c D G K M 0 Klandon Company manufactures decorative rocks for aquariums, Kim Klandon is preparing the budget for the quarter ended June 30. She has gathered the following information 1 Klandon's sales manager reported that the company sold 12,000 bags of rocks in March. He has developed the following sales forecast. The expected sales price is $10 per bag. April 20.000 bags May 50.000 bags June 30,000 bags July 25,000 bags August 15,000 bags 2. Sales personnel receive a 5 percent commission on every bag of rocks sold. The following monthly fixed selling and administrative expenses are planned for the quarter. However, these amounts do not include the depreciation increase resulting from the budgeted equipment purchase in June (see part 7) Monthly Fixed Selling and Administrative Costs Variable Cos Unit Depreciation $10,000 Salaries of sales personnel 25,000 $0.50 Advertising 1.000 Management salaries 10,000 Miscellaneous 500 0.50 Bad debts Total costs $46,500 $100 3. The standard laboralowed for one bag of rocks is 15 minutes. The orrent direct labor rate is $10 per hour. 4. After experiencing difficulty in supplying customers in a timely fashion due to inventory shortages, the company established a polcy requiring the ending finished goods inventory to equal 20 percent of the following month's budgeted sales, in units On March 31, 4,000 bags were on hand 6. Five pounds of raw materials are required to fill each bag of finished rocks. The company wants to have raw materials on hand at the end of each month equal to 10 percent of the following month's production needs. On March 31, 13,000 pounds of materials were on hand The raw materials used in production cost $0.40 per pound. Half of the month's purchases in paid for in the month of purchase the other halt in the following month. No discount is available 7 On June 1, the company plans to spend 548,000 to upgrade its office equipment that is fully depreciated. The new equipment is expected to have a five-year life with no residual value 8. The budgeted monthly variable and total fixed overhead are as follows. Variable overhead is based on the number of units produced. The fixed overhead budget is based on an annual production of 400,000 bags 0 Fred Monthly Overhead Variable Cost Un Depreciation $8,000 Indirect materials 1.000 50.05 Indirect labor 10,000 0.20 Utrities 20,000 0.10 Property taxes 5,000 Maintenance 6,000 0.15 Total costs $50,000 $0.50 9. All sales are made on account. Historically, the company has collected 70 percent of its sales in the month of sale and 25 percent in the month following the sale. The remaining 5 percent of sales is uncollectible 3. Klandon must maintain a minimum cash balance of $30,000. An open line of credit at a local bank allows the company to borrow up to $175.000 por quarter in $1,000 increments, 1. All borrowing is done at the beginning of the month, and all repayments are made at the end of a month in $1,000 increments. Accrued interest is paid only when principal is repaid. The interest rate is 12 percent per year. 2. A quarterly dividend of $49,000 will be declared and paid in April. 13. Income taxes payable for the first quarter will be paid on April 15. Kandon's tax rate is 30 percent 14. The March 31 balance sheet is as follows: March 31 Cash $40,000 Accounts receivable 30,000 Finished goods inventory 26,000 Raw materials inventory 5,200 Plant & equipment 200,000 Accumulated Depreciation (50.000) Total assets $251.200 Accounts payable Income taxes payable Common stock Retained 3amings Total liabilities and equities $12,000 50,000 52.000 137,200 $251,200 Required a Prepare all components of Klondon's master budget for the second quarter. Use the template's provided below to prepare the budgets and pro-forma statements. Sales Budget Budgeted units sold Budgeted sales price Budgeted sales revenue April 20.000 10 200,000 $ $ May 50,000 10 500,000 $ $ June 30,000 10 300,000 $ $ $ $ Quarter 100,000 10 1,000,000 May June Quarter $ Or solve your own way and solve the rest of the problem: Selling & Administrative Expense Budget April Depreciation Sales personnel compensation Advertising Management salaries Miscellaneous Bod debts 10,000 Total budgeted expenses $ 10,000 Less non-cash expenses Depreciation $ Bed debts 10,000 Total cash costs 25,000 25,000 15,000 15,000 50.000 50,000 $ $ $ $ $ $ 25,000 15,000 