Bettys Beautiful Baskets

Bettys Beautiful Baskets, a manufacturing business that sells baskets, wants a master budget prepared for the first three months of this year (January, February and March).

The managers of the different departments have provided the following information:

The Sales Manager has projected the following sales:

January 5,000 units

February 4,000 units

March 6,000 units

April 5,000 units

May 11,250 units

Projected selling price is $35.00/unit

Your Production Manager gave the following information:

Ending Inventory is to be 20% of next months production needs

Aprils Projected Sales 5,000 units

December 20X5 Ending Inventory was 1,000 units and December unit cost was $23.50.

The Manufacturing Manager has estimated the following:

Each unit will require 4 grams of material

Material in Ending Inventory is 20% of next months needs

Decembers Ending Material Inventory was 4,800 g

Projected cost of material: $2.50/gram

The Personnel Manager has estimated that Direct Labor will be projected at:

0.75 hours of Direct Labor per unit

Direct Labor Cost: $8.50/hour

The Facilities Manager has estimated that the Manufacturing Overhead will be projected at:

Variable Overhead Rate to be $8 per Direct Labor hours

Fixed Overhead Rate to be $3,000 per month

The Accounting Department Manager has provided the following information:

Selling and Administrative Expenses are projected to be a monthly cost of:

Salaries $6,000

Rent $1,500

Advertising $1,100

Telephone $300

Other $500

Cash Receivable:

Decembers Sales were $150,000

80% of sales is collected in the month in which they were made

20% of sales collected in the following month in which they were made

Bad Debts is negligible

Accounts Payable:

80% of Payables is paid for in the current month

20% of Payables is paid for in the following month

Decembers purchases were $50,000

Federal Income Tax is estimated at 22% average.

Bettys Beautiful Baskets

has a $20,000 cash balance for the beginning of January

pays Dividends of $8,000 to be paid in March

pays projected Federal Income tax in March

depreciation on the building is $150 per month

does not carry any WIP inventory

uses FIFO inventory costing

From the beginning Balance Sheet:

Land = $150,000

Building = $45,000

Depreciation (Building) = $11,250

Retained Earnings = $58,780

Capital Stock = $200,470

For the Master Budget, you are expected to prepare the following:

Sales budget plus schedule of accounts receivable collections

Production budget

Direct materials budget and schedule of cash payments for purchases

Direct labor budget

Manufacturing overhead budget

Cost of Goods Sold Budget

Selling & Administrative Expenses Budget

Budgeted income statements

Cash budget

Budgeted balance sheet for each month plus a beginning balance sheet

When you prepare the cost of goods sold budget, you must calculate a unit cost for each month. You must also calculate cost of goods manufactured. Remember, there is no Work in Process inventory but you must calculate direct materials used.