555 Master Budget PROBLEMS Group A P9-54A Comprehensive budgeting problem Damon Manufacturing preg Hema t og pertanto aming Objectives 28 for the future of the upcom scrisotions E12 Capital stock $ 43,000 $125.000 Actual sales in December were $71.000. Selling price per unit is projected to remain stable at $12 per unit throughout the budget period. Sales for the f ive months of the upcoming year are budgeted to be as follows: $99.600 $118.800 $115.200 $100.000 5103,200 Sales are 35% cash and 65% credit. All credit sales are collected in the month following the sale c Damon Manufacturing has a policy that states that each month's ending inventory of finished goods should be 10% of the following month's sales in units) Of each month's direct materials purchases, 20% are paid for in the month of our chase, while the remainder is paid for in the month following purchase. Three pounds of direct material is needed per unit at $2 per pound Ending inventory of direct materials should be 20% of next month's production needs. . Most of the labor at the manufacturing facility is indirect, but there is some direct labor incurred. The direct labor hours per unit is 0.05. The direct laborate per hour is $9 per hour. All direct labor is paid for in the month in which the work is performed The direct labor total cost for each of the upcoming three months is as follows: February March $3,807 54.442 54.293 f. Monthly manufacturing overhead costs are $5,500 for factory rent, $2.900 for other fuced manufacturing expenses and $1.10 per unit for variable manufacturing over head. Ne depreciation is included in these figures. Al expenses are paid in the month in which they are incurred 9. Computer equipment for the administrative offices will be purchased in the upcoming quarter. In January, Damon Manufacturing will purchase equipment for $5,000 (cash), while February's cash expenditure will be $12.200 and March's cash expenditure will be $16,600 h. Operating expenses are budgeted to be $1.25 per unit sold plus foed operating expenses of $1,800 per month. Al operating expenses are paid in the month in which they are incurred. Depreciation on the building and equipment for the general and administrative offices is budgeted to be $4,800 for the entire quarter, which includes depreciation on new acquisitions 556 CHAPTER Demon Madagas policy that the ending has a policy that the ending cash balance in each month must be at least $4,000. has a line of credit with a local bank. The company can borrow in increments of $1.000 at the beginning of each month up to a total outstanding loa balance of $130.000. The interest rate on these loans 1% per month simple inter est not compounded. The company would pay down on the line of credit balance in increments of $1.000 if it has excess funds at the end of the quarter. The company would also pay the accumulated interest at the end of the quarter on the funds bor. rowed during the quarter The company's income tax rates projected to be 30% of operating income fossers expense. The company pays $10,000 cash at the end of February insid e Requirements 1. Prepare a schedule of cash collections for January February and March, and for the quarter in total Use the following format Cash Collection For the inded March! 2. Prepare a production budget, using the following format: 5 h Les Deding ded Number Hintalnire per unit 2. Prepare a direct materials budget, using the following format: Direct Material Budget For the quarter Ended March 31 January February 5. Uns to be producedrom Production badge Mit by your per 7. Quant pour needed for production start pour needed 10 Less: Beginning invertory of DM S toryciu pounds to purchase corper pound The Master Budget 555 PROBLEMS Group A P9-54A Comprehensive budgeting problem (Learning Objectives 2 & 3) Damon Manufacturing is preparing its master budget for the first quarter of the upcom ing year. The following data pertain to Damon Manufacturing's operations: Current Assets as of December 31 prior yeark Cash $4,600 Accounts receivable, net 46.000 Inventory $15.600 Property, plant and equipment, net 5121,000 Accounts payable $ 43,000 Capital stock $125,000 Ratained ang $ 21000 Actual sales in December were 571,000. Selling price per unit is projected to remain stable at $12 per unit throughout the budget period. Sales for the first five months of the upcoming year are budgeted to be as follows: January February March $ 99,600 $118 800 $115 200 $108.000 $103.200 b. Sales are 35% cash and 65% credit. All credit sales are collected in the month following the sale. Damon Manufacturing has a policy that states that each month's ending inventory of Enished goods should be 10% of the following month's sales in units) d. Of each month's direct materials purchases, 20% are paid for in the month of put chase, while the remainder is paid for in the month following purchase. Three pounds of direct material is needed per unit at $2 per pound. Ending inventory of direct materials should be 20% of next month's production needs Most of the labor at the manufacturing facility is indirect, but there is some direct bor incurred. The direct labor hours