complete the following and submit for grading:

Part #2: Budgets

• Worksheet#s7through10.
• I just need worksheet 7-10..

MI5965 I SEE THE LIGHT MI5965.xls Mohammad, when you are ready to have your work graded you will upload this to the same screen that the project was downloaded from: www.cybertext.com, The Book List, Building Blocks of Accounting--A Managerial Perspective, Enter password, Upload Your Excel File. Keep two copies of your spreadsheet in two separate places in case one of Big Al's competitors sends someone to destroy your work or it is lost in transmission. You may find it easier to work on this project if you print a hard copy of all the pages. There are alternative methods of solving problems. To insure similar answers and to guarantee that you are graded correctly please follow the instructions as to rounding. NOTE: If there are any questions about the project email markfriedman@miami.edu or call 305.284.6296. Grade will be based upon answers entered into the shaded boxes. L831 160825 or MI5965.xlsx Elf Village Productions 50 Sheet Legal Pad Building Blocks of Accounting .. A Financial Perspective Page 1 FAQ FAQ 01 My file used to upload, why is it not uploading? Answer: Sometimes we unknowingly add items to a workbook that inhibits the upload process. The conversion to a Excel Binary Workbook (*.xlsb) version and then back to the current version generally fixes the situation. If the problem continues simple send your BINARY file as an attachment with your username and password... friedman@cybertext.com Windows Operating System Select File Select Save As Select Save As Type: Select Excel Binary Workbook (*.xlsb) Select Save Select Continue or Yes if prompted or if it indicates that there is limited memory. Select Select Select Select Select Select File Close File Open and open the .xlsb file Save As Save As Type: Excel Workbook (*.xlsx) Save Upload the file at cybertext.com Apple Operating System Select File Select Save As Select Format: Select Excel Binary Workbook (*.xlsb) Select Save Select Select Select Select Select Select File Close File Open and open the .xlsb file Save As Format: Excel Workbook (*.xlsx) Save Upload the file at cybertext.com MF1234.xlsx Elf Village Productions 50 Sheet Legal Pad Building Blocks of Accounting .. A Financial Perspective FAQ FAQ 02 Answer: What is the difference between rounding a number and rounding up a number? B 1 2 3 4 5 6 7 C D E F Cost of a Taxi $ 100.00 Number of Passengers 3 Cost per Passenger Without rounding 33.333333 =F1/F2 Rounding to two decimals 33.33 =ROUND(F1/F2,2) Roundup to two decimals 33.34 =ROUNDUP(F1/F2,2) FAQ 03 When I upload it, the results show that I have an answer wrong, yet that answer is needed for another question which is marked correct. Answer: The computer is giving you part credit. Given: Width 10 ft Length 12 ft Cost per sq. ft. $6 Find {1.1} Area ----- 100 sq ft (wrong) {1.2} Cost ---- $600 correct based on the wrong area. Note if the area is corrected,120 sq ft, the cost would be wrong. Page 2 FIRST LAST MohammadIslam number 5965 File MI5965 I SEE THE LIGHT Background Information I SEE THE LIGHT (ISTL) is a subchapter S corporation that manufactures children's lampsightlights for use in bedrooms. These lamps are sold nationwide through a group of independent sales representatives who have an exclusive sales region. The business is in its tenth year and has asked you to assist in planning for next year's operations. The lamps are ceramic figurines of animals, boats, boys and girls playing and singing, all in delightful colors. The owner of the business, Big Al, creates a drawing for the figurine and faxes it to a plant in China where a mold is created and a sample produced and hand painted. If the mold meets the expectations of Big Al an order of 500 pieces is placed. There are presently 10 different figurines that come in six different colors; 60 models. The lamp shades and the electrical parts are supplied from domestic manufacturers. There are presently 10 workers in the plant. They are responsible for receiving the raw