DATA:The East Division of Kensic Company manufactures a vital component that is used in one of Kensic's major product lines.The East Division has been experiencing some difficulty in coordinating activities between its various departments, which has resulted in some shortages of the component at critical times. To overcome the shortages, the manager of East Division has decided to initiate a monthly budgeting system that is integrated between departments.

The first budget is to be for the second quarter of the current year (April, May and June). To assist in developing the budget figures, the divisional controller has accumulated the following information.

Sales:Sales through the first three months of the current year were 30,000 units. Actual sales in units for January, February, and March, and planned sales in units over the next five months, are given below:

January (actual) 6,000

February (actual) 10,000

March (actual) 14,000

April (planned) 20,000

May (planned) 34,000

June (planned) 51,000

July (planned) 45,000

August (planned) 30,000

In total, the East Division expects to produce and sell 250,000 units during the current year.

Direct Material: Two different materials are used in production of the component. Data regarding these materials are given below:

Material 208:

Materials per Finished Component: 4 pounds

Cost per pound: $5.00

Inventory at March 13: 46,000 pounds

Material 311:

Materials per Finished Component: 9 feet

Cost per foot: $2.00

Inventory at March 31: 69,000 feet

Material No. 208 is sometimes in short supply. Therefore, the East Division requires that enough of the material be on hand at the end of each month to provide for 50% of the following month's production needs. Material No. 311 is easier to get, so only one-third of the following month's production needs must be on hand at the end of each month.

Direct Labor:The East Division has three department through which the components must past before they are completed. Information relating to direct labor in these departments is given below:

Department: Shaping

Direct Labor Hours per Finished Component:.25

Cost per Direct Labor Hour: $18.00

Department: Assembly

Direct Labor Hours per Finished Component:.70

Cost per Direct Labor Hour: $16.00

Department: Finishing

Direct Labor Hours per Finished Component: .10

Cost per Direct Labor Hour: $20.00

Direct labor is adjusted to the workload each month.

Manufacturing Overhead: East Division manufactured 32,000 components during the first three months of the current year. The actual variable overhead costs incurred during this three-month period are shown below. Each Division's controller believes that the variable overhead costs incurred during the last nine months of the year will be at the same rate per component as experienced during the first three months.

Utilities $57,000

Indirect Labor $31,000

Supplies $16,000

Other $8,000

Total variable overhead$112,000

The East Division has planned fixed manufacturing overhead costs for the entire year as follows:

Supervision $872,000

Property Taxes $143,000

Depreciation $2,910,000

Insurance $631,000

Other $72,000

Total fixed manufacturing

Overhead $4,628,000

Finished Goods Inventory: The desired monthly ending inventory of completed components is 20% of the next month's estimated sales. The East Division has 4,000 units in the finished goods inventory on March 31.

Selling and Administrative Expenses: Selling and Administrative Expenses are budgeted at $400,000 per month plus 1% of total credit sales for the month.

REQUIRED:

1. a production budget for the East Division for the second quarter ending June 30. Show computations by month and in total for the quarter.

2. a direct materials purchases budget in units and dollars for each

type of material for the second quarter ending June 30. Again show computations by month and in total for the quarter.

3.a schedule of cash payments for direct materials for the second quarter. Assume that all direct materials are purchased on account and the East Division pays for of the amount purchased in the month of purchase and the other in the month following the purchase. The balance in the Accounts Payable account at 3/31 was $351,200.

4. a direct labor budget in hours and in dollars for the second quarter ending June 30. Again show computations by month in total for the quarter.

5. a manufacturing overhead budget for the second quarter. Show computations by month and in total for the quarter.

6.Compute a new "selling price per unit" for the East Division that will enable them to accumulate a balance of $100,000 in their cash account by the end of the second quarter. Assume that the cash balance at March 31 was $10,000.

7.Using the selling price per unit computed in #6 a sales budget for the second quarter. Show computations by month and in total for the quarter.

8. a schedule of expected cash collections for the second quarter using the selling price per unit calculated in question #6. Assume that the East Division collects on its credit sales as follows; 70% in the month of sale, 20% in the month following the credit sale, 10% in the second month following the credit sale. To compute the balance in Accounts Receivable at 3/31 assume that the selling price per unit prior to 3/31 was $75.00.

