Background Information I SEE THE LIGHT (ISTL) is a subchapter S corporation that manufactures children's lampsightlights for use in bedrooms. These lamps are sold nationwide through a group of independent sales representatives who have an exclusive sales region. The business is in its tenth year and has asked you to assist in planning for next year's operations. The lamps are ceramic figurines of animals, boats, boys and girls playing and singing, all in delightful colors. The owner of the business, Big Al, creates a drawing for the figurine and faxes it to a plant in China where a mold is created and a sample produced and hand painted. If the mold meets the expectations of Big Al an order of 500 lamp parts is placed. Each lamp kit consists of the parts required to complete one lamp;a figurine, a lamp shade and the required electrical components. There are presently 10 different figurines that come in six different colors; 60 models. There are presently 10 workers in the plant. They are responsible for receiving the raw material, manufacturing the product, packing and shipping. In addition to Big Al there are two office workers who are responsible for all administrative duties. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 Big Al had his accountant prepare the Projected Income Statement and Balance Sheet presented on page two. Big Al heard about your skills in managerial accounting and would like your assistance in the following areas: Part 1 Part 2 Part 3 Part 4 Part 5 Part 6 Part 7 Fixed and Variable Cost Determinations - Unit Cost Calculations Cost Volume Relationships - Profit Planning ets Process Costing Job Order Costing Standard Costing - Variance Analysis Capital Decision Making To upload your work to Big Al the file without changing the name. Pay attention to the specific location that Excel saves the file. Return to the bottom of the page that you downloaded the file from; Cybertext.com, The Book List, Building Blocks of Accounting--A Managerial Perspective, Enter password, Upload Your Excel File. If you upload an old version of the file the results will not update. Keep two copies of your spreadsheet in two separate places in case one of Big Al's competitors sends someone to destroy your work or it is lost in transmission. You may find it easier to work on this project if you print a hard copy of all the pages. I See The Light Projected Income Statement For the Period Ending December 31, 20x1 1 2 3 4 5 6 7 8 9 10 11 12 13 23 $ 1,125,000.00 750,000.00 $ 375,000.00 Sales 25,000 lamps @ $45.00 Cost of Goods Sold @ $30.00 Gross Profit Selling Expenses: Fixed Variable (Commission per unit) @ $3.00 Administrative Expenses: Fixed Variable @ $2.00 Total Selling and Administrative Expenses: Net Profit $ 23,000.00 75,000.00 $ 98,000.00 $ 42,000.00 50,000.00 92,000.00 24 190,000.00 $ 185,000.00 25 26 27 37 38 39 40 41 51 I See The Light Projected Balance Sheet As of December 31, 20x1 52 53 54 55 65 66 $ 67 34,710.00 67,500.00 Current Assets Cash Accounts Receivable Inventory Raw Material Lamp Kits Work in Process Finished Goods Total Current Assets 8,000.00 500 @ $16.00 0 3000 @ $30.00 90,000.00 $ 200,210.00 68 69 79 80 81 82 83 93 94 95 96 97 107 108 109 110 111 121 Fixed Assets Equipment Accumulated Depreciation Total Fixed Assets Total Assets $ 20,000.00 6,800.00 13,200.00 $ 213,410.00 Current Liabilities Accounts Payable Total Liabilities Stockholder's Equity Common Stock $ $ 54,000.00 54,000.00 122 $ 12,000.00 27 37 38 39 40 41 51 52 53 54 55 65 66 67 68 69 79 80 81 I See The Light Projected Balance Sheet As of December 31, 20x1 $ 34,710.00 67,500.00 Current Assets Cash Accounts Receivable Inventory Raw Material Lamp Kits Work in Process Finished Goods Total Current Assets 8,000.00 500 @ $16.00 0 3000 @ $30.00 82 90,000.00 $ 200,210.00 Fixed Assets Equipment Accumulated Depreciation Total Fixed Assets Total Assets $ 20,000.00 6,800.00 13,200.00 $ 213,410.00 83 93 94 95 96 97 107 108 109 110 111 121 122 123 124 125 135 136 137 138 139 $ $ 54,000.00 54,000.00 Current Liabilities Accounts Payable Total Liabilities Stockholder's Equity Common Stock Retained Earings