1. The company is creating two sets of budgets under constant demand and seasonal demand. Prepare the constant demand budget schedules culminating in the cash budget, income statement and balance sheet. Expected sales under constant demand are 18,000 per quarter for a total of 72,000 units for the year. Assume the same quarterly and annual sales pattern to occur for year two. The information to prepare the sales budget with the collections schedule, production budget, direct materials budget with the disbursements schedule, direct labor budget, manufacturing overhead budget, finished goods budget, and the selling and general administrative expense budget are found in appendix A-1 through A-6 and appendix B-1 the beginning balance sheet. The information from these schedules and the appendices are used to prepare the cash budget by quarter and for the year and then the income statement and balance sheet at the year's end (not by quarter). Briefly, discuss the key numbers/results from the constant demand budget schedules, cash budget, income statement and balance sheet. 2. Recalculate all the budget schedules and then the cash budget, income statement and the balance sheet based on expected unit sales of 15,000 in quarter one, 25,000 in quarter two, 20,000 in quarter three, and finally 12,000 in quarter four. Demand is still expected to be 72,000 units for the year under a seasonal sales pattern. Assume the same quarterly and annual sales pattern to occur for year two. The beginning balance sheet under seasonal demand is appendix C-1. Compare the constant demand to the seasonal demand budget. What differences occur in the budget schedules and the cash budget, the income statement and the balance sheet on a quarterly and an annual basis? Identify what caused these differences. Bill of Materials Labor Routing Manufacturing Overhead Selling & Gen Appendix A-1 Water Play, Inc. Bill of Materials Year 1 Quantity Part Number Part Name/Description Unit Cost Total Cost 2 480 650 54689002 54689003 54689004 54689005 54689006 54689007 54689008 54689009 54689010 54689011 54689012 54689013 54689014 Base Pads Suspension Connectors Frame Connectors Center Chassis Rear Panel Engine Block/Assembly Rear Levelor/Platform Seat Assembly Propeller Platform/Attachment Propeller Steering Rods Rudders Diving Bell Suit 400 120 125 650 350 1.200 1501 700 160 260 300 2001 1,250 350 1,200 150 700 1.250 7.500 Total * Note: The quantity standards are ideal. Diving Bell Suit Subassembly: Diving Suit Jacket Diving Suit Pants Diving Bell/Helmet Face Mask Spear Guns Bill of Materials Labor Routing Manufacturing Overhead Selling & Gen. Admin Appendix A-2 Water Play, Inc. Labor Routing and Costs Year 1 Labor Operation/Description Time (in decimal hours Department Code Dept. Labor Rate Standard Cost 2 50 100 100 3.5 98 112 112 350 Arrange Base Pads on Platform Anchor Assemble Suspension Connectors to Pads Weld Connectors to Pads/Inspect Attach Frame Connectors to Suspension Conn Weld Frame Connectors to Suspension Conn Assemble Center Chassis to Base Pads Weld Center Chassis to Base Pads Assemble Rear Panel to Center Chassis Weld Rear Panel to Center Chassis Assemble Engine Block & Rear Levelor to Chassis Weld Engine Block & Rear Levelor to Chassis Attach Seat Assembly to Rear Levelor & Block Weld Scat Assembly to Levelor & Block Attach Propeller Platform & Propeller to Seat Frame Weld Propeller Platform to Seat Frame Weld Propeller to Propeller Platform Attach Steering Rods to Engine Block Attach Rudders to Rear Suspension Connectors Weld Rudders to Rear Suspension Connectors Assemble Diving Bell Suit Install Suit into Vehicle 101 101 101 102 102 102 102 102 102 103 103 104 104 105 105 105 105 105 105 106 106 175 4.5 2.5 30 2.5 4.5 4 30 90 10 420 252 90,01 2.8891 * Note: The labor hour (quantity) standards are practical Bill of Materials Labor Routing Manufacturing Overhead Selling & Gen. Appendix A-3 Water Play, Inc. Manufacturing Overhead Budget Year 1 Account Number Cost