per unit is 0.05. The direct labor rate per hour is $9 per hout. Al direct laboris paid for in the month in which the work is performed The direct labor total cost for each of the coming three months is as follow January February March $3,807 $4,442 $4,293 f. Monthly manufacturing overhead costs are $5,500 for factory rent, $2,900 for other fixed manufacturing expenses, and $1.10 per unit for variable manufacturing over head. No depreciation is included in these figures. All expenses are paid in the month in which they are incurred. Computerwoment for the administrative offices will be purchased in the upcoming quarter in January, Damon Manufacturing purchase equipment for $5.000 while February's cash expenditure will be $12.200 and March's cash expenditure will be $16,600 h. Operating expenses are budgeted to be $1.25 per unit sold plus fixed operating expenses of $1,800 per month. All operating expenses are paid in the month in which they are incurred. Depreciation on the building and equipment for the general and administrative offices is budgeted to be $4,800 for the entire quarter, which includes depreciation on new acquisitions 556 CHAPTER Damon Manufacturing has a policy that the ending cash balance in each month must be at least 54,000. It has a line of credit with a local bank. The company can borrow increments of $1,000 at the beginning of each month, up to a total outstanding loan balance of $130,000. The interest rate on these loans is 1% per month simple inter est not compounded. The company would pay down on the line of credit balance in increments of $1,000 it has excess funds at the end of the quarter. The company would also pay the accumulated interest at the end of the quarter on the funds bor rowed during the quarter. k. The company's income tax rate is projected to be 30% of operating income less interest expense. The company pays $10,000 cash at the end of February in estimated taxes. Requirements 1. Prepare a schedule of cash collections for January, February, and March, and for the quarter in total. Use the following format: ashratis Budet T March 2. Prepare a production budget, using the following format: Production Budget For the Quarter Ended March 31 January February March 5 6 7 Unit sales Plus: Desired ending inventory Total needed less: Benning inventory Number of units to produce B 9 Hint Unitales Sales in dollar/Selling price per unit 3. Prepare a direct materials budget, using the following format: Direct Materials Budget For the Quarter Ended March 31 M eeded per unit 8 Plus Desire 9 Total 10 Less: Beg TO 12 V 555 Master Budget PROBLEMS Group A P9-54A Comprehensive budgeting problem Damon Manufacturing preg Hema t og pertanto aming Objectives 28 for the future of the upcom scrisotions E12 Capital stock $ 43,000 $125.000 Actual sales in December were $71.000. Selling price per unit is projected to remain stable at $12 per unit throughout the budget period. Sales for the f ive months of the upcoming year are budgeted to be as follows: $99.600 $118.800 $115.200 $100.000 5103,200 Sales are 35% cash and 65% credit. All credit sales are collected in the month following the sale c Damon Manufacturing has a policy that states that each month's ending inventory of finished goods should be 10% of the following month's sales in units) Of each month's direct materials purchases, 20% are paid for in the month of our chase, while the remainder is paid for in the month following purchase. Three pounds of direct material is needed per unit at $2 per pound Ending inventory of direct materials should be 20% of next month's production needs. . Most of the labor at the manufacturing facility is indirect, but there is some direct labor incurred. The direct labor hours per unit is 0.05. The direct laborate per hour is $9 per hour. All direct labor is paid for in the month in which the work is performed The direct labor total cost for each of the upcoming three months is as follows: February March $3,807 54.442 54.293 f. Monthly manufacturing overhead costs are $5,500 for factory rent, $2.900 for other fuced manufacturing expenses and $1.10 per unit for variable manufacturing over head. Ne depreciation is included in these figures. Al expenses are paid in the month in which they are incurred 9. Computer equipment for the administrative offices will be purchased in the upcoming quarter. In January, Damon Manufacturing will purchase equipment for $5,000 (cash), while February's cash expenditure will be $12.200 and March's cash expenditure will be $16,600 h. Operating expenses are budgeted to be $1.25 per unit sold plus foed operating expenses of $1,800 per month. Al operating expenses are paid in the month in which they are incurred. Depreciation on the building and equipment for the general and administrative offices is budgeted to be $4,800 for the entire quarter, which includes depreciation on new acquisitions 556 CHAPTER Demon Madagas policy that the ending has a policy that the ending cash balance in each month must be at least $4,000. has a line of credit with a local bank. The company can borrow in increments of $1.000 at the beginning of each month up to a total outstanding loa balance of $130.000. The interest rate on these loans 1% per month simple inter est not compounded. The company would pay down on the line of credit balance in increments of $1.000 if it has excess funds at the end of the quarter. The company would also pay the accumulated interest at the end of the quarter on the funds bor. rowed during the quarter The company's income tax rates projected to be 30% of operating income fossers expense. The company pays $10,000 cash at the end of February insid e Requirements 1. Prepare a schedule of cash collections for January February and March, and for the quarter in total Use the following format Cash Collection For the inded March! 