ABC Pty Ltd produces turbines used in the production of hydro-electric generating

equipment. The turbines are sold to various engineering companies that produce hydropowered generators in Australia.

Details of the operations for the coming four months are provided in the attached excel

spread sheet.

Other information:

The company plans to purchase land for future expansion

Sales are on credit. Amounts not received in the month following the sale are

written off as bad debt immediately.

The payment for labour and purchases of materials and other costs are for cash

and paid for in the month of acquisition.

If the firm develops a cash shortage by the end of the month, sufficient cash is

borrowed to cover the shortage (including any interest payments due ). Any cash

borrowed is repaid one month later, as is the interest due.

During the process of preparing the organisation's budget, the Sales Manager is

discussing the possible outcome of the forthcoming election with the Production

Manager. She noted that if one of the major political parties wins the election and forms

the government, there is a strong possibility that alternative sources of energy such as

hydro-powered electricity may no longer be as actively supported by the new

government as is the case under the current government.

The sales manager's primary concern is that market for alternative power generation is

already volatile and subject to significant uncertainty. The production manager is also

concerned about his plans to build the new automated manufacturing facility on the

land to be purchased in May. This new manufacturing facility will enable him to

manufacture, in-house, the major two parts he is now purchasing and to significantly

automate the assembly process that is currently somewhat labour intensive. His

projection for the new facility indicates a reduction in direct material & direct labour

costs of 33% but that his fixed manufacturing overheads are likely to increase by 65%

due to the increased investment in production capacity.

Required:

Part A: Prepare Operating Budgets as follows: (75% of the marks)