material, manufacturing the product, packing and shipping. In addition to Big Al there are two office workers who are responsible for all administrative duties. Big Al had his accountant prepare the Projected Income Statement and Balance Sheet presented on page two. Big Al heard about your skills in managerial accounting and would like your assistance in the following areas: Part 1 Part 2 Part 3 Part 5 Part 6 Fixed and Variable Cost Determinations - Unit Cost Calculations Cost Volume Relationships - Profit Planning Budgets Job Order Costing Standard Costing - Variance Analysis To upload your work to Big Al the file without changing the name. Pay attention to the specific location that Excel saves the file. Return to the bottom of the page that you downloaded the file from; Cybertext.com, The Book List, Building Blocks of Accounting--A Managerial Perspective, Enter password, Upload Your Excel File. If you upload an old version of the file the results will not update. Keep two copies of your spreadsheet in two separate places in case one of Big Al's competitors sends someone to destroy your work or it is lost in transmission. You may find it easier to work on this project if you print a hard copy of all the pages. NOTE: If there are any questions about the project e-mail markfriedman@miami.edu or call 305.284.6296. Grade will be based upon answers entered into the shaded boxes. Page 2 I See The Light Projected Income Statement For the Period Ending December 31, 20x1 Sales 25,000 lamps @ $45.00 Cost of Goods Sold @ $28.93 Gross Profit Selling Expenses: Fixed Variable (Commission per unit) @ $3.15 Administrative Expenses Total Selling and Administrative Expenses: Net Profit $ 1,125,000.00 723,250.00 $ 401,750.00 $ 23,000.00 78,750.00 $ 101,750.00 40,500.00 $ 142,250.00 259,500.00 I See The Light Projected Balance Sheet As of December 31, 20x1 Current Assets Cash Accounts Receivable Inventory Raw Material Figurines Electrical Sets Work in Process Finished Goods Total Current Assets Fixed Assets Equipment Accumulated Depreciation Total Fixed Assets Total Assets Current Liabilities Accounts Payable Total Liabilities Stockholder's Equity Common Stock Retained Earnings Total Stockholder's Equity Total Liabilities and Stockholder's Equity $ 500 @ $9.20 500 @ $1.25 0 3000 @ $28.9250 34,710.00 67,500.00 $ 4,600.00 625.00 86,775.00 194,210.00 $ 13,200.00 207,410.00 $ $ 54,000.00 54,000.00 $ 153,410.00 207,410.00 $ 20,000.00 6,800.00 $ 12,000.00 141,410.00 Page 3 Mohammad Islam 6337 PART 1 Fixed and Variable Cost Determinations Unit Cost Calculations The projected cost of a lamp is calculated based upon the projected increases or decreases to current costs. The present costs to manufacture one lamp are: Figurines Electrical Sets Lamp Shade Direct Labor: Variable Overhead: Fixed Overhead: Cost per lamp: $9.2000000 1.2500000 6.0000000 2.2500000 0.2250000 10.0000000 per lamp per lamp per lamp per lamp (4 lamps/hr.) per lamp per lamp (based on normal capacity of 25,000 lamps) $28.9250000 per lamp Expected increases for 20x2 When calculating projected increases round to SEVEN decimal places,$0.0000000. 1. Material Costs are expected to increase by 6.50% . 2. Labor Costs are expected to increase by 5.00%. 3. Variable Overhead is expected to increase by 5.50%. 4. Fixed Overhead is expected to increase to $265,000. 5. Fixed selling expenses are expected to be $41,000 in 20x2. 6. Variable selling expenses (measured on a per lamp basis) are expected to increase by 2.00%. 7. Fixed Administrative expenses are expected to increase by $8,000. The total administrative expenses for 20x0 were $40,320.00, when 22,000 units were sold. Use the High-Low method to calculate the total fixed administrative expense. 