Total Stockholder's Equity Total Liabilities and Stockholder's Equity $ 12,000.00 147,410.00 159.410.00 $ 213,410.00 140 141 142 143 144 145 146 147 148 4 PART 1 Fixed and Variable Cost Determinations Unit Cost Calculations 11 12 13 14 The projected cost of a lamp is calculated based upon the projected increases or decreases to 15 current costs. The present costs to manufacture one lamp are: 22 23 Lamp Kit: $16.0000000 per lamp 26 Direct Labor: 2.0000000 per lamp (4 lamps/hr.) 33 Variable Overhead: 2.0000000 per lamp 34 Fixed Overhead: 10.0000000 per lamp (based on normal capacity of 25,000 lamps) 35 36 Cost per lamp: $30.0000000 per lamp 37 44 Expected increases for 20x2 45 When calculating projected increases round to TWO ($0.00) decimal places. 46 47 1. Material Costs are expected to increase by 5.50%. 48 55 2. Labor Costs are expected to increase by 5.50%. 56 57 3. Variable Overhead is expected to increase by 6.50%. 58 59 4. Fixed Overhead is expected to increase to $300,000. 66 67 5. Fixed Administrative expenses are expected to increase to $44,000. 68 69 6. Variable selling expenses (measured on a per lamp basis) are expected to increase 70 by 6.50% 77 78 7. Fixed selling expenses are expected to be $33,000 in 20x2. 79 80 8. Variable administrative expenses (measured a per lamp basis) are expected to 81 increase by 6.00%. 88 89 On the following schedule develop the following figures: 1- 20x2 Projected Variable Manufacturing Unit Cost of a lamp. 90 91 92 99 100 101 2- 20x2 Projected Variable Unit Cost per lamp. 3- 20x2 Projected Fixed Costs. 9 10 Variable Manufacturing Unit Cost 20x1 Cost Projected Percent Increase 20x2 Cost Rounded to 2 Decimal Places 11 {4.01) {4.02) {4.03) 13 Lamp Kit 14 Labor 15 Variable Overhead 16 17 Projected Variable Manufacturing Cost Per Unit 19 {4.04) 20 21 22 Total Variable Cost Per Unit 20x1 Cost Projected Percent Increase 20x2 Cost Rounded to 2 Decimal Places 23 {4.05) {4.06) {4.04) 25 Variable Selling 26 Variable Administrative 27 Projected Variable Manufacturing Unit Cost 28 29 31 Projected Total Variable Cost Per Unit 32 {4.07) 33 34 35 Schedule of Fixed Costs 20x1 Cost 20x2 Cost Projected Percent Increase {4.08) lamps @_) {4.09) {4.10) 37 38 Fixed Overhead 39 (normal capacity of 40 Fixed Selling 41 Fixed Administrative 43 44 Projected Total Fixed Costs 45 46 47 49 50 {4.11) 6 9 10 11 12 13 16 17 18 1. 19 20 23 Cost Volume Relationships - Profit Planning Big Al is about to begin work on the budget for 20x2 and they have requested that you prepare an analysis based on the following assumptions. Note: Remember, that we cannot sell part of a lamp, therefore to find the number of units you have to round up to the next complete unit. Furthuremore, to find the required sales in dollars it may be easier to find the number of units and then multiply by the selling price per unit. For 20x2 the selling price per lamp will be $45.00. What is the projected contribution margin and contribution margin ratio for each lamp sold? 24 25 26 27 30 31 Contribution Margin per unit (Round to two places, $##.##) {5.01) Contribution Margin Ratio (Round to four places,% is two of those places ##.##%) {5.02) For 20x2 the selling price per lamp will be $45.00. The desired net income in 20x2 is $200,000. What would sales in units have to be in 20x2 to reach the profit goal? 32 33 34 37 38 39 2. 40 41 44 45 46 47 48 51 52 53 54 55 58 59 60 61 3. 62 65 66 67 68 69 70 Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit if needed) {5.03) For 20x2 the selling price per lamp will be $45.00. If the fixed cost increase by $65,000.00 how many lamps must be sold to breakeven? Try" poi in our www pico, www Contribution Margin Ratio (Round to four places,% is two of those places ##.##%) {5.02) For 20x2 the selling price per lamp will be $45.00. The desired net income in 20x2 is $200,000. What would sales in units have to be in 20x2 to reach the profit goal? Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit if needed) {5.03) For 20x2 the selling price per lamp will be $45.00. If the fixed cost increase by $65,000.00 how many lamps must be sold to breakeven? 