Birmingham Steal Corp. - Cash Budget
BIRMINGHAM STEAL The Sales budget of the Birmingham Steal Corporation, a manufacturer of baseball uniforms, shows budgeted sales (in uniforms) for the first 5 months of next year as follows: November December January February March April May Uniforms 4,000 18,000 2.000 6,000 12.000 18,000 2,000 1. Birmingham sells each uniform for $75. All sales are made on credit. Past experience shows that 20% are collected in the month of sale, 70% in the next month, and 10% in the second month Prepare a sales budget and a schedule of expected cash collections for the first quarter of the year 2. Inventory on December 31" was 1,000 units. Birmingham Steal Corporation has a policy to have half of next month budgeted sales on hand at the end of each month. Prepare a production budget for the first quarter of the year. 3. Each uniform requires 5 yards of heavy cotton costing $3 per yard. Birmingham Steal buys cotton on credit, paying in the month following the purchase. Its supplier offers no cash discounts A Prepare a direct materials purchases budget for the direct materials needed in the first three months of next year. Birmingham Steal's policy is to have direct materials in its raw materials inventory at the end of each month equal to 50% of the following month's usage requirement B. Independent of 3 A. Birmingham Steal's policy is to keep the direct materials in its raw materials inventory at the end of each month to a minimum, but without letting it fall below 5,000 yards. Assume that December 1 raw materials inventory has 5,000 yards of direct materials and that the company's only supplier is willing to sell a maximum of 60,000 yards of cotton to the company per month 4. Birmingham Steal Corporation uses 2 direct labor hours to produce one baseball uniform. The direct labor rate is $16 per hour. It pays three-fourths of each month's wages in the month earned. It pays the other one-fourth in the following month. Prepare a direct labor budget for the first three months of next year. 5. Birmingham Steal Corporation's variable manufacturing overhead costs include utilities (S.20 per baseball uniform), supplies (5.05 per uniform), and other variable costs ($.12 per uniform). Fixed manufacturing overhead costs include supervisory salaries ($20,000 per month), depreciation of plant and equipment ($5,500 per month), and other fixed costs ($12,000) per month). Birmingham Steal makes cash payments for manufacturing overhead costs (except for depreciation) in the month these costs are occurred. Prepare a manufacturing overhead budget for the first three months of next year. BIRMINGHAM STEAL CORPORATION - Sales Budget Nov. Dec Jan Feb Mar Quarter 18,000 2,000 6,000 12.000 2DOO Budget sales in uniforms Sellings prices per unit 4000 75 75 75 75 75 75 Total sales 300,000 $40,000 1, So0,40 150,000 450,000 900,000 Cash collections: 60,000 90,000 Current month 27,00 30,000 180,000 210,000 945.000 105,000 315,000 Previous month Two months previous 30,000 135,000 15,000 510,000 Total cash collections 60.000 480,000 1,009,00 330,000 1,845,000 OSTER BIRMINGHAM STEAL CORPORATION - Production Budget Feb Mar Quarter April 6,000 12,000 20,000 18,000 9,000 awa VODO 9000 1/000 1,000 12,000 21,000 Nov. Dec Jan Budget sales in uniforms 4,000 19,000 2,000 Add: Desired ending 14,000 inventory of . 3,000 finished goods 13,000 19,000 5,000 Total needs Less: Beginning inventory of 2,00 9,000,000 finished goods Required production in 0,000 10,000 4,000 uniforms 29,000 119,000 3,000 4,000 4,000 9,000 15,000 9,000 10,000 28,000 Jan Mar 4,000 140,000 - BIRMINGHAM STEAL CORPORATION - Direct Materials Purchases Budget for Cotton (A) April Quarter Dec Feb Budgeted production 10,000 9,000 X uniforms) 15,000 28,000 10,000 Expected direct 2 materials usage per s 5 5 5 ss unit (yards) 3 Total expected usage (yards) So,odo 20 000 45,000 75,000 So,000 Add: Desired ending +4 inventory of direct materials (yards) 10,000 22,500 37,500 25,000 25,000 Total direct s materials required (yards) 60.000 42,500 82,500 100,000 IOS 000 inventory of direct materials (yards) 125,000) (10,000) 122,500) (37,500) (10,000) (25,000) Direct materials 7 purchases (yards) 35,000 32,500 60,000 62,500 155,000 Direct materials 9 price per yard $3 13 $3 $3 3 $3 Direct materials purchase cost 5105,000 $97,500 $180,000 $187,500 $415,000 Cash payments for chases $105,000 $47,500 $150,000 1362,500 - - - BIRMINGHAM STEAL CORPORATION - Direct labor Budget Mar Quarter Jan Feb Budgeted production (uniforms) 4 poo 9,000 15,000 24,000 2 Direct labor hours per uniform 2 2 Direct labor hours required 2 | 1,000 16 30,000 56000 8.000 16 128,000 Labor rate per hour 162 16 Budgeted labor cost 288,000 480,000 896,000 Cash payments for labor Current Month - 75% of current month Previous Month - 25% of previous month Total cash payment for labor 360,000 96,000 80,000 176,000 216,000 32,000 245,000 72,000 432,000 672,000 159.000 ht 8 SL.000 BIRMINGHAM STEAL CORPORATION - Manufacturing Overhead Budget Jan Feb Mar Quarter Budgeted production (uniforms) 4,000 9,000 15,000 28.000 Variable overheat costs Utilities ($0.20 per uniform) 3.000 5,600 800 200 1.800 450 750 1,400 Supplies (50.05 per uniform) Other variable costs ($0.12 per uniform) Total Variable Costs ($0.37 per uniform 460 1,080 5560 " 1,800 5550 1490 3330 10360 Fixed overhead costs 20000 20000 20000 20000 Supervisory salaries Depreciation of plant and equipment SSOD ssoo Soo 16 500 36000 12000 12000 12000 Other fixed costs 37500 37500 37580 112 SOO Total faced costs 38990 Total manufacturing overhead costs Less: Depreciation of plant and equipment Cash payment for mfg. overhead costs 40930 (5500) 35380 43050 (5500) (5500) 122860 (16 506) 100360 33480 37 $50