8. Variable administrative expenses (measured on a per lamp basis) are expected to increase by 3.50%. The total administrative expenses for 20x0 were $40,320.00, when 22,000 units were sold. Use the High-Low method to calculate the variable administrative expense per lamp. On the following schedule develop the following figures: 1- 20x2 Projected Variable Manufacturing Unit Cost of a lamp. 2- 20x2 Projected Variable Unit Cost per lamp. 3- 20x2 Projected Fixed Costs. Page 4 Mohammad Islam 6337 I See The Light, Inc Schedule of Projected Costs Variable Manufacturing Unit Cost 20x1 Cost 9.2 6.50% $9.7980000 {4.01} 7 6.50% $1.3312500 {4.02} 6 6.50% $6.3900000 {4.03} 2.25 5% $2.3625000 {4.04} 0.225 5.50% $0.2373750 {4.05} 7 7 7 7 $20.1191250 {4.06} 7 Lamp Shade Labor Variable Overhead Projected Variable Manufacturing Cost Per Unit 20x2 Cost Rounded to 7 Decimal Places 1.25 Figurines Electrical Sets Projected Percent Increase 18.925 Total Variable Cost Per Unit 20x1 Cost Variable Selling Variable Administrative 20x1 3.15 Projected Total Variable Cost Per Unit 20x2 Cost Rounded to 7 Decimal Places $3.2130000 {4.07} 2% {4.08} 0.0600000 Variable Administrative 20x2 Projected Variable Manufacturing Unit Cost Projected Percent Increase 0.0621000 {4.09} 3.50% $18.9250000 $20.1191250 {4.06} 22.0750000 23.3942250 {4.10} 7 7 7 7 Schedule of Fixed Costs 20x1 Cost Fixed Overhead 250000 $ Projected Increase 15,000.00 20x2 Cost Rounded to 2 Decimal Places $ 265,000.00 {4.11} 2 $ 41,000.00 {4.12} 2 7 2 2 (normal capacity of _________ lamps @ __ ) Fixed Selling Fixed Administrative 20x1 Fixed Administrative 20x2 Projected Total Fixed Costs {4.13} 39,000.00 8000 $ 47,000.00 {4.14} $ 353,000.00 {4.15} Page 5 Mohammad Islam 6337 PART 2 Cost Volume Relationships Profit Planning Big Al is about to begin work on the budget for 20x2 and they have requested that you prepare an analysis based on the following assumptions. Note: Remember, that we cannot sell part of a lamp, therefore to find the number of units you have to round up to the next complete unit. Furthuremore, to find the required sales in dollars it may be easier to find the number of units and then multiply by the selling price per unit. 1. For 20x2 the selling price per lamp will be $45.00. What is the projected contribution margin and contribution margin ratio for each lamp sold? Sales price per unit Contribution Margin per unit (Round to seven places, $##.#######) Contribution Margin Ratio (Round to seven places,% is two of those places ##.#####%) 2. $21.6057750 {5.01} 7 48.01283% {5.02} 7 {5.03} 0 {5.04} 0 For 20x2 the selling price per lamp will be $45.00. How many lamps must be sold to breakeven? Total Fixed Cost (A) Contribution Margin ratio (B) $ 353,000.00 48.01283% Break Even Sales in $ (AB) Sales price per unit $ 735,220.15 45 16,339 units Breakeven sales in units (Round up to zero places, ###,### units) 3. 45 23.394225 Less: Total Variable cost per unit For 20x2 the selling price per lamp will be $45.00. The desired operating income in 20x2 is $267,000 . What would sales in units have to be in 20x2 to reach the profit goal? $ 353,000.00 Total Fixed Cost (A) 267000 Add: Desired operating Income (B) Total of Fixed cost and operating Income (A+B) Contribution Margin ratio (C) $ 620,000.00 48.01283% Break Even Sales in $ Sales price per unit $ 1,291,321.51 45 Sales in units (Round up to zero places, ###,### units) 28,697 units Page 6 Mohammad Islam 6337 4. For 20x2 the selling price per lamp will be $45.00. The company would like to have a operating income equal to 32.00% of sales. If that is to be achieved, what would be the sales in units in 20x2? 45 32% Sales Price Per unit * Desired Profit percentage per unit Desired Profit per unit Variable cost per unit Total Fixed cost 14.4 23.394225 $ 48,989 units Sales in units (Round up to zero places, ###,### units) 5. $ Total Fixed cost Total Units $ New Selling Price (Round up to two places, $###,###.## ) 0 $ {6.02} 2 {6.03} 0 {6.04} 2 22.925 573,125.00 353,000.00 25000 37.05 For 20x2 the selling price per lamp will be $45.00 and the effective tax rate is 40%. How many units must be sold to generated a operating income of $240,000 after taxes? $ 353,000.00 Total Fixed Cost (A) 400000 Add: Desired operating Income before Tax (B) Total of Fixed cost and operating Income (A+B) Contribution Margin ratio (C) $ 753,000.00 0.4801283 Break Even Sales in $ Sales price per unit $ 1,568,330.80 45 34,852 units Sales in units (Round up to zero places, ###,### units) 7. {6.01} If the company believed that it could only sell 25,000 lamps, what would the new selling price have to be so that the new contribution margin per unit is equal to last year's contribution margin per unit? Contribution Margin per unit of last year Total Contribution Margin 6. 