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

• I just need help with the question 7,8,9,10

• 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

  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

  10) Monthly Cash budget for the quarter.

• 

ABC Pty Ltd Sales April May 67,500 $6,200 June 54,000 July 60,750 81,000 Actual Sales Volume 3-moths to June 162,200 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 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 Direct Material used per unit Rotor 4 Quantity Cost per unit 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 $48,651,840 $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 $70,660,100 Direct Labour cost per hour $50 Budgeted Manufacturing Overheads Recent statistical data for Maintenance Costs Fixed Cost component per month Variable Cost component per DL hour $0 Indirect labour Power Maintenance Labour Hours 1,302,800 1,485,000 1,363,500 1,242,000 $56.70 $5.40 ?? Total Maintenance Costs $ 79,920,000 $86,805,000 $82,215,000 $77,625,000 $0 ?? Supervision Depreciation Rates & Utilities Other $37,800,000 $3,375,000 $2,789,100 $13,500,000 $0 $0 $0 $40.50 April May June $62,775,000 $50,220,000 $56,497,500 Variable Selling Expenses Fixed Selling & Admin Expenses Total Selling & Admin Expenses $24,300,000 $19,440,000 $21,870,000 $87,075,000 $ 69,660,000 $78,367,500 Cash on hand at opening $3,375,000 Annual interest rate on borrowing 6% Cash Sales Received in month of sale Received in month after sale $0 80% 18% Balance of accounts receivables at the start of the month $82,863,000 Dividends paid in June Land purchased in May $1,194,750 $185,100,000 Sales units Unit selling price Total sales revenue SALES BUDGET April May 67,500 54,000 6,200 $ 6,200 $ 418,500,000 $ 334,800,000 $ June 60,750 6,200 $ 376,650,000 $ Total 182,250 6,200 1,129,950,000 $ $ Desired ending inv. Sales units Total units needed Less: Beginning inventory Total units to produce PRODUCTION BUDGET April May 32,400 36,450 67,500 54,000 99,900 90,450 43,200 32,400 56,700 58,050 June 48,600 60,750 109,350 36,450 72,900 Total 48,600 182,250 230,850 43,200 187,650 DIRECT MATERIALS BUDGET April May June Total 64800 187,650 4 Rotor Desired ending inventory Units to produce Direct materials per unit DM needed for production Total DM needed Less: Beginning inventory Total DM to purchase Cost per unit Total cost of DM purchase 43,200 56,700 4 226,800 270,000 54,000 216,000 81 $ 17,496,000 $ 48,600 58,050 4 232,200 280,800 43,200 237,600 81 $ 19,245,600 $ 64800 72,900 4 291,600 356,400 48,600 307,800 81 $ 24,931,800 $ 750,600 815,400 54,000 761,400 81 61,673,400 $ $ Blades Desired ending inventory Units to produce Direct materials per unit DM needed for production Total DM needed Less: Beginning inventory Total DM to purchase Cost per unit Total cost of DM purchase 54,000 56,700 5 283,500 337,500 67,500 270,000 108 $ 29,160,000 $ 60,750 58,050 5 290,250 351,000 54,000 297,000 108 $ 32,076,000 $ 81,000 72,900 5 364,500 445,500 60,750 384,750 108$ 41,553,000 $ 81,000 187,650 5 938,250 1,019,250 67,500 951,750 108 102,789,000 $ $ June Total Units to produce Direct labor per unit Total direct labor hours needed Cost per direct labor hour Total direct labor cost DIRECT LABOR BUDGET April May 56,700 58,050 8 8 453,600 464,400 50 $ 50 $ 22,680,000 $ 23,220,000 $ 72,900 8 583,200 50 $ 29,160,000 $ 187,650 8 1,501,200 50 75,060,000 $ $ Direct labor hours needed Indirect labor cost per DLH Total indirect labor cost MANUFACTURING OVERHEAD BUDGET April May June 453,600 464,400 583,200 56.7 56.7 56.7 25,719,120 26,331,480 33,067,440 Total 1,501,200 56.7 85,118,040 5.4 5.4 Power cost per DLH Total power cost 5.4 2,507,760 5.4 3,149,280 2,449,440 8,106,480 37.78 37.78 Maintenance cost per DLH Maintenance cost - variable Maintenance cost-fixed Total maintenance cost 37.78 17,137,008 30,705,000 47,842,008 17,545,032 30,705,000 48,250,032 22,033,296 30,705,000 52,738,296 37.78 56,715,336 92,115,000 148,830,336 Supervision Depreciation Rates & utilities Others - fixed Others - variable per DLH 37,800,000 3,375,000 2,789,100 13,500,000 18,370,800 37,800,000 3,375,000 2,789,100 13,500,000 18,808,200 37,800,000 3,375,000 2,789,100 13,500,000 23,619,600 113,400,000 