Computer Accessories assembles a computer networking device from kits of imported components.

You have been asked to develop a quarterly and annual operating budget and a pro-forma income statements for the year ending December 31, 2017.

You have obtained the following information:

Beginning-of-year balances

Cash

$50,000

Accounts receivables (previous quarter's sales)

$61,200

Raw materials

653 Kits

Finished Goods

510 units

Accounts payable

$33,255

Desired end-of-year inventory balances

Raw materials

500

kits

Finished goods

270

units

Desired end-of-quarter balances

Raw materials as a portions of the following quarter's production

20%

Finished goods as a portion of the following quarter's sales

15%

Manufacturing costs other than raw materials are paid in month incurred unless it is an noncash expense

Variable Standard cost per unit

Unit of input

Unit price per input

Total cost per unit

Raw materials

1

Kit 50

50

$50

Direct labor hours at rate

0.8

Hour 25

20

$20

Variable overhead/labor hour

0.8

Hour 10

8

$8

Total Variable Standard cost per unit

78

$78

Fixed overhead cost per quarter used cash

$50,000

Manufacturing Depreciation per quarter

$10,000

Selling and administrative costs are paid in month incurred unless it is an noncash expense

Variable cost per unit

$6

Fixed selling and administrative cost per quarter used cash

$25,000

Selling and administrative depreciation per quarter

$5,000

Additional information: All cash payments except purchases are made quarterly as incurred.

Portion of sales collected

Collected in the quarter of sale

75%

Subsequent quarter

24%

Bad debts

1%

Portion of purchases paid

Paid in the quarter of purchases

70%

Subsequent quarter

30%

Unit selling price

$150

Sales forecast

Quarter

First

Second

Third

Fourth

Unit sales

3,400

2,500

3,000

4,100

Required: Prepare and answer the following. Make sure you use cell referencing

1. A sales budget for each quarter and the year.

2. A production budget for finished goods of units each quarter and the year.

3. A purchases budget for raw material of kits each quarter and the year.

4. A manufacturing cost budget for each quarter and the year.

5. A selling and administrative expense budget for each quarter and the year.

6. A cash budget for each quarter and the year.

7. A pro-forma contribution income statement for each quarter and the year.

Hint: You will need to compute Variable Cost of Goods Sold for each quarter, which is unit sold times total Variable Standard cost per unit.

8. Using your information from #7, compute the Breakeven in dollars for the year.

Hint: Compute the annual contribution margin ratio.

9. What if the company is able to lower the fixed Manufacturing overhead costs that uses per quarter from $50,000 to $45,000. Which budgets will change and what will be the new annual income? You should only Have to change the fixed manufacturing costs that uses cash on this worksheet and all the appropriate Budgets will change on the solution worksheet if you have set up your cell references correctly. Make sure You return the Fixed manufacturing overhead costs that uses cash back to the original number before you Submit your solution.