50,000 $ $ $ Production Budget May Budgeted unit sales Budgeted ending inventory April 20,000 10,000 50,000 6,000 June 30,000 5,000 Quarter 100,000 5,000 25,000 3.000 M N Production Budget July Budgotod unit sales + Budgeted ending inventory = Total units required - Beginning inventory = Budgeted production April 20.000 10.000 30,000 4,000 26,000 May 50,000 6,000 56,000 10.000 46.000 June 30,000 5.000 35,000 6,000 29,000 Quarter 100.000 5,000 105,000 4,000 101,000 25,000 3,000 28,000 5,000 23,000 Materials Purchase Budget April 26.000 May 46,000 June 29,000 Quarter 101,000 23,000 Budgeted production x Standard pounds/unit - Production needs +Budgeted ending inventory = Total pounds required - Beginning inventory = Budgeted purchases x Standard price/pound =Budgeted purchases cost $ $ Direct Labor Budget April 26,000 May 46,000 June 29,000 Quarter 101.000 Budgeted production x Standard DLH/unit - Total direct labor hrs required x Standard wage rate - Budgeted direct labor cost $ s Manufacturing Overhead Budget April 26,000 May 46,000 June 29,000 Quarter 101,000 Budgeted production x Variable OH/unit Total variable overhead B D E F G H Manufacturing Overhead Budget April 26,000 May 46,000 June 29,000 Quarter 101.000 Budgeted production X Variable OH/unit = Total variable overhead + Fixed overhead Total budgeted Manufacturing OH Less: Non-cash items Depreciation = Total cash costs $ $ Ending Inventory and Costs of Goods Sold Budget Raw Materials Beginning Balance Purchases of raw materials Less: Ending rawy materials inventory Raw materials used Finished Goods Unit costs: Direct materials Direct labor Overhead Total standard unit cost X Ending inventory units Ending finished goods inventory $ $ $ Cost of Goods Sold Beginning work in process inventory Direct materials used Direct labor Manufacturing overhead Total manufacturing costs Less: Ending work in process inventory $ F K M N D Cost of Goods Sold Beginning work in process inventory Direct materials used Direct labor Manufacturing overhead Total manufacturing costs Less: Ending work in process inventory Cost of goods manufactured Add: Beginning finished goods inventory Less: Ending finished goods inventory Cost of goods sold 5 $ $ April May June Total Cash Receipts Bad Debts Accounts Receivable Cash Reels Budget March wales $120,000x285 April sales 5200,000 x 70% $200,000 x 20 3200,000 May sales 5500,000 X 70% 1500.000 x 2 5500.000 June sales $300.000X70% $300.000 20% $300,000 Totals Cash Payments for Materials Budget April May June Total Cash Payments Accounts Payable A/P from March April purchases Cash Payments for Materials Budget April May June Total Cash Payments Accounts Payable A/P from March April purchases $55,000 x 50% $56,000 x 50% May purchases $88,600 x 50% $88,600 x 50% June purchases $50,800 x 50% $56,800 x 50% Total $ Cash Budget April May June Quarter Beginning cash balance Collections from sales Total cash available Less disbursements Materials purchases Direct labor Manufacturing overhead Selling & administrative expense Income taxes Equipment purchase Dividends Total cash disbursements Cash excess (deficiency) Minimum cash balance Cash excess (deficiency) Financing Borrowings Repayments D E F G H b. Prepare a pro forma income statement for the second quarter. Solve: Sales Cost of goods sold Gross profit Selling & administrative expense Operating income Interest expense Income before taxes Income tax expense (30%) Net income $ G. Prepare a pro forma balance sheet as of June 30, Solve: Cash A/R Finished Goods Raw Materials Inventory Property. Plant & Equipment Less: Accumulated Depreciation Total Assets $ A/P Income Taxes Payable Note Payable Common Stock Retained Eamnings Total Liabilities & Equities $ Selling & Administrative Budget; total cash costs for the quarter = $159,500 - Production Budget: Total budgeted production (units) for June = 29,000 Materials Purchase Budget; Total budgeted purchases cost for the quarter = $201.400 Manufacturing Overhead Budget: total budgeted MOH for May = $73,000 . Finished Goodsnding finished goods inventory 32,500 o Cost of Goods Sold: total manufacturing costs = $655,000 o Cash Receipts budget; total cash receipts for the quarter = $905,000 Cash Budget; Ending cash balance at June 30th = $30,560 Proforma Income Stmt: Net income - $75,782 o Proforma Balance Sheet; Total Assets = $285,860