Item Annual Cost | Cost Code Variable Costs Fixed Costs 5 0.000.000 20,000,000 1 25.000.000 60,000,000 2 60,000,000 30,000,000 150,000,000 1 2 25,000,000 23-600130-2 23-600131-2 23-600132-2 23-600133-2 23-600134-2 23-600135-2 23-600136-2 23-600137-2 23-600139-2 23-600140-2 23-600140-2 23-600142-2 23-600143-2 23-600144-2 23-600145-2 23-600146-2 Indirect Materials/Supplies Factory Office Supplies Overtime: Direct Laborers Indirect Labor Plant Managers' Salaries Fringe Benefits: Indirect Fringe Benefits: Direct Fringe Benefits: Managers Rework Costs: Mat & Labor Utilities Insurance: Plant & Equip Maintenance/Repairs Training of Direct Laborers Engineering Tooling Depreciation: Building Depreciation: Equipment Total Overhead 50,000,000 1 20,000,000 25,000,000 60,000,000 60,000,0001 30,000,000 150,000,000 25,000,000 30.000.000 35.000.000 10.000.000 20,000,00012 10,000,00012 20.000.00012 6,400,000 15,000,000 566,400,000 30,000,000 35,000,000 10,000,000 20,000,000 10,000,000 20,000,000 6,400,000 15,000,000 2 345,000,000 221,400,000 Cost code 1 identifies variable overhead costs and cost code 2 identifies fixed overhead costs. Overhead Rate per unit 7,866.667 566,400,000 72,000 Variable OH rate per unit 4.791.667 345,000,000 72,000 Fixed OH rate per unit 3,075 221,400,000 72,000 Bill of Materials Labor Routing Manufacturing Overhead Selling & G Appendix A-4 Water Play, Inc. Selling and General Administrative Expenses Year 1 Act Number Cost Item Annual Cost Cost Code Variable Costs Fed Costs 5.000.000 15,000,000 23.7001012 23-700102-2 21.700103-2 23.700104-2 23-700105-2 23-700106-2 83.000.000 15.000000 118.800,000 55,000,000 6.000.000 55.000.000 600 Selling Express: Advertising Expense Sales Managers Salaries Sales Commissions Fringe Benefits Sales Office Supplies Depreciation Equipment and Furniture Depreciation: Building Research & Development Warehousing costs Utilities costs Maintenance & Repairs Shipping Costs Customer Training Costs 23.7001072 23.7001082 21.700109-2 23-700110-2 21.700111-2 23.700112-2 23-700113-2 750,000 1.237.500 25.000.000 10,000,000 15.000.000 3.000.000 32.400.000 21.600.000 388.787 500 750 000 1.237.500 25,000,000 10.000 15.000.000 3,000,000 32.400.000 21.600.000 172.100.000 21597,500 23-800201-2 23-800202-2 23.800203-2 23.800204-2 23.800205-2 23-800206-2 60,000,000 28.000.000 15.000.000 6,000,000 5.000.000 60.000.000 2,000,000 15,000,000 6.000.000 5,000,000 General Administrative Expenses: Executive Salarics Executive Fringe Benefits Accounting & MIS Office Supplies Leased Computer System Depreciation Equipment and Furniture Depreciation Building Clerical Wages Clerical Fringe Benefits Utilities cost Maintenance & Repairs Insurance Property Taxes 23.800207-2 21.00208-2 23.8002092 23.800210-2 1.750.000 412.500 7.000.000 2.200.000 2,000,000 2.400.000 6.000.000 12.000.000 147,762 500 1,750.000 412.500 7.000.000 2200.000 2000 2400.000 6.000.000 12.000.000 147,762 500 23.800212-2 21.00211-2 Total S&GA 536 550.000 1722 161.00 Variable S&GA per unit 2.400 172.800.000 722.000 Fixed S&GA per unit 363.750,000 72.000 5.052013 Total S&GA per unit 7.452.083 536.550.000 72 000 Bill of Materials Manufacturing Overhead Selling & Gen. A Appendix A-5 Water Play, Inc Standard Cost Card Year 1 Cost Component 1 Cost per Unit Labor Hours Rate per DLH I Direct Material 7,500 Direct Labor 2,889| 90 32.1 Manufacturing Overhead 7,866,667 90 87.407 18.255.667 Bill of Materials Labor Routing Manufacturing Overhead Selling & Gen. A Appendix A-6 Water Play, Inc. Index Sheet Parts 1 & 2 Shark Scout Vehicle Water Play, Inc.'s Shark Scout Personal Watercraft 30,000 6,000 5.5% Retail Price: Estimated Monthly Sales (units): Sales Commission Rate Yearly Sales (by Quarter)--Constant Demand: 01 02 18,000 18,000 04 18,000 Total 72,000 Q1 18.000 Q2 18,000 18,000 Yearly Sales (by Quarter)--Seasonal Demand: Q2 25.000 04 02 Total 72.000 01 15.000 20.000 12.000 25.000 Expected Collection Percentages: Quarter of Sale: Quarter after Sale: Uncollectable: 67.0% 