Developing a Master Budget for a Manufacturing Organization Jacobs Incorporated manufactures a product with a selling price of $50 per unit. Units and monthly cost data follow: Variable: Selling and administrative $5 per unit sold Direct materials 10 per unit manufactured Direct labor 10 per unit manufactured Variable manufacturing overhead 5 per unit manufactured Fixed: Selling and administrative $20,000 per month Manufacturing (including depreciation of $10,000) 30,000 per month Jacobs pays all bills in the month incurred. All sales are on account with 50 percent collected the month of sale and the balance collected the following month. There are no sales discounts or bad debts. Jacobs desires to maintain an ending finished goods inventory equal to 20 percent of the following month's sales and a raw materials inventory equal to 10 percent of the following month's production. January 1, 2011, inventories are in line with these policies. Actual unit sales for December and budgeted unit sales for January, February, and March of 2011 are as follows: JACOBS INCORPORATED Sales Budget For the Months of January, February, and March 2011 Month December January February March Sales - Units 5,250 6,000 9,000 9,000 Sales - Dollars $262,500 $300,000 $450,000 $450,000 Additional information: The January 1 beginning cash is projected as $3,000. For the purpose of operational budgeting, units in the January 1 inventory of finished goods are valued at variable manufacturing cost. Each unit of finished product requires one unit of raw materials. Jacobs intends to pay a cash dividend of $7,000 in January. NOTE: For the entire problem - do not use any negative signs with your answers unless appropriate for net income(loss) or ending balance. (a) A production budget for January and February. JACOBS INCORPORATED Production Budget For the Months of January and February 2011 January February March Requirements for current sales Desired ending inventory Total requirements Less beginning inventory Production requirements (b) A purchases budget in units for January. JACOBS INCORPORATED Purchases Budget For the Month of January 2011 January February Current requirements (units) Desired ending inventory Total requirements Less beginning inventory Purchases (units) Purchases (dollars at $10 each) $ (c) A manufacturing cost budget for January. JACOBS INCORPORATED Manufacturing Cost Budget For the Month of January 2011 Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable costs Fixed manufacturing overhead Total manufacturing costs $ $ (d) A cash budget for January. JACOBS INCORPORATED Cash Budget For the Month of January 2011 Beginning balance Receipts: December sales $ January sales Total cash available Disbursements: Purchases Direct labor Variable manufacturing overhead Fixed manufacturing overhead (exclude depreciation) Variable selling and strati Fixed selling and administrative Dividend Ending Balance $ (e) A budgeted contribution income statement for January. JACOBS INCORPORATED Budgeted Contribution Income Statement For the Month of January 2011 Sales $ Less variable costs: Cost of goods sold $ Selling and administrative Contribution Less fixed costs: Manufacturing overhead Selling and administrative Net income $ Developing a Master Budget for a Manufacturing Organization Jacobs Incorporated manufactures a product with a selling price of $50 per unit. Units and monthly cost data follow: Variable: Selling and administrative $5 per unit sold Direct materials 10 per unit manufactured Direct labor 10 per unit manufactured Variable manufacturing overhead 5 per unit manufactured Fixed: Selling and administrative $20,000 per month Manufacturing (including depreciation of $10,000) 30,000 per month Jacobs pays all bills in the month incurred. All sales are on account with 50 percent collected the month of sale and the balance collected the following month. There are no sales discounts or bad debts. Jacobs desires to maintain an ending finished goods inventory equal to 20 percent of the following month's sales and a raw materials inventory equal to 10 percent of the following month's production. January 1, 2011, inventories are in line with these policies. Actual unit sales for December and budgeted unit sales for January, February, and March of 2011 are as follows: JACOBS INCORPORATED Sales Budget For the Months of January, February, and March 2011 Month December January February March Sales - Units 5,250 6,000 9,000 9,000 Sales - Dollars $262,500 $300,000 $450,000 $450,000 Additional information: The January 1 beginning cash is projected as $3,000. For the purpose of operational budgeting, units in the January 1 inventory of finished goods are valued at variable manufacturing cost. Each unit of finished product requires one unit of raw materials. Jacobs intends to pay a cash dividend of $7,000 in January. NOTE: For the entire problem - do not use any negative signs with your answers unless appropriate for net income(loss) or ending balance. (a) A production budget for January and February. JACOBS INCORPORATED Production Budget For the Months of January and February 2011 January February March Requirements for current sales Desired ending inventory Total requirements Less beginning inventory Production requirements (b) A purchases budget in units for January. JACOBS INCORPORATED Purchases Budget For the Month of January 2011 January February Current requirements (units) Desired ending inventory Total requirements Less beginning inventory Purchases (units) Purchases (dollars at $10 each) $ (c) A manufacturing cost budget for January. JACOBS INCORPORATED Manufacturing Cost Budget For the Month of January 2011 Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable costs Fixed manufacturing overhead Total manufacturing costs $ $ (d) A cash budget for January. JACOBS INCORPORATED Cash Budget For the Month of January 2011 Beginning balance Receipts: December sales $ January sales Total cash available Disbursements: Purchases Direct labor Variable manufacturing overhead Fixed manufacturing overhead (exclude depreciation) Variable selling and strati Fixed selling and administrative Dividend Ending Balance $ (e) A budgeted contribution income statement for January. JACOBS INCORPORATED Budgeted Contribution Income Statement For the Month of January 2011 Sales $ Less variable costs: Cost of goods sold $ Selling and administrative Contribution Less fixed costs: Manufacturing overhead Selling and administrative Net income $