33 34 37 38 39 2 40 41 44 45 46 47 48 51 52 53 54 55 58 59 60 61 3. 62 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit if needed) {5.04) 89 90 91 {6.01) 3 4. For 20x2 the selling price per lamp will be $45.00. If the variable cost increase by $6.50 a unit how many lamps 5 must be sold to breakeven? 6 7 11 12 13 14 15 19 20 21 22 Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit needed) 23 27 28 5. For 20x2 the selling price per lamp will be $45.00. If the variable cost decreased by $6.50 a unit how many lamps 29 must be sold to breakeven? 30 31 35 36 37 38 39 Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit if needed) 43 44 6. If for 20x2 the selling price per lamp is increased to $51.50 a unit how many lamps must be sold 45 to breakeven? 46 47 51 52 53 54 55 59 60 61 Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit if needed) 62 63 7 If for 20x2 the selling price per lamp is decreased to $38.50 a unit how many lamps must be sold 67 to breakeven? 68 69 70 71 75 76 77 78 {6.02) {6.03) 79 4 PART 3 Budgets 5 6 7 8 Division N has decided to develop its budget based upon projected sales of 25,000 lamps at 13 $55.00 per lamp. 14 The company has requested that you prepare a master budget for the year. This budget is to be used 15 for planning and control of operations and should be composed of: 16 17 1. Production Budget 22 23 2. Materials Budget 24 25 3. Direct Labor Budget 26 31 4. Factory Overhead Budget 32 33 5. Selling and Administrative Budget 34 35 6. Cost of Goods Sold Budget 40 41 7. Budgeted Income Statement 42 43 8. Cash Budget 44 49 Notes for Budgeting: 50 51 52 The company wants to maintain the same number of units in the beginning and ending inventories of 53 work-in-process, and electrical parts while increasing the inventory of Lamp Kits to 650 pieces and 58 decreasing the finished goods by 20%. 59 60 Complete the following budgets 61 62 1 Production Budget 67 68 Planned Sales 69 Desired Ending Inventory of Finished Goods 70 Total Needed 71 Less: Beginning Inventory 76 77 Total Production 78 79 80 85 86 87 {7.01) Background Information I SEE THE LIGHT (ISTL) is a subchapter S corporation that manufactures children's lampsightlights for use in bedrooms. These lamps are sold nationwide through a group of independent sales representatives who have an exclusive sales region. The business is in its tenth year and has asked you to assist in planning for next year's operations. The lamps are ceramic figurines of animals, boats, boys and girls playing and singing, all in delightful colors. The owner of the business, Big Al, creates a drawing for the figurine and faxes it to a plant in China where a mold is created and a sample produced and hand painted. If the mold meets the expectations of Big Al an order of 500 lamp parts is placed. Each lamp kit consists of the parts required to complete one lamp;a figurine, a lamp shade and the required electrical components. There are presently 10 different figurines that come in six different colors; 60 models. There are presently 10 workers in the plant. They are responsible for receiving the raw material, manufacturing the product, packing and shipping. In addition to Big Al there are two office workers who are responsible for all administrative duties. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 Big Al had his accountant prepare the Projected Income Statement and Balance Sheet presented on page two. Big Al heard about your skills in managerial accounting and would like your assistance in the following areas: Part 1 Part 2 Part 3 Part 4 Part 5 Part 6 Part 7 Fixed and Variable Cost Determinations - Unit Cost Calculations Cost Volume Relationships - Profit Planning ets Process Costing Job Order Costing Standard Costing - Variance Analysis Capital Decision Making To upload your work to Big Al the file without changing the name. Pay attention to the specific location that Excel saves the file. Return to the bottom of the page that you downloaded the file from; Cybertext.com, The Book List, Building Blocks of Accounting--A Managerial Perspective, Enter password, Upload Your Excel File. If you upload an old version