32.5% 0.5% Expected Payment Percentages: Quarter of Purchase Quarter after Purchase 63.0% 37.0% Desired Ending Finished Goods Inventory Level 10.0% Desired Ending Raw Material Inventory Level 10.0% Shipping Cost per Vehicle Training Cost per Vehicle 450 300 Beginning Cash Balance Minimum Required Quarterly Cash Balance 25.000.000 25,000,000 150,000,000 100,000,000 Long-term loan principal Seasonal Line of Credit Available Annual Interest Rate on both long term loan and Seasonal Line of credit 10.0% Dividends declared and paid Bill of Materials Labor Routing Manufacturing Overhead Appendix B-1 Water Play, Inc. Beginning Balance Sheet January 1, 20XX Constant Demand Part 2 25,000,000 13,500,000 32.860,200 Assets Current Assets Cash Raw Material Inventory Finished Goods Inventory Total Current Assets Land Buildings Equipment Total Noncurrent Assets Total Assets 71,360,200 12.000.000 72,000,000 140,000,000 224,000,000 295,360,200 Liabilities Term Loan Note Payable 150,000,000 Stockholders' Equity Common Stock (S1 par value, 25 million shares authorized, 3 million shares issued and outstanding Paid in Capital Total Contributed Capital Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity 3,000,000 142,360,200 145,360,200 01 145,360,200 295,360,200 Bill of Materials Labor Routing Manufacturing Overhead Selling Appendix C-1 Water Play, Inc. Beginning Balance Sheet January 1, 20XX Seasonal Demand Part 2 25.000.000 12,000,000 27,383,500 Assets Current Assets Cash Raw Material Inventory Finished Goods Inventory Total Current Assets Land Buildings Equipment Total Noncurrent Assets Total Assets 64,383,500 12,000,000 72,000,000 140,000,000 224,000,000 288,383,500 Liabilities Term Loan Note Payable 150,000,000 Stockholders' Equity Common Stock ($1 par value, 25 million shares authorized 3 million shares issued and outstanding Paid in Capital Total Contributed Capital Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity 3,000,000 135,383,500 138,383,500 138,383,500 288,383,500 1. The company is creating two sets of budgets under constant demand and seasonal demand. Prepare the constant demand budget schedules culminating in the cash budget, income statement and balance sheet. Expected sales under constant demand are 18,000 per quarter for a total of 72,000 units for the year. Assume the same quarterly and annual sales pattern to occur for year two. The information to prepare the sales budget with the collections schedule, production budget, direct materials budget with the disbursements schedule, direct labor budget, manufacturing overhead budget, finished goods budget, and the selling and general administrative expense budget are found in appendix A-1 through A-6 and appendix B-1 the beginning balance sheet. The information from these schedules and the appendices are used to prepare the cash budget by quarter and for the year and then the income statement and balance sheet at the year's end (not by quarter). Briefly, discuss the key numbers/results from the constant demand budget schedules, cash budget, income statement and balance sheet. 2. Recalculate all the budget schedules and then the cash budget, income statement and the balance sheet based on expected unit sales of 15,000 in quarter one, 25,000 in quarter two, 20,000 in quarter three, and finally 12,000 in quarter four. Demand is still expected to be 72,000 units for the year under a seasonal sales pattern. Assume the same quarterly and annual sales pattern to occur for year two. The beginning balance sheet under seasonal demand is appendix C-1. Compare the constant demand to the seasonal demand budget. What differences occur in the budget schedules and the cash budget, the income statement and the balance sheet on a quarterly and an annual basis? Identify what caused these differences. Bill of Materials Labor Routing Manufacturing Overhead Selling & Gen Appendix A-1 Water Play, Inc. Bill of Materials Year 1 Quantity Part Number Part Name/Description Unit Cost Total Cost 2 480 650 