a. Actual sales in December were $70,000. Selling price per unit is projected to remain stable at $9 per unit throughout the budget period. Sales for the first five months of the upcoming year are budgeted to be as follows: January ...........$ 80,100 February ..........$ 89,100 March ..........$ 82,800 April.............$ 85,500 May...............$ 77,400 b. Sales are 30% cash and 70% credit. All credit sales are collected in the month following the sale c.Derry 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). d. Of each month's direct material purchases, 20% are paid for in the month of purchase, while the remainder is paid for in the month following purchase. Two pounds of direct material is needed per unit at $1.50 per pound. Ending inventory of direct materials should be 20% of next month's production needs. e. Most of the labor at the manufacturing facility is indirect, but there is some direct labor incurred. The direct labor hours per unit is 0.03. The direct labor rate per hour is $13 per hour. All direct labor is paid for in the month in which the work is performed. The direct labor total cost for each of the upcoming three months is as follows: January ..........$ 3,510 February..... $ 3,834 March $ 3.600 1. Monthly manufacturing overhead costs are $6,500 for factory rent, $2,900 for other fixed manufacturing expenses. and $1 40 per unit for variable manufacturing overhead No depreciation is included in these figures. All expenses are e. Most of the labor at the manufacturing facility is indirect, but there is some direct labor incurred. The direct labor hours per unit is 0.03. The direct labor rate per hour is $13 per hour. All direct labor is paid for in the month in which the work is performed. The direct labor total cost for each of the upcoming three months is as follows: January.........$ 3,510 February...... 3.834 March .........5 3.600 1. Monthly manufacturing overhead costs are $6.500 for factory rent. $2.900 for other fored manufacturing expenses and $1.40 per unit for variable manufacturing overhead. No depreciation is included in these figures. All expenses are paid in the month in which they are incurred g.Computer equipment for the administrative offices will be purchased in the upcoming quarter. In January, Derry Manufacturing will purchase equipment for $5,800 (cash), while February's cash expenditure will be $11,600 and March's cash expenditure will be $15,800 h. Operating expenses are budgeted to be $1.20 per unit sold plus fixed operating expenses of $1.400 per month Al operating expenses are paid in the month in which they are incurred. No depreciation is included in these figures i. Depreciation on the building and equipment for the general and administrative offices is budgeted to be 55.100 for the entire quarter, which includes depreciation on new acquisitions J. Derry Manufacturing has a policy that the ending cash balance in each month must be at least $4,400. It 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 loan balance of $125,000. The interest rate on these loans is 1% per month simple interest (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 borrowed during the quarter k. The company's income tax rate is projected to be 30% of operating income less interest expense. The company pays $10,800 cash at the end of February in estimated taxes Derry Manufacturing Direct Materials Budget For the Quarter Ended March 31 Month January February March Quarter Units to be produced Multiply by: Quantity (pounds) of DM needed per unit Quantity (pounds) needed for production Plus: Desired ending inventory of DM Total quantity (pounds) needed Less: Beginning inventory of DM Quantity (pounds) to purchase Multiply by: Cost per pound Total cost of DM purchases
