Company information:
	Number of units of the company's only product:			Budgeted	Mar. 20X1 Actual
		Included in inventory on hand at March 1, 20X1		NA	8,000	units
		Manufactured during month ended March 31, 20X1		NA	102,000	units
		Sales for month of March 20X1		?	105,000	units
		Budgeted total production and sales for fiscal year ended (FYE) Dec. 31, 20X1		1,200,000	NA	units
	Per-unit information:			Budgeted	Mar. 20X1 Actual	17M8W1
		Average selling price		$ 150.00	$ 150.00
		Variable manufacturing costs
			Direct materials (DM)	$ 31.50	$ 32.00	17M8W1
			Direct labor (DL)	26.50	25.50
			Manufacturing overhead (MOH) (Var. MOH)	37.00	38.50
		Variable selling and administrative (S&A) cost (Var. S&A)		$ 15.00	$ 14.50
	Fixed costs:			Budget 20X1
				(see Note 1)	Mar. 20X1 Actual
		Manufacturing overhead (MOH) costs (Fxd MOH)		$ 8,400,000	$ 714,000
		Selling and administrative (S&A) costs (Fxd S&A)		$ 9,000,000	$ 770,000
		Research and development (R&D) costs		$ 6,000,000	$ 510,000
	Other information:
		Budgeted net income for month ended March 31, 20X1		$ 630,000
		Company's projected combined effective tax rate for FY 20X1		40.0%	(i.e., 0.40)
		Cost of contemplated supplemental advertising campaign for March 20X1		$ 130,000	(see Note 2)
	Note 1 - Management's monthly budget for each category of fixed costs listed is 1/12 of the annual budget amount
	Note 2 - Management estimates that the supplemental advertising, if conducted, would generate a 7.5% increase in sales (units and
	dollars), compared to budget, for the month of March 20X1.

Using the information about Western Manufacturing Company provided below, complete the following two tabs in this MS Excel Workbook:

Company information:

Number of units of the company's only product:

Budgeted

Mar. 20X1 Actual

Included in inventory on hand at March 1, 20X1

NA

8,000

units

Manufactured during month ended March 31, 20X1

NA

102,000

units

Sales for month of March 20X1

?

105,000

units

Budgeted total production and sales for fiscal year ended (FYE) Dec. 31, 20X1

1,200,000

NA

units

Per-unit information:

Budgeted

Mar. 20X1 Actual

17M8W1

Average selling price

$ 150.00

$ 150.00

Variable manufacturing costs

Direct materials (DM)

$ 31.50

$ 32.00

17M8W1

Direct labor (DL)

26.50

25.50

Manufacturing overhead (MOH) (Var. MOH)

37.00

38.50

Variable selling and administrative (S&A) cost (Var. S&A)

$ 15.00

$ 14.50

Fixed costs:

Budget 20X1

(see Note 1)

Mar. 20X1 Actual

Manufacturing overhead (MOH) costs (Fxd MOH)

$ 8,400,000

$ 714,000

Selling and administrative (S&A) costs (Fxd S&A)

$ 9,000,000

$ 770,000

Research and development (R&D) costs

$ 6,000,000

$ 510,000

Other information:

Budgeted net income for month ended March 31, 20X1

$ 630,000

Company's projected combined effective tax rate for FY 20X1

40.0%

(i.e., 0.40)

Cost of contemplated supplemental advertising campaign for March 20X1

$ 130,000

(see Note 2)

Note 1 - Management's monthly budget for each category of fixed costs listed is 1/12 of the annual budget amount

Note 2 - Management estimates that the supplemental advertising, if conducted, would generate a 7.5% increase in sales (units and

dollars), compared to budget, for the month of March 20X1.

a. Compute Western Manufacturing Company's budgeted break-even sales - number of units and dollars - for the month of March 20X1. To do so, use the Cost-Volume-Profit model, SP x Q VC x Q = FC, described and illustrated on page 15 of the background paper, Management Accounting Concepts.

In order to complete Part A, you will need to use the formula given above:

(SP x Q - VC x Q = FC), or use the formula: BE (units) = FC/CM, where CM = SP-VC

Your answers must appear in the yellow shaded area.

FC =

VC =

SP =

CM =

BE Units =

BE Sales =

b. Compute the company's required sales - number of units and dollars - necessary to achieve its budgeted net income for the month of March 20X1. To do so, use the Cost-Volume-Profit model, Targeted NI = [(SP x Q) (VC x Q) FC] x (1 t), described and illustrated on page 16 of the background paper, Management Accounting Concepts.

For Part B, you can use the formula described above, or you can use the formula: BE = (FC+Targeted Revenue)/ CM, where TR = TNI /(1-Tax Rate)

Targeted NI =

Tax Rate =

Targeted Rev =

Required Units =

Required Sales =

c. Compute the company's operating leverage ratio using budgeted operating results for the month of March 20X1. As described on page 15 of the background paper, Management Accounting Concepts, the operating leverage ratio is computed as: CM ratio / Net margin ratio, where CM ratio = Unit CM / SP, and Net margin ratio = Net income / Sales.

CM Ratio=

NM Ratio=

Oper Lev Ratio =

d. Management is contemplating the expanded advertising expenditures for the month of March 20X1 (see Company Information in previous tab). Assuming management does not change the product's selling price, compute the additional amount of sales - units and dollars - necessary to achieve the company's budgeted net income for the month, if it proceeds with the additional advertising campaign. It may be helpful to review the illustration on pages 17 - 18, ("Estimating Impact of Contemplated Management Decisions") of the background paper, Management Accounting Concepts.
	Budgeted NI =
	Tax Rate =
	Budgeted Rev =
	Required Units =
	Required Sales =
	Additional Units =
	Additional Sales =