of the file the results will not update. Keep two copies of your spreadsheet in two separate places in case one of Big Al's competitors sends someone to destroy your work or it is lost in transmission. You may find it easier to work on this project if you print a hard copy of all the pages. I See The Light Projected Income Statement For the Period Ending December 31, 20x1 1 2 3 4 5 6 7 8 9 10 11 12 13 23 $ 1,125,000.00 750,000.00 $ 375,000.00 Sales 25,000 lamps @ $45.00 Cost of Goods Sold @ $30.00 Gross Profit Selling Expenses: Fixed Variable (Commission per unit) @ $3.00 Administrative Expenses: Fixed Variable @ $2.00 Total Selling and Administrative Expenses: Net Profit $ 23,000.00 75,000.00 $ 98,000.00 $ 42,000.00 50,000.00 92,000.00 24 190,000.00 $ 185,000.00 25 26 27 37 38 39 40 41 51 I See The Light Projected Balance Sheet As of December 31, 20x1 52 53 54 55 65 66 $ 67 34,710.00 67,500.00 Current Assets Cash Accounts Receivable Inventory Raw Material Lamp Kits Work in Process Finished Goods Total Current Assets 8,000.00 500 @ $16.00 0 3000 @ $30.00 90,000.00 $ 200,210.00 68 69 79 80 81 82 83 93 94 95 96 97 107 108 109 110 111 121 Fixed Assets Equipment Accumulated Depreciation Total Fixed Assets Total Assets $ 20,000.00 6,800.00 13,200.00 $ 213,410.00 Current Liabilities Accounts Payable Total Liabilities Stockholder's Equity Common Stock $ $ 54,000.00 54,000.00 122 $ 12,000.00 27 37 38 39 40 41 51 52 53 54 55 65 66 67 68 69 79 80 81 I See The Light Projected Balance Sheet As of December 31, 20x1 $ 34,710.00 67,500.00 Current Assets Cash Accounts Receivable Inventory Raw Material Lamp Kits Work in Process Finished Goods Total Current Assets 8,000.00 500 @ $16.00 0 3000 @ $30.00 82 90,000.00 $ 200,210.00 Fixed Assets Equipment Accumulated Depreciation Total Fixed Assets Total Assets $ 20,000.00 6,800.00 13,200.00 $ 213,410.00 83 93 94 95 96 97 107 108 109 110 111 121 122 123 124 125 135 136 137 138 139 $ $ 54,000.00 54,000.00 Current Liabilities Accounts Payable Total Liabilities Stockholder's Equity Common Stock Retained Earings Total Stockholder's Equity Total Liabilities and Stockholder's Equity $ 12,000.00 147,410.00 159.410.00 $ 213,410.00 140 141 142 143 144 145 146 147 148 4 PART 1 Fixed and Variable Cost Determinations Unit Cost Calculations 11 12 13 14 The projected cost of a lamp is calculated based upon the projected increases or decreases to 15 current costs. The present costs to manufacture one lamp are: 22 23 Lamp Kit: $16.0000000 per lamp 26 Direct Labor: 2.0000000 per lamp (4 lamps/hr.) 33 Variable Overhead: 2.0000000 per lamp 34 Fixed Overhead: 10.0000000 per lamp (based on normal capacity of 25,000 lamps) 35 36 Cost per lamp: $30.0000000 per lamp 37 44 Expected increases for 20x2 45 When calculating projected increases round to TWO ($0.00) decimal places. 46 47 1. Material Costs are expected to increase by 5.50%. 48 55 2. Labor Costs are expected to increase by 5.50%. 56 57 3. Variable Overhead is expected to increase by 6.50%. 58 59 4. Fixed Overhead is expected to increase to $300,000. 66 67 5. Fixed Administrative expenses are expected to increase to $44,000. 68 69 6. Variable selling expenses (measured on a per lamp basis) are expected to increase 70 by 6.50% 77 78 7. Fixed selling expenses are expected to be $33,000 in 20x2. 79 80 8. Variable administrative expenses (measured a per lamp basis) are expected to 81 increase by 6.00%. 88 89 On the following schedule develop the following figures: 1- 20x2 Projected Variable Manufacturing Unit Cost of a lamp. 90 91 92 99 100 101 2- 20x2 Projected Variable Unit Cost per lamp. 3- 20x2 Projected Fixed Costs. 9 10 Variable Manufacturing Unit Cost 20x1 Cost Projected Percent Increase 20x2 Cost Rounded to 2 Decimal Places 11 {4.01) {4.02) {4.03) 13 Lamp Kit 14 Labor 15 Variable Overhead 16 17 Projected Variable Manufacturing Cost Per Unit 19 {4.04) 20 21 22 Total Variable Cost Per Unit 20x1 Cost Projected Percent Increase 20x2 Cost Rounded to 2 Decimal Places 23 {4.05) {4.06) {4.04) 25 Variable Selling 26 Variable Administrative 27 Projected Variable Manufacturing Unit Cost 28 29 31 Projected Total Variable Cost Per Unit 32 {4.07) 33 34 35 Schedule of Fixed Costs 20x1 Cost 20x2 Cost Projected Percent Increase {4.08) lamps @_) {4.09) {4.10) 37 38 Fixed Overhead 39 (normal capacity of 40 Fixed Selling 41 Fixed Administrative 43 44 Projected Total Fixed Costs 45 46 47 49 50 {4.11) 6 9 10 11 12 13 16 17 18 1. 