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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

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 organisations 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 managers 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)

5) Monthly Manufacturing Overhead Budget for the quarter ending June

6) Monthly Selling & Administrative Expenses Budget for the quarter ending June

7) Ending Inventory Budget for the month of June

8) Cost of goods Sold Budget for the quarter

9) Budgeted Income Statement for the quarter

image text in transcribedimage text in transcribedimage text in transcribed10) Monthly Cash budget for the quarter.

E F G H 1 J K L M N July 60,750 81,000 Actual Sales Volume 3-moths to June 162,200 A B C D 1 ABC Pty Ltd 2 3 Sales 4 April May June 5 Units 67,500 54,000 6 Unit selling price $6,200 7 8 The desired finished goods inventory for each month is 9 The full absorption cost of the opening finished goods inventory is 10 The variable manufacturing cost of the opening finished goods inventory is 71 Finished goods inventory on April 1 is 12 Materials required to be on hand at the beginning of the month to produce 13 14 15 Direct Material used per unit 16 Rotor Blades 17 Quantity 4 5 18 Cost per unit $81 $108 19 20 21 Budgeted Direct Labour time per unit 22 23 Direct Labour cost per hour 24 60% of the next month's sales $4,730 per unit $1,930 per unit 43,200 units 20% of that month's estimated sales Actual Material Used - 3 months to June Rotor Blades 750,800 729,100 Actual cost of material Used - 3 months to June $48,651,840 $80,883,680 8 hours Actual Labour Used - 3 months to June 1,662,590 Actual cost of labour Used - 3 months to June $70,660,100 $50 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 25 26 Budgeted Manufacturing Overheads 27 Fixed Cost Variable Cost component per component per 28 month DL hour 29 30 Indirect labour SO $56.70 31 Power SO $5.40 32 Maintenance ?? ?? 33 34 35 Supervision $37,800,000 SO 36 Depreciation $3,375,000 SO 37 Rates & Utilities $2,789,100 $0 38 Other $13,500,000 $40.50 39 40 41 42 April May June 43 Variable Selling Expenses $62,775,000 $50,220,000 $56,497,500 Fixed Selling & Admin $24,300,000 $19,440,000 $21,870,000 Total Selling & Admin 45 Expenses $87,075,000 $69,660,000 $78,367,500 46 47 48 49 Cash on hand at opening $3,375,000 so 44 Expenses $24,300,000 $19,440,000 $21,870,000 Fixed Selling & Admin 4 Expenses Total Selling & Admin -5 Expenses 6 $87,075,000 $69,660,000 $78,367,500 -7 $3,375,000 6% $0 80% 18% 8 9 Cash on hand at opening 0 -1 Annual interest rate on borrowing 2 3 Cash Sales 4 Received in month of sale 5 Received in month after sale 6 Balance of accounts receivables at the start of 7 the month 8 9 o Dividends paid in June -1 Land purchased in May 2 $82,863,000 $1,194,750 $185,100,000 4 -5 E F G H 1 J K L M N July 60,750 81,000 Actual Sales Volume 3-moths to June 162,200 A B C D 1 ABC Pty Ltd 2 3 Sales 4 April May June 5 Units 67,500 54,000 6 Unit selling price $6,200 7 8 The desired finished goods inventory for each month is 9 The full absorption cost of the opening finished goods inventory is 10 The variable manufacturing cost of the opening finished goods inventory is 71 Finished goods inventory on April 1 is 12 Materials required to be on hand at the beginning of the month to produce 13 14 15 Direct Material used per unit 16 Rotor Blades 17 Quantity 4 5 18 Cost per unit $81 $108 19 20 21 Budgeted Direct Labour time per unit 22 23 Direct Labour cost per hour 24 60% of the next month's sales $4,730 per unit $1,930 per unit 43,200 units 20% of that month's estimated sales Actual Material Used - 3 months to June Rotor Blades 750,800 729,100 Actual cost of material Used - 3 months to June $48,651,840 $80,883,680 8 hours Actual Labour Used - 3 months to June 1,662,590 Actual cost of labour Used - 3 months to June $70,660,100 $50 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 25 26 Budgeted Manufacturing Overheads 27 Fixed Cost Variable Cost component per component per 28 month DL hour 29 30 Indirect labour SO $56.70 31 Power SO $5.40 32 Maintenance ?? ?? 33 34 35 Supervision $37,800,000 SO 36 Depreciation $3,375,000 SO 37 Rates & Utilities $2,789,100 $0 38 Other $13,500,000 $40.50 39 40 41 42 April May June 43 Variable Selling Expenses $62,775,000 $50,220,000 $56,497,500 Fixed Selling & Admin $24,300,000 $19,440,000 $21,870,000 Total Selling & Admin 45 Expenses $87,075,000 $69,660,000 $78,367,500 46 47 48 49 Cash on hand at opening $3,375,000 so 44 Expenses $24,300,000 $19,440,000 $21,870,000 Fixed Selling & Admin 4 Expenses Total Selling & Admin -5 Expenses 6 $87,075,000 $69,660,000 $78,367,500 -7 $3,375,000 6% $0 80% 18% 8 9 Cash on hand at opening 0 -1 Annual interest rate on borrowing 2 3 Cash Sales 4 Received in month of sale 5 Received in month after sale 6 Balance of accounts receivables at the start of 7 the month 8 9 o Dividends paid in June -1 Land purchased in May 2 $82,863,000 $1,194,750 $185,100,000 4 -5

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