Developing a Master Budget for a Manufacturing Organization: Challenge Problem

Electric Monkey 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 pro forma income statements for next year. You have obtained the following information:

Beginning$-$of$-$year balances

Cash $$75,000$

Accounts receivable $($previous quarter$$s sales$)$ $$245,000$

Raw materials $950$ kits

Finished goods $1,500$ kits

Accounts payable $($materials$)$ $$125,000$

Borrowed funds $$30,000$

Desired end$-$of$-$year inventory balances

Raw materials $1,000$ kits

Finished goods $1,600$ kits

Desired end$-$of$-$quarter balances

Cash $$30,000$

Raw materials as a portion of the following quarter$$s production $0\mathrm{.}20$

Finished goods as a portion of the following quarter$$s sales $0\mathrm{.}30$

Manufacturing costs

Standard cost per unit Units Unit price Total

Direct labor hours at rate $0\mathrm{.}50$ hour $$30\mathrm{.}00$ $$15\mathrm{.}00$

Raw materials $1$ kit $$75\mathrm{.}0075\mathrm{.}00$

Variable overhead$/$labor hour $0\mathrm{.}50$ hour $$5\mathrm{.}002\mathrm{.}50$

Total standard variable cost $$92\mathrm{.}50$

Fixed cost per quarter

Cash $$110,000$

Depreciation $15,000$

Total $$125,000$

Selling and administrative costs $$8\mathrm{.}00$

Variable cost per unit

Fixed costs per quarter

Cash $$150,000$

Depreciation $7,500$

Total $$157,500$

Interest rate per quarter $0\mathrm{.}015$

Portion of sales collected

Quarter of sale $0\mathrm{.}70$

Subsequent quarter $0\mathrm{.}29$

Bad debts $0\mathrm{.}01$

Portion of purchases paid

Quarter of purchase $0\mathrm{.}60$

Subsequent quarter $0\mathrm{.}40$

Unit selling price $$225$

Sales forecast

Quarter First Second Third Fourth

Unit sales $4,4004,6004,5004,800$

Additional information

$$ All cash payments except purchases are made quarterly as incurred.

$$ All borrowings occur at the start of a quarter.

$$ All repayments on borrowings occur at the end of a quarter.

$$ At the time the principal is repaid, interest is paid on the portion of principal that is repaid.

$$ Borrowings and repayments may be made in any amount

Required

Note: Do not use negative signs with any of your answers in the requirements that follow.

Part A

Part B

Part C

Part D

Part E

Part F

Part G

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

Electric Monkey Computer Accessories

Selling and Administrative Expense Budget

For the Year Ending December $31$

First Second Third Fourth Total

Unit sales Answer

$4400$

Answer

$4600$

Answer

$4500$

Answer

$4800$

Answer

$18,300$

Sales Revenue Answer

$0$

Answer

$0$

Answer

$0$

Answer

$0$

Answer

$0$

Variable costs:

Bad debts Answer

$0$

Answer

$0$

Answer

$0$

Answer

$0$

Answer

$0$

Other Answer

$0$

Answer

$0$

Answer

$0$

Answer

$0$

Answer

$0$

Total Answer

$0$

Answer

$0$

Answer

$0$

Answer

$0$

Answer

$0$

Fixed costs Answer

$0$

Answer

$0$

Answer

$0$

Answer

$0$

Answer

$0$

Total selling and admin. Answer

$0$

Answer

$0$

Answer

$0$

Answer

$0$

Answer

$0$