353,000.00 If the company believes that the demand will be 27,500 units for the year. What selling price per lamp, rounded to two places, would generate a operating income of $825,500? $ Total Fixed Cost (A) Add: Desired operating Income before Tax (B) Add: Total Variable Cost Total Sales in $ Total Sales Units $ New selling price per lamp (Round up to two places, $###,###.## ) $ 353,000.00 825500 643341.1875 1,821,841.19 27500 66.25 Page 7 Mohammad Islam 6337 PART 3 Budgets Keep in mind that the budget section builds on work from the previous parts, including Part I as well as the Background Information (tabs 1-4). You should continue to use the same file with your previously submitted answers. Division N has decided to develop its budget based upon projected sales of 31,000 lamps at $46.00 per lamp. The company has requested that you prepare a master budget for the year. This budget is to be used for planning and control of operations and should be composed of: 1. Production Budget 2. Materials Budget 3. Direct Labor Budget 4. Factory Overhead Budget 5. Selling and Administrative Budget 6. Cost of Goods Sold Budget 7. Budgeted Income Statement 8. Cash Budget Notes for Budgeting: The company wants to maintain the same number of units in the beginning and ending inventories of work-in-process, and electrical parts while increasing the figurines inventory to 750 pieces and increasing the finished goods by 26.00% . Complete the following budgets 1 Production Budget Planned Sales Desired Ending Inventory of Finished Goods (roundup to the next unit) Total Needed Less: Beginning Inventory Total Production {7.01} 0 Page 8 Mohammad Islam 6337 2 Materials Budget Figurines Needed for Production Desired Ending Inventory Total Needed Less: Beginning Inventory Total Purchases Cost per piece Cost of Purchases (Round to two places, $##.##) Electrical Parts Needed for Production Desired Ending Inventory Total Needed Less: Beginning Inventory Total Purchases Cost per piece Cost of Purchases (Round to two places, $##.##) Lamp Shades - not inventoried they arrive from the shop next door Just-in-time. Needed for Production Desired Ending Inventory Total Needed Less: Beginning Inventory Total Purchases Cost per piece Cost of Purchases (Round to two places, $##.##) {8.01} {8.02} 0 0 {8.03} {8.04} 0 0 {8.05} 2 {8.06} 0 {8.07} 2 {8.08} 2 {8.09} 2 {8.10} 2 {8.11} 2 {8.12} 7 3 Direct Labor Budget Labor Cost Per Lamp Production Total Labor Cost (Round to two places, $##.##) $ 1.00 4 Factory Overhead Budget Variable Factory Overhead: Variable Factory Overhead Cost Per Unit Number of Units to be Produced Total Variable Factory Overhead (Round to two places, $##.##) Fixed Factory Overhead Total Factory Overhead (Round to two places, $##.##) Predetermined Factory Overhead Rate based upon the budgeted total factory OH, divided by the budgeted number of units to be produced, and then rounded to seven places, $##.#######) Page 9 Mohammad Islam 6337 5 Selling and Admin. Budget Fixed Selling Variable Selling (Round to two places, $##.##) Fixed Administrative Variable Administrative (Round to two places, $##.##) Total Selling and Administrative (Round to two places, $##.##) 6 ### 2 ### 7 ### 2 ### 2 ### 2 ### ### ### ### ### ### ### 2 2 2 2 2 2 2 Cost of Goods Sold Budget - Assume FIFO (First-In, First-Out) and overhead is applied based on the number of units to be produced. Cost of making one unit next year Material cost per unit Labor Cost Per Lamp Factory overhead per unit Round dollars to seven places, $##.####### Total cost of one unit (Round to seven places, $##.#######) Round dollars to two places, $##.