10,125,000 8,367,300 40,500,000 60,798,600 Total manufacturing overhead $ 151,845,468 $ 153,361,572 $ 170,038,716 $ 475,245,756 ABC Pty Ltd Sales April May 67,500 $6,200 June 54,000 July 60,750 81,000 Actual Sales Volume 3-moths to June 162,200 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 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 Direct Material used per unit Rotor 4 Quantity Cost per unit 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 $48,651,840 $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 $70,660,100 Direct Labour cost per hour $50 Budgeted Manufacturing Overheads Recent statistical data for Maintenance Costs Fixed Cost component per month Variable Cost component per DL hour $0 Indirect labour Power Maintenance Labour Hours 1,302,800 1,485,000 1,363,500 1,242,000 $56.70 $5.40 ?? Total Maintenance Costs $ 79,920,000 $86,805,000 $82,215,000 $77,625,000 $0 ?? Supervision Depreciation Rates & Utilities Other $37,800,000 $3,375,000 $2,789,100 $13,500,000 $0 $0 $0 $40.50 April May June $62,775,000 $50,220,000 $56,497,500 Variable Selling Expenses Fixed Selling & Admin Expenses Total Selling & Admin Expenses $24,300,000 $19,440,000 $21,870,000 $87,075,000 $ 69,660,000 $78,367,500 Cash on hand at opening $3,375,000 Annual interest rate on borrowing 6% Cash Sales Received in month of sale Received in month after sale $0 80% 18% Balance of accounts receivables at the start of the month $82,863,000 Dividends paid in June Land purchased in May $1,194,750 $185,100,000 Sales units Unit selling price Total sales revenue SALES BUDGET April May 67,500 54,000 6,200 $ 6,200 $ 418,500,000 $ 334,800,000 $ June 60,750 6,200 $ 376,650,000 $ Total 182,250 6,200 1,129,950,000 $ $ Desired ending inv. Sales units Total units needed Less: Beginning inventory Total units to produce PRODUCTION BUDGET April May 32,400 36,450 67,500 54,000 99,900 90,450 43,200 32,400 56,700 58,050 June 48,600 60,750 109,350 36,450 72,900 Total 48,600 182,250 230,850 43,200 187,650 DIRECT MATERIALS BUDGET April May June Total 64800 187,650 4 Rotor Desired ending inventory Units to produce Direct materials per unit DM needed for production Total DM needed Less: Beginning inventory Total DM to purchase Cost per unit Total cost of DM purchase 43,200 56,700 4 226,800 270,000 54,000 216,000 81 $ 17,496,000 $ 48,600 58,050 4 232,200 280,800 43,200 237,600 81 $ 19,245,600 $ 64800 72,900 4 291,600 356,400 48,600 307,800 81 $ 24,931,800 $ 750,600 815,400 54,000 761,400 81 61,673,400 $ $ Blades Desired ending inventory Units to produce Direct materials per unit DM needed for production Total DM needed Less: Beginning inventory Total DM to purchase Cost per unit Total cost of DM purchase 54,000 56,700 5 283,500 337,500 67,500 270,000 108 $ 29,160,000 $ 60,750 58,050 5 290,250 351,000 54,000 297,000 108 $ 32,076,000 $ 81,000 72,900 5 364,500 445,500 60,750 384,750 108$ 41,553,000 $ 81,000 187,650 5 938,250 1,019,250 67,500 951,750 108 102,789,000 $ $ June Total Units to produce Direct labor per unit Total direct labor hours needed Cost per direct labor hour Total direct labor cost DIRECT LABOR BUDGET April May 56,700 58,050 8 8 453,600 464,400 50 $ 50 $ 22,680,000 $ 23,220,000 $ 72,900 8 583,200 50 $ 29,160,000 $ 187,650 8 1,501,200 50 75,060,000 $ $ Direct labor hours needed Indirect labor cost per DLH Total indirect labor cost MANUFACTURING OVERHEAD BUDGET April May June 453,600 464,400 583,200 56.7 56.7 56.7 25,719,120 26,331,480 33,067,440 Total 1,501,200 56.7 85,118,040 5.4 5.4 Power cost per DLH Total power cost 5.4 2,507,760 5.4 3,149,280 2,449,440 8,106,480 37.78 37.78 Maintenance cost per DLH Maintenance cost - variable Maintenance cost-fixed Total maintenance cost 37.78 17,137,008 30,705,000 47,842,008 17,545,032 30,705,000 48,250,032 22,033,296 30,705,000 52,738,296 37.78 56,715,336 92,115,000 148,830,336 Supervision Depreciation Rates & utilities Others - fixed Others - variable per DLH 37,800,000 3,375,000 2,789,100 13,500,000 18,370,800 37,800,000 3,375,000 2,789,100 13,500,000 18,808,200 37,800,000 3,375,000 2,789,100 13,500,000 23,619,600 113,400,000 10,125,000 8,367,300 40,500,000 60,798,600 Total manufacturing overhead $ 151,845,468 $ 153,361,572 $ 170,038,716 $ 475,245,756