19 20 23 Cost Volume Relationships - Profit Planning Big Al is about to begin work on the budget for 20x2 and they have requested that you prepare an analysis based on the following assumptions. Note: Remember, that we cannot sell part of a lamp, therefore to find the number of units you have to round up to the next complete unit. Furthuremore, to find the required sales in dollars it may be easier to find the number of units and then multiply by the selling price per unit. For 20x2 the selling price per lamp will be $45.00. What is the projected contribution margin and contribution margin ratio for each lamp sold? 24 25 26 27 30 31 Contribution Margin per unit (Round to two places, $##.##) {5.01) Contribution Margin Ratio (Round to four places,% is two of those places ##.##%) {5.02) For 20x2 the selling price per lamp will be $45.00. The desired net income in 20x2 is $200,000. What would sales in units have to be in 20x2 to reach the profit goal? 32 33 34 37 38 39 2. 40 41 44 45 46 47 48 51 52 53 54 55 58 59 60 61 3. 62 65 66 67 68 69 70 Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit if needed) {5.03) For 20x2 the selling price per lamp will be $45.00. If the fixed cost increase by $65,000.00 how many lamps must be sold to breakeven? Try" poi in our www pico, www Contribution Margin Ratio (Round to four places,% is two of those places ##.##%) {5.02) For 20x2 the selling price per lamp will be $45.00. The desired net income in 20x2 is $200,000. What would sales in units have to be in 20x2 to reach the profit goal? Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit if needed) {5.03) For 20x2 the selling price per lamp will be $45.00. If the fixed cost increase by $65,000.00 how many lamps must be sold to breakeven? 33 34 37 38 39 2 40 41 44 45 46 47 48 51 52 53 54 55 58 59 60 61 3. 62 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit if needed) {5.04) 89 90 91 {6.01) 3 4. For 20x2 the selling price per lamp will be $45.00. If the variable cost increase by $6.50 a unit how many lamps 5 must be sold to breakeven? 6 7 11 12 13 14 15 19 20 21 22 Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit needed) 23 27 28 5. For 20x2 the selling price per lamp will be $45.00. If the variable cost decreased by $6.50 a unit how many lamps 29 must be sold to breakeven? 30 31 35 36 37 38 39 Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit if needed) 43 44 6. If for 20x2 the selling price per lamp is increased to $51.50 a unit how many lamps must be sold 45 to breakeven? 46 47 51 52 53 54 55 59 60 61 Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit if needed) 62 63 7 If for 20x2 the selling price per lamp is decreased to $38.50 a unit how many lamps must be sold 67 to breakeven? 68 69 70 71 75 76 77 78 {6.02) {6.03) 79 4 PART 3 Budgets 5 6 7 8 Division N has decided to develop its budget based upon projected sales of 25,000 lamps at 13 $55.00 per lamp. 14 The company has requested that you prepare a master budget for the year. This budget is to be used 15 for planning and control of operations and should be composed of: 16 17 1. Production Budget 22 23 2. Materials Budget 24 25 3. Direct Labor Budget 26 31 4. Factory Overhead Budget 32 33 5. Selling and Administrative Budget 34 35 6. Cost of Goods Sold Budget 40 41 7. Budgeted Income Statement 42 43 8. Cash Budget 44 49 Notes for Budgeting: 50 51 52 The company wants to maintain the same number of units in the beginning and ending inventories of 53 work-in-process, and electrical parts while increasing the inventory of Lamp Kits to 650 pieces and 58 decreasing the finished goods by 20%. 59 60 Complete the following budgets 61 62 1 Production Budget 67 68 Planned Sales 69 Desired Ending Inventory of Finished Goods 70 Total Needed 71 Less: Beginning Inventory 76 77 Total Production 78 79 80 85 86 87 {7.01)