## Beginning Inventory, Finished Goods Production Costs: Materials: Figurines: Beginning Inventory Purchased Available for Use Ending Inventory of Figurines Figurines Used In Production Electrical Parts Beginning Inventory Purchased Available for Use Ending Inventory of Electrical Parts Electrical Parts Used In Production Lamp Shades: Lamp Shades Used In Production Total Materials: Labor Overhead Cost of Goods Available Less: Ending Inventory, Finished Goods Cost of Goods Sold Page 10 Mohammad Islam 6337 7 Budgeted Income Statement Sales Cost of Goods Sold Gross Profit Selling Expenses & Admin. Expenses Net Operating Income ### 2 ### ### ### 2 2 2 ### 2 ### ### 2 2 Budgeted Cash Balance before financing Needed Minimum Balance ### 2 Amount to be borrowed (if any) ### 2 Budgeted Cash Balance ### 2 8 Cash Budget Assume actual cash receipts and disbursements will follow the pattern below: (Note: Receivables and Payables of 12/31/x1 will have a cash impact in 20x2.) 1. 18.00% of sales for the year are made in November and December. Since our customers have 60 day terms those funds will be collected be collected in January and February. 2. 89.00% of material purchases will be paid during the year, the remaining portion will be paid in Januay or February. 3. All other manufacturing and operating costs are paid for when incurred. 4. The budgeted depreciation expense is equal to 0.6% of the fixed manufacturing, selling and administrative expenses. 5. Minimum Cash Balance needed for 20x2, $185,000 . I See The Light Projected Cash Budget For the Year Ending December 31, 20x2 Round dollars to two places, $##.## Beginning Cash Balance Cash Inflows: Sales Collections: Account Receivable (Sales last year not collected) Sales made and collected in 20x2 Cash Available Cash Outflows: Purchases Accounts Payable (Purchases last year) Material purchases made and paid for in 20x2 Other Manufacturing Costs Direct Labor Total Manufacturing Overhead Selling and Administrative Less: Depreciation Total Cash Outflows Page 9 Mohammad Islam 6337 9 Variable Cost of making one unit next year - used to calculate the Ending Inventory of Finished Goods Material cost per unit Labor Cost Per Lamp Variable Factory overhead per unit 20x2 Cost Rounded to 7 Decimal Places {11.01} 7 {11.02} 2 {11.03} 2 {11.04} 2 {11.05} {11.06} 2 2 {11.07} 2 {11.08} {11.09} 2 2 Operating Income, Absorption Operating Income, Variable Costing Excess (Absorption Costing Operating Income - Variable Costing Operating Income) {11.10} 2 Budgeted Fixed Overhead Budgeted Number of Units to be Produced Budgeted Fixed Cost Per Unit (Round to 7 decimals #.#######) {11.11} 7 Fixed Manufacturing Overhead in the Ending Inventory Fixed Manufacturing Overhead in the Beginning Inventory Increase (Fixed Manufacturing Overhead in the Ending Inventory-Fixed Manufacturing Overhead in the Beginning Inventory) {11.12} {11.13} {11.14} 2 2 2 Total variable manufacturing cost of one unit 10 Budgeted Operating Income Using Variable (Direct) Costing 20x2 Cost Rounded to 2 Decimal Places Sales Variable Cost of Goods Sold - Assume FIFO (First-In, First-Out) Beginning Inventory, Finished Goods (Variable Costing) Production Costs: Materials: Figurines: Electrical Parts Lamp Shades: Labor: Variable Overhead: Total Variable Production Costs Cost of Goods Available For Sale Less: Ending Inventory, Finished Goods (Variable Costing) Variable Cost of Goods Sold Variable Selling (Round to two places, $##.##) Variable Administrative (Round to two places, $##.##) Total Variable Costs Contribution Margin Fixed Costs: Fixed Manufacturing Overhead Fixed Selling Fixed Administrative Total Fixed Operating Income, Variable Costing Page 13 Mohammad Islam 6337 PART 5 Job Order Costing To keep records of the actual cost of a special order job, a Job Order Cost System has been developed. Overhead is applied at the rate of 50% of the direct labor cost. Job Order Costing Section On January 1, 20x2, Division S began Job 2407 for the Client, THE BIG CHILDREN STORE. The job called for 4,000 customized lamps. The following set of transactions occurred from January 5 until the job was completed: 5-Jan Purchased 4,225 figurines @ $9.40 per figurine. 