9. a cash budget for the second quarter in month and in total for the East Division.

A B C D E G H KENSIC COMPANY SALES BUDGET April May June Total Juh August Units 20.000 34,000 51,000 105,000 45,000 30,000 Sales price per unit 97.71496 7.71496 97.71496 98 Total Sales 1951299 3322309 4983463 10260071 PRODUCTION BUDGET April May June Total July August Sales in Units 20,000 34,000 51,000 105,000 45,000 30,000 Desired units of ending Inventory 6.800 10.200 21.000 9,000 6,000 Desired Total Units 26.800 44,200 72.000 143,000 51,000 Less: desired units of 4.000 6,800 10.200 4,000 21,000 beginning inventory Total production units 22.800 37,4100 61,800 122,000 30,000 DIRECT MATERIALS BUDGET (No. 208) April May June Quarter July Units to be produced 22,800 37 400 61.800 122,000 30,000 x4 lbs. 4 4 4 Total material needs 91,200 149,600 247,200 488,090 120,000 Add: desired and. Inv. 74,800 123,600 60,000 Loss: Beginning Inventory 46,000 74,800 123,600 60,000 Total matorals to be purchased 120,000 198/400 163,600 502,000X Team #4 Kensic Budgets.xisx Open with A B C D E F G H 48 DIRECT MATERIALS BUDGET (No. 311) April May June Quarter July Inits to be produced 22,800 37 400 61,800 122,000 30.000 x9 feet 9 9 9 9 9 Tolal material needs 205,200 336,600 556,200 1,098,000 270,000 Add: Desired end. Inv. subtotal 112,088 185,215 89.910 387,000 Less: Beginning 69,000 112,088 185.215 366,302 89.910 60 Inventory 61 62 Tolal materials to be 248,288 409,727 460.895 1,118.910 purchased 85 *$2.00 $2.00 $2.00 $2.00 $2.00 87 Total cost of purchased $496,575.60 $819453.60 $921,790.40 $2,237,820.00 70 SCHEDULE OF CASH PAYMENTS FOR DIRECT MATERIALS april May June Quarter Accounts Payable 3/31 $351,200 SO SO $351,200 74 75 April $548,288 $548,289 $O $1,096,576 78 77 May SO $905,727 $905,727 $1,811454 78 70 June SO $919,895 $919,895 81 Total $899/189 $1454,015 $1,825,622 $4,179,125 82 83 84 DIRECT LABOR BUDGET April May June Quarter Units to be produced 22.800 37.400 61.800 122,000 28 8988 x 25 (Shaping) 0.25 0.25 0.25 0.25 Hrs. Shaping Dept. 5700 9350 15450 30500 91 X 518.00 $18.00 $18.00 $18.00 $18.00B C D E F G H 84 DIRECT LABOR BUDGET 85 April May June Quarter 86 87 Units to be produced 22.800 37,400 61.800 122,000 88 x 25 (Shaping) 0.25 0.25 0.25 0.25 80 90 Hrs. Shaping Dept. 5700 9350 15150 30500 91 x$18.00 $18.00 $16.00 $18.00 $18.00 92 93 Labor cost Shaping dept. $102.600.00 $168,300.00 $278,100.00 $549,000.00 94 95 x.70 (Assembly) 0.7 0.7 0.7 0.7 9B 97 Hrs, Assembly Dept. 15960 26180 43260 85100 98 * $16.00 $16.00 $16 00 $16.00 $16.00 100 Labor cost for Assembly $255,360.00 $418.880.00 $692,160.00 $1,366,100.00 101 dept 102 103 x.10 (Finishing) 0.1 0.1 0.1 0.1 104 105 Hrs, Finishing Dept 2280 3740 6180 12200 106 x$20.00 $20.00 $20.00 $20.00 $20.00 107 108 Labor cost Finishing $45,600.00 $74,800.00 $123,600.00 $214,000.00 109 dept 110 111 Tolal Labor Cost $403,560.00 $661,980.00 $1,093,860.00 $2.159,400,00 112 113 114 MANUFACTURING OVERHEAD BUDGET 115 April May June Quarter 116 117 Variable Overhead: 118 119 Villides $19,000.00 $19,000.00 $19,000.00 $57,000.00 120 Indirect Labor $10,333.33 $10,393.33 $10,333.33 $31,000.00 121 Supplies $5,333.33 $5,333.33 $5,333.33 $16,000.00 122 Other $2,666.67 $2,666.67 $2,666.67 $8,000.00 123 124 Total Variable Overhead $37,333.33 $37,333.33 $37,333.33 $1 12,000.00 125 128 Fixed Overhead $385,666.67 $385,666.67 $385,666.67 $1,157,000.00 - Q + 127111 Tolal Labor Cost $403.560.00 $661,980.00 $1,093,860.00 $2,159,400.00 112 113 114 MANUFACTURING OVERHEAD BUDGET 115 April May June Quarter 116 117 Variable Overhead: 118 119 Dulives $19,000.00 $19,000.00 $19,000.00 $57,000.00 120 Indirect Labor $10.333.33 $10,333.33 $10,393.33 $31,000.00 121 Supplies $5,333.33 $5,333.33 $5,333.33 $16,000.00 122 Other $2,666.67 $2,666.67 $2,666.67 $8,000,00 123 124 Total Variable Overhead $37,333.33 $37,333.33 $37,333.33 $1 12,000.00 125 120 Fixed Overhead $385,666.67 $385.666.67 $385,666.67 $1,157,000.00 127 128 Total Overhead 128 less: depreciation $242,500.00 $242,500.00 $242,500.00 $727,500.00 130 131 Total Overhead paid in $180,500.00 $180,500.00 $180,500.00 3541,500.00 132 cash 133 134 CASH BUDGET 135 April May June Quarter 130 Beginning Balance 10,000.00 -538,000 00 -671,341.00 137 Total Cash Receipts $1.653,009.00 $2,821,476.00 $4.318,316.00 138 Total Cash Available $1,663,009.00 $2,283,476.00 $3,677,002.00 130 Cash Payments: 140 Material Purchases $899,187.80 $1,454,014.60 $1,825.622 20 34,179,124.60 142 Direct Labor $103.560.00 $661.980.00 $1,093,860.00 $2,159/100.00 143 Overhead $180,500.00 $180,500.00 $180,500.00 $541,500.00 144 Fixed Sell. & Admin. $400,000.00 $400,000.00 $400,090.00 $1,200,000.00 145 Variable Sell. & Admin. 148 147 Total Cash Payments $2,201,010.00 $2,954,790.00 $3,577,001.00 148 149 Excess (deficiency) 150 of cash 151 152 153 Endng Balance of cash $538,000.00 $671,314.00 $100,000.00 154B C D E F G "variable sell. & Admin. H 146 147 Total Cash Payments $2,201,010.00 148 $2,954,790.00 $3,577,001.00 149 Excess (deficiency) 150 of cash 151 152 153 Ending Balance of cash $538,000.00 $671.314.00 $100,000.00 154 155 SALES BUDGET 157 (Repeated) February March April 158 May June Quarter 159 Units 10,000 14,000 20.000 180 34,000 Sales price per unit 51,000 $75.00 105,000 $75.00 181 Total Sales $750.000.00 $1.050.000.00 $0.00 182 $0.00 $0.00 $0.00 183 184 185 SCHEDULE OF EXPECTED CASH COLLECTIONS 186 April May June 187 Quarter 108 February (.10) $75,000.00 $0.00 $0.00 109 $75,000.00 170 March (.20; .10) $210,000.00 $105,000.00 $0.00 $315,000.00 171 172 April (.70; 20;10) SO.00 30.00 $0.00 30.00 173 174 May (.70; 20) 30.00 30.00 $0.00 30.00 175 178 June ( 70) 50.00 30.00 30.00 $0.00 177 178 Totals $285,000.00 $105,000.00 SO.00 179 $390,000.00 180 181 182 183 184 185 186 187 188 189