-42 Comprehensive operating budget. Skulas, Inc., manufactures and sells snowboards. Skulas manu-factures a single model, the Pipex. In late 2017, Skulass management accountant gathered the following data to prepare budgets for January 2018:

Materials and Labor Requirements

Direct materials Wood

Fiberglass Direct manufacturing labor

9 board feet (b.f.) per snowboard 10 yards per snowboard 5 hours per snowboard

Skulass CEO expects to sell 2,900 snowboards during January 2018 at an estimated retail price of $650 per board. Further, the CEO expects 2018 beginning inventory of 500 snowboards and would like to end January 2018 with 200 snowboards in stock.

Direct Materials Inventories Wood Fiberglass

Beginning Inventory 1/1/2018 2,040 b.f.

1,040 yards

Ending Inventory 1/31/2018 1,540 b.f.

2,040 yards

Variable manufacturing overhead is $7 per direct manufacturing labor-hour. There are also $81,000 in fixed manufacturing overhead costs budgeted for January 2018. Skulas combines both variable and fixed manu-facturing overhead into a single rate based on direct manufacturing labor-hours. Variable marketing costs are allocated at the rate of $250 per sales visit. The marketing plan calls for 38 sales visits during January 2018. Finally, there are $35,000 in fixed nonmanufacturing costs budgeted for January 2018. Other data include:

2017 Unit Price Wood Fiberglass Direct manufacturing labor

$32.00 per b.f. $ 8.00 per yard $28.00 per hour

2018 Unit Price

$34.00 per b.f. $ 9.00 per yard $29.00 per hour

The inventoriable unit cost for ending finished-goods inventory on December 31, 2017, is $374.80. Assume Skulas uses a FIFO inventory method for both direct materials and finished goods. Ignore work in process in your calculations. 1. Prepare the January 2018 revenues budget (in dollars). 2. Prepare the January 2018 production budget (in units). 3. Prepare the direct material usage and purchases budgets for January 2018. 4. Prepare a direct manufacturing labor costs budget for January 2018. 5. Prepare a manufacturing overhead costs budget for January 2018. 6. What is the budgeted manufacturing overhead rate for January 2018? 7. What is the budgeted manufacturing overhead cost per output unit in January 2018? 8. Calculate the cost of a snowboard manufactured in January 2018. 9. Prepare an ending inventory budget for both direct materials and finished goods for January 2

6-43 Cash budgeting, budgeted balance sheet. (Continuation of 6-42) (Appendix) Refer to the information in Problem 6-42. Budgeted balances at January 31, 2018 are as follows:

Cash

Accounts receivable Inventory

Property, plant and equipment (net) Accounts payable Long-term liabilities Stockholders equity

Selected budget information for December 2017 follows: Cash balance, December 31, 2017

Budgeted sales Budgeted materials purchases

? ? ?

$1,175,600 ?

182,000 ?

$ 124,000 1,650,000 820,000

Customer invoices are payable within 30 days. From past experience, Skulass accountant projects 40% of invoices will be collected in the month invoiced, and 60% will be collected in the following month. Accounts payable relates only to the purchase of direct materials. Direct materials are purchased on credit with 50% of direct materials purchases paid during the month of the purchase, and 50% paid in the month following purchase.

Fixed manufacturing overhead costs include $64,000 of depreciation costs and fixed nonmanufacturing

overhead costs include $10,000 of depreciation costs. Direct manufacturing labor and the remaining manu-facturing and nonmanufacturing overhead costs are paid monthly.

All property, plant, and equipment acquired during January 2018 were purchased on credit and did not entail any outflow of cash.

Required

There were no borrowings or repayments with respect to long-term liabilities in January 2018. On December 15, 2017, Skulass board of directors voted to pay a $160,000 dividend to stockholders on January 31, 2018. 1. Prepare a cash budget for January 2018. Show supporting schedules for the calculation of collection of receivables and payments of accounts payable, and for disbursements for fixed manufacturing and nonmanufacturing overhead.

2. Skulas is interested in maintaining a minimum cash balance of $120,000 at the end of each month. Will Skulas be in a position to pay the $160,000 dividend on January 31?

3. Why do Skulass managers prepare a cash budget in addition to the revenue, expenses, and operating income budget?

4. Prepare a budgeted balance sheet for January 31, 2018 by calculating the January 31, 2018 balances in (a) cash (b) accounts receivable (c) inventory (d) accounts payable and (e) plugging in the balance for stockholders equity.