2. Prepare a production budget, using the following format: 5 h Les Deding ded Number Hintalnire per unit 2. Prepare a direct materials budget, using the following format: Direct Material Budget For the quarter Ended March 31 January February 5. Uns to be producedrom Production badge Mit by your per 7. Quant pour needed for production start pour needed 10 Less: Beginning invertory of DM S toryciu pounds to purchase corper pound The Master Budget 555 PROBLEMS Group A P9-54A Comprehensive budgeting problem (Learning Objectives 2 & 3) Damon Manufacturing is preparing its master budget for the first quarter of the upcom ing year. The following data pertain to Damon Manufacturing's operations: Current Assets as of December 31 prior yeark Cash $4,600 Accounts receivable, net 46.000 Inventory $15.600 Property, plant and equipment, net 5121,000 Accounts payable $ 43,000 Capital stock $125,000 Ratained ang $ 21000 Actual sales in December were 571,000. Selling price per unit is projected to remain stable at $12 per unit throughout the budget period. Sales for the first five months of the upcoming year are budgeted to be as follows: January February March $ 99,600 $118 800 $115 200 $108.000 $103.200 b. Sales are 35% cash and 65% credit. All credit sales are collected in the month following the sale. Damon Manufacturing has a policy that states that each month's ending inventory of Enished goods should be 10% of the following month's sales in units) d. Of each month's direct materials purchases, 20% are paid for in the month of put chase, while the remainder is paid for in the month following purchase. Three pounds of direct material is needed per unit at $2 per pound. Ending inventory of direct materials should be 20% of next month's production needs Most of the labor at the manufacturing facility is indirect, but there is some direct bor incurred. The direct labor hours per unit is 0.05. The direct labor rate per hour is $9 per hout. Al direct laboris paid for in the month in which the work is performed The direct labor total cost for each of the coming three months is as follow January February March $3,807 $4,442 $4,293 f. Monthly manufacturing overhead costs are $5,500 for factory rent, $2,900 for other fixed manufacturing expenses, and $1.10 per unit for variable manufacturing over head. No depreciation is included in these figures. All expenses are paid in the month in which they are incurred. Computerwoment for the administrative offices will be purchased in the upcoming quarter in January, Damon Manufacturing purchase equipment for $5.000 while February's cash expenditure will be $12.200 and March's cash expenditure will be $16,600 h. Operating expenses are budgeted to be $1.25 per unit sold plus fixed operating expenses of $1,800 per month. All operating expenses are paid in the month in which they are incurred. Depreciation on the building and equipment for the general and administrative offices is budgeted to be $4,800 for the entire quarter, which includes depreciation on new acquisitions 556 CHAPTER Damon Manufacturing has a policy that the ending cash balance in each month must be at least 54,000. It has a line of credit with a local bank. The company can borrow increments of $1,000 at the beginning of each month, up to a total outstanding loan balance of $130,000. The interest rate on these loans is 1% per month simple inter est not compounded. The company would pay down on the line of credit balance in increments of $1,000 it has excess funds at the end of the quarter. The company would also pay the accumulated interest at the end of the quarter on the funds bor rowed during the quarter. k. The company's income tax rate is projected to be 30% of operating income less interest expense. The company pays $10,000 cash at the end of February in estimated taxes. Requirements 1. Prepare a schedule of cash collections for January, February, and March, and for the quarter in total. Use the following format: ashratis Budet T March 2. Prepare a production budget, using the following format: Production Budget For the Quarter Ended March 31 January February March 5 6 7 Unit sales Plus: Desired ending inventory Total needed less: Benning inventory Number of units to produce B 9 Hint Unitales Sales in dollar/Selling price per unit 3. Prepare a direct materials budget, using the following format: Direct Materials Budget For the Quarter Ended March 31 M eeded per unit 8 Plus Desire 9 Total 10 Less: Beg TO 12 V