54689002 54689003 54689004 54689005 54689006 54689007 54689008 54689009 54689010 54689011 54689012 54689013 54689014 Base Pads Suspension Connectors Frame Connectors Center Chassis Rear Panel Engine Block/Assembly Rear Levelor/Platform Seat Assembly Propeller Platform/Attachment Propeller Steering Rods Rudders Diving Bell Suit 400 120 125 650 350 1.200 1501 700 160 260 300 2001 1,250 350 1,200 150 700 1.250 7.500 Total * Note: The quantity standards are ideal. Diving Bell Suit Subassembly: Diving Suit Jacket Diving Suit Pants Diving Bell/Helmet Face Mask Spear Guns Bill of Materials Labor Routing Manufacturing Overhead Selling & Gen. Admin Appendix A-2 Water Play, Inc. Labor Routing and Costs Year 1 Labor Operation/Description Time (in decimal hours Department Code Dept. Labor Rate Standard Cost 2 50 100 100 3.5 98 112 112 350 Arrange Base Pads on Platform Anchor Assemble Suspension Connectors to Pads Weld Connectors to Pads/Inspect Attach Frame Connectors to Suspension Conn Weld Frame Connectors to Suspension Conn Assemble Center Chassis to Base Pads Weld Center Chassis to Base Pads Assemble Rear Panel to Center Chassis Weld Rear Panel to Center Chassis Assemble Engine Block & Rear Levelor to Chassis Weld Engine Block & Rear Levelor to Chassis Attach Seat Assembly to Rear Levelor & Block Weld Scat Assembly to Levelor & Block Attach Propeller Platform & Propeller to Seat Frame Weld Propeller Platform to Seat Frame Weld Propeller to Propeller Platform Attach Steering Rods to Engine Block Attach Rudders to Rear Suspension Connectors Weld Rudders to Rear Suspension Connectors Assemble Diving Bell Suit Install Suit into Vehicle 101 101 101 102 102 102 102 102 102 103 103 104 104 105 105 105 105 105 105 106 106 175 4.5 2.5 30 2.5 4.5 4 30 90 10 420 252 90,01 2.8891 * Note: The labor hour (quantity) standards are practical Bill of Materials Labor Routing Manufacturing Overhead Selling & Gen. Appendix A-3 Water Play, Inc. Manufacturing Overhead Budget Year 1 Account Number Cost Item Annual Cost | Cost Code Variable Costs Fixed Costs 5 0.000.000 20,000,000 1 25.000.000 60,000,000 2 60,000,000 30,000,000 150,000,000 1 2 25,000,000 23-600130-2 23-600131-2 23-600132-2 23-600133-2 23-600134-2 23-600135-2 23-600136-2 23-600137-2 23-600139-2 23-600140-2 23-600140-2 23-600142-2 23-600143-2 23-600144-2 23-600145-2 23-600146-2 Indirect Materials/Supplies Factory Office Supplies Overtime: Direct Laborers Indirect Labor Plant Managers' Salaries Fringe Benefits: Indirect Fringe Benefits: Direct Fringe Benefits: Managers Rework Costs: Mat & Labor Utilities Insurance: Plant & Equip Maintenance/Repairs Training of Direct Laborers Engineering Tooling Depreciation: Building Depreciation: Equipment Total Overhead 50,000,000 1 20,000,000 25,000,000 60,000,000 60,000,0001 30,000,000 150,000,000 25,000,000 30.000.000 35.000.000 10.000.000 20,000,00012 10,000,00012 20.000.00012 6,400,000 15,000,000 566,400,000 30,000,000 35,000,000 10,000,000 20,000,000 10,000,000 20,000,000 6,400,000 15,000,000 2 345,000,000 221,400,000 Cost code 1 identifies variable overhead costs and cost code 2 identifies fixed overhead costs. Overhead Rate per unit 7,866.667 566,400,000 72,000 Variable OH rate per unit 4.791.667 345,000,000 72,000 Fixed OH rate per unit 3,075 221,400,000 72,000 Bill of Materials Labor Routing Manufacturing Overhead Selling & G Appendix A-4 Water Play, Inc. Selling and General Administrative Expenses Year 1 Act Number Cost Item Annual Cost Cost Code Variable Costs Fed Costs 5.000.000 15,000,000 23.7001012 23-700102-2 21.700103-2 23.700104-2 23-700105-2 23-700106-2 83.000.000 15.000000 118.800,000 55,000,000 6.000.000 55.000.000 600 Selling Express: Advertising Expense Sales Managers Salaries Sales Commissions Fringe Benefits Sales Office Supplies Depreciation Equipment and Furniture Depreciation: Building Research & Development Warehousing costs Utilities costs Maintenance & Repairs Shipping Costs Customer Training Costs 23.7001072 23.7001082 21.700109-2 