6-Jan Purchased 4,125 sets of electical components @ $1.65 per set. 7-Jan Purchased 4,000 lamp shades @ $6.55 per set. 8-Jan 4,225 figurines were requisitioned. 9-Jan 4,100 sets of electrical components were requisitioned. 17-Jan Payroll of 610 Direct Labor Hours @ $9.75 per hour. 28-Jan 3,990 lamp shades were requisitioned 30-Jan Payroll of 660 Direct Labor Hours @ $10.00 per hour. 30-Jan 3,990 lamps were completed and shipped. All materials requisitioned were used or scrapped, and are a cost of normal processing. Month End Overhead Information Actual Variable Manufacturing Overhead Actual Fixed Manufacturing Overhead $ 1,600.20 $ 40,623.45 Round to six places, $##.###### Cost of Direct Material Incurred in Manufacturing Job 2407 ### 6 ### 6 ### 6 ### 6 Cost of Direct Labor Incurred in Manufacturing Job 2407 Cost of Manufacturing Overhead Applied to Job 2407 Cost of manufacturing one lamp Page 14 Mohammad Islam 6337 PART 6 Standard Job Order Costing Variance Analysis Special order lamps are manufactured in division S. Because of the precise nature of the process a standard cost system has been developed. The following standards are used for the special orders: Standards Figurines Electrical Sets Lamp Shade Direct Labor Variable Overhead ** Fixed Overhead Total $ 9.500000 per lamp 1.300000 per lamp per lamp 2.400000 per lamp (4 lamps/hr.) per lamp (4 lamps/hr.) per lamp ** Fixed overhead is based on expected production of ##### customized lamps each month. To keep records of the actual cost of a job, a Job Order Cost System has been developed. Entries are made to the Job Order System at actual cost (overhead is applied based on actual labor hours) while entries are made to the accounting system at standard. Variance analysis is used to analyze the differences. Job Order Costing Section On January 1, 20x2, Division S began Job 1101 for the Client, THE BIG CHILDREN STORE. The job called for 4,000 customized lamps. The following set of transactions occurred from January 5 until the job was completed: 5-Jan Purchased 4,225 figurines @ $9.40 per figurine. 6-Jan Purchased 4,125 sets of electical components @ $1.65 per set. 7-Jan Purchased 4,000 lamp shades @ $6.55 per set. 8-Jan 4,225 figurines were requisitioned. 9-Jan 4,100 sets of electrical components were requisitioned. 17-Jan Payroll of 610 Direct Labor Hours @ $9.75 per hour. 28-Jan 3,990 lamp shades were requisitioned 30-Jan Payroll of 660 Direct Labor Hours @ $10.00 per hour. 30-Jan 3,990 lamps were completed and shipped. All materials requisitioned were used or scrapped. Month End Overhead Information Actual Variable Overhead Actual Fixed Overhead $ 1,600.20 $ 40,623.45 Page 15 Mohammad Islam 6337 How many Lamps were completed? Note: Show favorable variances as negative numbers Round dollars to two places, $##.## What was the total material price variance for the figurines purchased? ### 2 What was the material usage variance for figurines? ### 2 What was the material price variance for the electrical components ? ### 2 What was the material usage variance for electrical components? ### 2 What was the direct labor efficiency variance ? ### 2 What was the direct labor rate variance? ### 2 Page 16 Mohammad Islam 6337 Mary correctly completed the material variances for the lamp shades and the overhead variences. Her work is correct however, in reviewing her work the standards were crossed out. The total material price variance for the lamp shades purchased: The variable overhead efficiency variance: The variable OH spending variance: The fixed OH volume (denominator) variance: The fixed OH spending variance: $ $ $ $ $ 40.00 327.00 76.20 200.80 363.05 Favorable Unfavorable Unfavorable Unfavorable Unfavorable What was the standard cost of a Lamp Shade? ### 2 What was the standard cost per lamp for the variable overhead? ### 2 What was the budgeted fixed overhead? ### 2 2 What was the standard cost per lamp for the fixed overhead? ### 2 What was the monthly expected production of customized lamps that was used to determine the standard fixed overhead rate? ### 2