NG HELMET COMPANY Armstrong Helmet Company The Business Situation Developed by Dick Wasson, Southwestern College Armstrong Helmet Company manufactures a unique model of bicycle helmet. The company began operations December 1, 2013. Its accountant quit the second week of operations, and the company is searching for a replacement. The com- pany has decided to test the knowledge and ability of all candidates interviewing for the position. Each candidate will be provided with the information below and then asked to prepare a series of reports, schedules, budgets, and recommenda- tions based on that information. The information provided to each candidate is as follows. Cost Items and Account Balances Administrative salaries Advertising for helmets. Cash, December 1 Depreciation on factory building $15,500 11,000 -0- 1,500 Depreciation on office equipment 800 Insurance on factory building 1,500 Miscellaneous expenses-factory 1,000 Office supplies expense 300 Professional fees 500 Property taxes on factory building 400 Raw materials used 70,000 Rent on production equipment 6,000 Research and development 10,000 Sales commissions 40,000 Utility costs-factory 900 Wages-factory 70,000 Work in process, December 1 -0- Work in process, December 31 Raw materials inventory, December 1 -0- -0- Raw materials inventory, December 31 -0- Raw material purchases Finished goods inventory, December 1 70,000 -0- Production and Sales Data Number of helmets produced Expected sales in units for December ($40 unit sales price) Expected sales in units for January Desired ending inventory Direct materials per finished unit Direct materials cost Direct labor hours per unit 10,000 8,000 10,000 20% of next month's sales 1 kilogram $7 per kilogram .35 $20 Direct labor hourly rate Cash Flow Data Cash collections from customers: 75% in month of sale and 25% the following month. Cash payments to suppliers: 75% in month of purchase and 25% the following month. Income tax rate: 45%. Cost of proposed production equipment: $720,000. Manufacturing overhead and selling and administrative costs are paid as incurred. Desired ending cash balance: $30,000. 10. Prepare the following budgets for the month of December 2013. (a) Sales. (b) Production. (c) Direct materials. (d) Direct labor (e) Selling and administrative expenses. (f) Cash. (g) Budgeted income statement.