1) Monthly Sales Budget for the quarter ending June

2) Monthly Production Budget for the quarter ending June

3) Monthly Direct Materials Budget for the quarter ending June

4) Monthly Direct Labour Budget for the quarter ending June

Comment ABC Pty Lto produces turomnes used in the production or nyaro-electric generating equipment. The turbines are sold to various engineering companies that produce hydro- powered generators in Australia. Details of the operations for the coming four months are provided in the attached excel spread sheet. Other information: The company plans to purchase land for future expansion Sales are on credit. Amounts not received in the month following the sale are written off as bad debt immediately. The payment for labour and purchases of materials and other costs are for cash and paid for in the month of acquisition. If the firm develops a cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage (including any interest payments due ). Any cash borrowed is repaid one month later, as is the interest due. . During the process of preparing the organisation's budget, the Sales Manager is discussing the possible outcome of the forthcoming election with the Production Manager. She noted that if one of the major political parties wins the election and forms the government, there is a strong possibility that alternative sources of energy such as hydro-powered electricity may no longer be as actively supported by the new government as is the case under the current government. The sales manager's primary concern is that market for alternative power generation is already volatile and subject to significant uncertainty. The production manager is also concerned about his plans to build the new automated manufacturing facility on the land to be purchased in May. This new manufacturing facility will enable him to manufacture, in-house, the major two parts he is now purchasing and to significantly automate the assembly process that is currently somewhat labour intensive. His projection for the new facility indicates a reduction in direct material & direct labour costs of 33% but that his fixed manufacturing overheads are likely to increase by 65% due to the increased investment in production capacity. Required: Part A: Prepare Operating Budgets as follows: (75% of the marks) 1) Monthly Sales Budget for the quarter ending June 2) Monthly Production Budget for the quarter ending June 3) Monthly Direct Materials Budget for the quarter ending June 4) Monthly Direct Labour Budget for the quarter ending June 40 2/3 B D E F G H A ABC Pty Ltd Sales April June July 54,000 60,750 81,000 Actual Sales Volume 3-moths to June 162,200 May 67,500 $6,200 Units Unit selling price The desired finished goods inventory for each month is The full absorption cost of the opening finished goods inventory is The variable manufacturing cost of the opening finished goods inventory is Finished goods inventory on April 1 is Materials required to be on hand at the beginning of the month to produce GON of the next month's sales $4,730 per unit $1,930 per unit 43,200 units 20% of that month's estimated sales Direct Material used per unit Rotor 4 Quantity Cost per unit Blades 5 5108 Actual Material Used - 3 months to June Rotor Blades 750.800 729,100 Actual cost of material Used - 3 months to June wwwwww $80,883,680 $81 Budgeted Direct Labour time per unit 8 hours Actual Labour Used - 3 months to June 1,662,590 Actual cost of labour Used - 3 months to June $50 Recent statistical data for Maintenance Costs 3 Direct Labour cost per hour + 5 6 Budgeted Manufacturing Overheads 7 Fixed Cost Variable Cost component per component month per DL hour Labour Hours 1,302,800 Total Maintenance Costs $79.920,000 M H E D 117 G A B 26 Budgeted Manufacturing Overheads Recent statistical data for Maintenance Costs Fixed Cost Variable Cost component per component month per DL hour Labour Hours 1,302,800 1,485,000 1,363,500 1,242,000 Total Maintenance Costs 579,920,000 $86,805,000 $82,215,000 $77,625,000 30 Indirect labour SO $56.70 31 Power SO $5.40 32 Maintenance ?? ?? 33 34 35 Supervision $37,800,000 $0 36 Depreciation $3,375,000 $0 37 Rates & Utilities $2,789,100 $0 30 Other $13,500,000 $40.50 39 40 41 42 April May June Variable Selling 43 Expenses $62,775,000 $50,220,000 Fixed Selling & Admin 44 Expenses $24,300,000 $19,440,000 Total Selling & Admin 45 Expenses $87,075,000 $69,660,000 46 47 48 49 Cash on hand at opening $3,375,000 50 51 Annual interest rate on borrowing 6% Sheet1 $2,789,100 $13,500,000 $0 $40.50 April May June 37 Rates & Utilities 38 Other 39 40 41 42 Variable Selling 43 Expenses Fixed Selling & Admin 44 Expenses Total Selling & Admin 45 Expenses 46 $62,775,000 $50,220,000 $24,300,000 $19,440,000 $87,075,000 $69,660,000 47 $3,375,000 696 SO 48 49 Cash on hand at opening 50 51 Annual interest rate on borrowing 52 53 Cash Sales 54 Received in month of sale 55 Received in month after sale 56 Balance of accounts receivables at the start 57 of the month 8096 1896 $82,863,000 58 59 60 Dividends paid in June 61 Land purchased in May 62 $1,194,750 $185,100,000 F - 101 121 11 Merge & Center - $ - % 8.8 Clipboard Conditional Format as Cell Formatting Table Styles Styles Font Alignment Number 19 48651840 B D E F G H Sales M April Units Unit selling price May 67,500 $6,200 June July 54,000 60,750 81,000 Actual Sales Volume 3-moths to June 162,200 The desired finished goods inventory for each month is The full absorption cost of the opening finished goods inventory is The variable manufacturing cost of the opening finished goods inventory is 2 Finished goods inventory on April 1 is 2 Materials required to be on hand at the beginning of the month to produce 3 60% of the next month's sales $1,730 per unit $1,930 per unit 43,200 units 20% of that month's estimated sales 5 Direct Material used per unit 5 7 Quantity B Cost per unit Rotor 4 Blades 5 $108 Actual Material Used - 3 months to June Rotor Blades 750.800 729,100 Actual cost of material Used - 3 months to June $80,883 680 $81 8 hours Actual Labour Used - 3 months to June 1,662,590 Actual cost of labour Used - 3 months to June $50 0 1 Budgeted Direct Labour time per unit 2 3 Direct Labour cost per hour 4 5 6 Budgeted Manufacturing Overheads 7 Fixed Cost comanent Sheet1 QUESTION 1 Recent statistical data for Maintenance Costs Variable Cost comanent Formatting Table Styles Font Alignment Number Styles SIGN IN TO OFFICE It looks like your stored credentials are out of date. Please sign in as 53632538@student.mit.edu.au so we can verify your subscription. 117 Sign- 750800 E F G H L M Recent statistical data for Maintenance Costs Labour Hours 1,302,800 1,485,000 1,363,500 1,242,000 Total Maintenance Costs $79,920,000 $86,805,000 $82,215,000 $77,625,000 B D 24 25 26 Budgeted Manufacturing Overheads 27 Fixed Cost Variable Cost component component 28 per month per DL hour 29 30 Indirect labour $0 $56.70 31 Power $0 $5.40 32 Maintenance ?? 22 33 34 35 Supervision $37,800,000 $o 36 Depreciation $3,375,000 $0 37 Rates & Utilities $2,789,100 $0 38 Other $13,500,000 $40.50 39 40 41 42 April May June Variable Selling 43 Expenses $62,775,000 $50,220,000 Fixed Selling & Admin 44 Expenses $24,300,000 $19.440,000 Sheet1 QUESTION 1 ste ipboard Font Alignment SIGN IN TO OFFICE It looks like your stored credentials are out of date. Please sign in a -7 750800 x & D F C E B $24,300,000 $19,440,000 $87,075,000 $69,660,000 #### $3,375,000 6% A Fixed Selling & Admin Expenses Total Selling & Admin 5 Expenses 6 7 18 49 Cash on hand at opening 50 51 Annual interest rate on borrowing 52 53 Cash Sales 54 Received in month of sale 55 Received in month after sale 56 Balance of accounts receivables at the start 57 of the month 58 59 60 Dividends paid in June 61 Land purchased in May 62 63 $o 80% 18% $82,863,000 $1,194,750 $185,100,000 64 Sheet1