23-700110-2 21.700111-2 23.700112-2 23-700113-2 750,000 1.237.500 25.000.000 10,000,000 15.000.000 3.000.000 32.400.000 21.600.000 388.787 500 750 000 1.237.500 25,000,000 10.000 15.000.000 3,000,000 32.400.000 21.600.000 172.100.000 21597,500 23-800201-2 23-800202-2 23.800203-2 23.800204-2 23.800205-2 23-800206-2 60,000,000 28.000.000 15.000.000 6,000,000 5.000.000 60.000.000 2,000,000 15,000,000 6.000.000 5,000,000 General Administrative Expenses: Executive Salarics Executive Fringe Benefits Accounting & MIS Office Supplies Leased Computer System Depreciation Equipment and Furniture Depreciation Building Clerical Wages Clerical Fringe Benefits Utilities cost Maintenance & Repairs Insurance Property Taxes 23.800207-2 21.00208-2 23.8002092 23.800210-2 1.750.000 412.500 7.000.000 2.200.000 2,000,000 2.400.000 6.000.000 12.000.000 147,762 500 1,750.000 412.500 7.000.000 2200.000 2000 2400.000 6.000.000 12.000.000 147,762 500 23.800212-2 21.00211-2 Total S&GA 536 550.000 1722 161.00 Variable S&GA per unit 2.400 172.800.000 722.000 Fixed S&GA per unit 363.750,000 72.000 5.052013 Total S&GA per unit 7.452.083 536.550.000 72 000 Bill of Materials Manufacturing Overhead Selling & Gen. A Appendix A-5 Water Play, Inc Standard Cost Card Year 1 Cost Component 1 Cost per Unit Labor Hours Rate per DLH I Direct Material 7,500 Direct Labor 2,889| 90 32.1 Manufacturing Overhead 7,866,667 90 87.407 18.255.667 Bill of Materials Labor Routing Manufacturing Overhead Selling & Gen. A Appendix A-6 Water Play, Inc. Index Sheet Parts 1 & 2 Shark Scout Vehicle Water Play, Inc.'s Shark Scout Personal Watercraft 30,000 6,000 5.5% Retail Price: Estimated Monthly Sales (units): Sales Commission Rate Yearly Sales (by Quarter)--Constant Demand: 01 02 18,000 18,000 04 18,000 Total 72,000 Q1 18.000 Q2 18,000 18,000 Yearly Sales (by Quarter)--Seasonal Demand: Q2 25.000 04 02 Total 72.000 01 15.000 20.000 12.000 25.000 Expected Collection Percentages: Quarter of Sale: Quarter after Sale: Uncollectable: 67.0% 32.5% 0.5% Expected Payment Percentages: Quarter of Purchase Quarter after Purchase 63.0% 37.0% Desired Ending Finished Goods Inventory Level 10.0% Desired Ending Raw Material Inventory Level 10.0% Shipping Cost per Vehicle Training Cost per Vehicle 450 300 Beginning Cash Balance Minimum Required Quarterly Cash Balance 25.000.000 25,000,000 150,000,000 100,000,000 Long-term loan principal Seasonal Line of Credit Available Annual Interest Rate on both long term loan and Seasonal Line of credit 10.0% Dividends declared and paid Bill of Materials Labor Routing Manufacturing Overhead Appendix B-1 Water Play, Inc. Beginning Balance Sheet January 1, 20XX Constant Demand Part 2 25,000,000 13,500,000 32.860,200 Assets Current Assets Cash Raw Material Inventory Finished Goods Inventory Total Current Assets Land Buildings Equipment Total Noncurrent Assets Total Assets 71,360,200 12.000.000 72,000,000 140,000,000 224,000,000 295,360,200 Liabilities Term Loan Note Payable 150,000,000 Stockholders' Equity Common Stock (S1 par value, 25 million shares authorized, 3 million shares issued and outstanding Paid in Capital Total Contributed Capital Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity 3,000,000 142,360,200 145,360,200 01 145,360,200 295,360,200 Bill of Materials Labor Routing Manufacturing Overhead Selling Appendix C-1 Water Play, Inc. Beginning Balance Sheet January 1, 20XX Seasonal Demand Part 2 25.000.000 12,000,000 27,383,500 Assets Current Assets Cash Raw Material Inventory Finished Goods Inventory Total Current Assets Land Buildings Equipment Total Noncurrent Assets Total Assets 64,383,500 12,000,000 72,000,000 140,000,000 224,000,000 288,383,500 Liabilities Term Loan Note Payable 150,000,000 Stockholders' Equity Common Stock ($1 par value, 25 million shares authorized 3 million shares issued and outstanding Paid in Capital Total Contributed Capital Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity 3,000,000 135,383,500 138,383,500 138,383,500 288,383,500
