cash budget

Week Seven Dec 9-15 Understanding Relationships, Master Budget, Comprehensive Review Optima Company is a high-technology organization that produces a mass storage system. The design of Optima's system is unique and represents a breakthrough in the industry. The units Optima produces combine positive features of both compact and hard disks. The company is completing its fifth year of operations and is preparing to build its master budget for the coming year (20Y1). The budget will detail each quarter's activity and the activity for the year in total. The master budget will be based on the following information: a. Fourth quarter sales for 2010 are 55,000 units b. Unit sales by quarter (for 20Y1) are projected as follows: First quarter 65,000 Second quarter 70,000 Third quarter 75,000 Fourth quarter 90,000 The selling price is $400 per unit. All sales are credit sales. Optima collects 85% of all sales within the quartet in which they are realized; the other 15% is collected in the following quarter. There are no bad debts. There is no beginning inventory of finished goods. Optima is planning the following ending finished goods inventories for each quarter: First quarter 13,000 units Second quarter 15,000 units Third quarter 20,000 units Fourth quarter 10,000 units d. Each mass-storage unit uses 5 hours of direct labor and three units of direct materials. Laborers are paid $10 per hour, and one unit of direct materials costs $80. e. There are 65,700 units of direct materials in beginning inventory as of January 1, 2011 At the end of each quarter, Optima plans to have 30% of the direct materials needed for next quarter's unit sales. Optima will end the year with the same amount of direct materials found in this year's beginning inventory Check My Work f. Optima buys direct materials on account. Half of the purchases are paid for in the quarter of acquisition, and the remaining half are paid for in the following quarter. Wages and salaries are paid on the 15th and 30th of each month. g. Fixed overhead totals $1 million each quarter of this total, $350,000 represents depreciation. All other fixed expenses are paid for in cash in the quarter incurred. The fixed overhead rate is computed by dividing the year's total fixed overhead by the year's budgeted production in units. h. Variable overhead is budgeted at $6 per direct labor hour. All variable overhead expenses are paid for in the quarter incurred. 1. Fixed selling and administrative expenses total $250,000 per quarter, including $50,000 depreciation j. Variable selling and administrative expenses are budgeted at $10 per unit sold. All selling and administrative expenses are paid for in the quarter incurred. k. The balance sheet as of December 31, 20YO, is as follows: Assets Cash $ 250,000 Direct materials inventory 5,256,000 Accounts receivable Plant and equipment, net 3,300,000 33,500,000 Total assets $42,306,000 Liabilities and Stockholders' Equity Accounts payable $ 7,248,000 27,000,000 Capital stock Retained earnings 8,058,000 Total liabilities and stockholders' equity $42,306,000 * For purchase of direct materials only. 1. Optima will pay quarterly dividends of $300,000. At the end of the fourth quarter, $2 million of equipment will be purchased. Required: Prepare a master budget for Optima Company for each quarter of 2011 and for the year in total. The following component budgets must be included: ween seven we 9-13 3. Direct Materials Purchases Budget (in thousands, except for per unit/hour data) If required, round answers to one decimal place. Optima Company Direct Materials Purchases Budget For the Year Ending December 31, 2011 Otr. 1 Qtr. 2 Qtr. 3 Production 78 72 80 80 310 Materials/unit Production needs 2 40 240 930 216 22.5 Desired ending inventory 21 x x 65.7 Total needs 255 X 238.5 X 267 305.7 995.7 Less: Beginning inventory 65.7 21 X 22.5 X 65.7 Purchases 189.3 X 217.5 X 244.5 X 278.7 930 80 Cost per unit 80 $ 80 Purchase cost 15,144 X $ 17,400 X $ 19,560 X $ 22.296 X $ 74,400 Check My Work 5. Overhead Budget (in thousands, except per unit/hour data) Optima Company Overhead Budget For the Year Ending December 31, 2041 Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total Budgeted hours 390,000 360,000 400,000 400,000 1,550,000 Variable rate Budgeted VOH $2,340,000 X $ 2,160,000 X $ 2,400,000 X $ 2,400,000 X $ 9,300,000 Budgeted FOH 1,000,000 X 1,000,000 1,000,000 X 1,000,000 4,000,000 $ 3,340,000 X $ 3,160,000 X $3,400,000 X S 3,400,000 X $ 13,300,000 Total OH X Feedback Partially correct 6. Selling and Administrative Expenses Budget (in thousands, except per unit/hour data) Optima Company Selling and Administrative Expenses Budget For the Year Ending December 31, 2071 Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total Planned sales Variable rate Variable expenses $ Fixed expenses Total expenses 7. Ending finished goods inventory budget. Enter amounts in full, not in thousands. Round to the nearest cent. Optima Company Ending Finished Goods Inventory Budget For the Year Ending December 31, 2011 Unit cost computation: Direct materials Direct labor Overhead: Variable Fixed Total unit cost Finished goods 8. Cost of goods sold budget (Note: Assume that there is no change in work-in-process inventories.) Enter amounts in full, not in thousands. If an amount is zero, enter"0" Optima Company Cost of Goods Sold Budget For the Year Ending December 31, 2011 Direct materials used Direct labor used Overhead Budgeted manufacturing costs Add: Beginning finished goods inventory Cost of goods available for sale Less: Ending finished goods inventory Budgeted cost of goods sold Beginning cash bal. $ Collections: Credit sales: Current quarter Prior quarter Cash available Less disbursements: Direct materials: Current quarter Prior quarter Direct labor Overhead Selling and admin Dividends Equipment Total cash needs Ending cash Check My Work 10. Pro forma income statement (using absorption costing). Enter amounts in full, not in thousands (Note: Ignore income taxes.) Optima Company Pro Forma Income Statement For the Year Ending December 31, 2011 Feedback laise Week Seven Dec 9-15 eBook Calculator 11. Pro forma balance sheet. Enter amounts in full, not in thousands. List all assets and liabilities in order of liquidity. (Note: Ignore income taxes Optima Company Pro Forma Balance Sheet December 31, 2011 Assets Total assets Liabilities and stockholders' equity Total liabilities and stockholders equity Check My Work