Brass instruments LTD.

Brass instruments LTD is a worldwide musical part manufacturing firm based in North America. After many years in the market, the Toronto division, which produces one product called Brass instruments Stand, reaches a spike on the sales level. The Management wants to have a significant investment to expand the facility and increase production, but it is requesting from the division to prepare a budget for the third quarter of 2021.

The actual sales from 2021 are:

May 82,000 units June 110,000 units

The division manager projected the following sales:

July 2021 August 2021

110,000 units 215,000 units

September 2021 October 2021 November 2021

The selling price is $12 per unit

132,000 units 157,000 units 162,000 units

1. From previous experience, management has determined that finished goods ending inventory equal to 25% of the next months unit sales are required to fit the buyers demands.

2. The Brass instruments Stand requires one type of raw material: Plastic

   • Each Brass instrument Stand requires 1.6 kilograms of Plastic, at the cost of $1.75 per kilogram.

   • The supplier of Plastic tends to be somewhat erratic, so Brass instruments LTD finds it necessary to maintain an inventory balance equal to 20% of the material needed for the next month as a precaution against stock-outs. The direct material on June 30 is 45,360 Kg.

3. The beginning accounts payable will consist of $151,704.

4. Brass instruments LTD pays for 60% of a months purchases in the month of purchase and 40% in the following month.

5. The manufacturing overhead is based on direct labour hours. The workers receive an average of $18.00 per hour, including employee benefits. EachBrass instrument Stand takes 15 minutes to complete.

6. Brass instruments LTD allocate the manufacturing overhead based on direct labour hours; The variable manufacturing overhead is as follow: Maintenance $0.40; Utilities $0.60; Indirect Labor $0.60; Indirect materials $0.40

7. The Monthly Fixed manufacturing overhead costs are as follows:

Janitorial Insurance Depreciation Property Taxes Salaries

$2,500 $1,750 $15,200 $2,100 $44,800

8. Brass instruments LTD allocates the selling and administration expenses based on units sales; The variable selling and administration rate is $1.5 per unit sales.

9. The Monthly Selling and administrative expenses are

Salaries Other fixed cost Insurance Depreciation Advertising

$62,100 $4,600 $1,200 $2,800 $12,000

10. Sales are on account (credit); 60% of the sales are collected during the month of sales and 40% the following month. This was the same collection pattern as in previous years.

11. The company wants to maintain at the end of each month a minimum bank balance of $500,000. In case the company has a deficiency of money or is not able to reach this minimum bank balance, the company can borrow from a line of credit at the rate of 12% per annum. All borrowing is considered to happen on the first day of the month, and repayments are on the last day of the month. All borrowings and repayments from the bank should be in multiples of $5,000. It pays interest monthly. The cash balance on June 30 is $184,000.

12. In August, $500,000 of new equipment to update operations will be purchased with cash.

13. Three months insurance is prepaid on the first day of the first month of the quarter. At the beginning of each quarter, the company pays $5,250. In addition at the end of each quarter, the company pays $250,000 in dividends.

14. The company has a Common Stock beginning balance of $238,260 and the Retained Earnings Beginning to Balance of $685,000

15. Common Shares should be $237,410

16. Retained Earning Beginning Balance is $685,000

Required:

Prepare 2021, Third Quarter Master Budget for Brass instruments LTD for the including the following schedules:

1. g) Prepare the Manufacturing Overhead Budget for the third quarter (Illustration 10.12)

2. h) Prepare the Unit cost (Illustration 10.14)

3. i) Prepare the Selling and Administrative Expenses Budget for the third quarter

   (Illustration 10.13)

4. Prepare the Cash Budget for the third quarter (Illustration 10.19) k) Prepare the income statement (illustration 10.15)

5. l) Prepare the statement of financial position (Illustration 10.21)