6-42 Comprehensive operating budget. Skules, Inc., manufactures and sell snowboards Salman factures a single model the Pipex In 2017. Skulas's management accountant gathered the following data to prepare for January 2018 Materials and Labor Requirements Direct Wood 9 board t o wboard 10 arm band Direct manufacturing labor Shours per wboard S 's CEO expects to sell 2.900wboards during January 2013 a p rice of SEO pe board. Further the CEO expects 2018 being inventory of 500 words and would like to end January 2013 with 200 wordsstock Direct Materiais metais Begiming eventory 11.2013 Ending Inventory 101/2018 2.0 154 Fiberglass 10 yards Variable manufacturing overhead is per direct manufacturing laborhout. There are also $1.000 info manufacturing overhead costs budged for January 2011 Styles combines both variable and fema facturing overhead into a single based on direct a c turing labor Variable marketing con are allocated at the rate of $250 per les visit. The marketing plan calls for 38 sales visits during January 2018. Finally, there are $95.000 in vedno manufacturing costs budgeted for January 2018 Other dat include Wood Fiberglass Direct manufacturing labor 2017 Unit Price 200 per t $ 8.00 per yard 8.00 per hour 2018 Unit Price 53400 perb $ 9.00 per yard $29.00 per hour The inventoriable unit cost for ending finished-goods inventory on December 31, 2017 is M Assume Skulas uses a FIFO inventory method for both direct materials and finished goods. Ignore work in process in your calculations 1. Prepare the January 2018 revenues budget in dollars 2. Prepare the January 2018 production budget in units 3. Prepare the direct material usage and purchases budgets for January 2018 4. Prepare a direct manufacturing labor costs budget for January 2013 5. Prepare a manufacturing overhead costs budget for January 2018 6. What is the budgeted manufacturing overhead rate for January 2018? 7. What is the budgeted manufacturing overhead cost per output unit in January 2018? & Calculate the cost of a snowboard manufactured in January 2018 9. Prepare an ending investory budget for both direct materials and finished goods for January 2018 10. Prepare a cost of goods sold budget for January 2018 11. Prepare the budgeted income statement for Sales, Inc., for January 2018 12. What questions might the CEO ask the management team when reviewing the budget? Should the CEO stretch targets Explain briefly 13. How does preparing the budget hele Skulas's management team better manage the company 243 Reader Contents Notebook Bookmarks 6-43 Cash budgeting, budgeted balance sheet. (Continuation of 6-42) (Appendix) Refer to the information in Problem 6-42. Budgeted balances at January 31, 2018 are as follows: $1,175,600 Cash Accounts receivable Inventory Property, plant and equipment (net) Accounts payable Long-term liabilities Stockholders' equity Selected budget information for December 2017 follows: 182,000 Cash balance, December 31, 2017 $ 124,000 Budgeted sales 1,650,000 Budgeted materials purchases 820,000 Customer invoices are payable within 30 days. From past experience, Skulas's accountant projects 40% of invoices will be collected in the month invoiced, and 60% will be collected in the following month. Accounts payable relates only to the purchase of direct materials. Direct materials are purchased on credit with 50% of direct materials purchases paid during the month of the purchase, and 50% paid in the month following purchase. Foed manufacturing overhead costs include $64,000 of depreciation costs and fixed nonmanufacturing overhead costs include $10,000 of depreciation costs. Direct manufacturing labor and the remaining manu- facturing and nonmanufacturing overhead costs are paid monthly All property, plant, and equipment acquired during January 2018 were purchased on credit and did not entail any outflow of cash. There were no borrowings or repayments with respect to long-term liabilities in January 2018 On December 15, 2017, Skulas's board of directors voted to pay a $160,000 dividend to stockholders on January 31, 2018 1. Prepare a cash budget for January 2018. Show supporting schedules for the calculation of collection of receivables and payments of accounts payable, and for disbursements for fixed manufacturing and nonmanufacturing overhead. 2. Skulas is interested in maintaining a minimum cash balance of $120,000 at the end of each month. Will Skulas be in a position to pay the $160,000 dividend on January 31? 3. Why do Skulas's managers prepare a cash budget in addition to the revenue, expenses, and operating income budget? 4. Prepare a budgeted balance sheet for January 31, 2018 by calculating the January 31, 2018 balances in (a) cash (b) accounts receivable (c) inventory (d) accounts payable and le) plugging in the balance for stockholders' equity. Required