficient.

You will be preparing a budget for the quarter July through September 2014. You are provided the following information. The budgeted balance sheet on

June

30, 2014, is:

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 l

iabilities

397,400

Common stock

$600,000

Retained earnings

61,230

Total stockholders' equity

661,230

Total liabilities and equity

$1,058,630

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 products selling price is $18.00 per unit 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 months ending finished goods inventory to equal 70% of the next months 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 $7.75perunit. Each finished unit requires 0.50 units of raw materials. Company policy calls for a given months ending raw materials inventory to equal 20% of the next months 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 unit produced. 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 representatives commissions are 12% of sales and are paid in the month of the sales. The sales managers monthly salary is $3,750 per mon