As the head accountant for L$.$ C$.$ Body Boards Inc., you are responsible for preparing the company$’$s master budget for the first quarter of $20$XX$.$  The administrative and divisional managers have prepared the appropriate information $($found below$)$ for you to prepare the budget. In addition to the compiled information, you will also find the budgets, reports, questions, and statements required by the CFO.

Step $1$ 

L$.$ C$.$ Body Boards Inc. produces Body Boards for sale at local surf shops.

The company is in the process of creating a master budget for the first quarter of $20$XX$.$ 

Sales results from the prior year are:

 Last Year Units Sold



January $190,000$ 

February $210,000$ 

March $215,000$ 

April $199,000$ 

May $194,000$ 



Unit Sales are to expected increase $14\%$ above last year$’$s sales and each unit sells for $$53\mathrm{.}00.$

All sales are on credit. The company expects to collect

$•70\%$ of sales in the month of sale,

$•28\%$ of sales in the month following the sale,

$•2\%$ percent will be uncollectable $($Bad Debt Debts Expense is recognized in the month of sale$).$ 

The company gives credit terms of $2/$ EOM, n$/$EOM second month. Accounts receivable at the end of last year totaled $ $485,000.$  This represents the collectable amount of December sales that will be collected in January.

Management prefers to maintain ending finished goods inventory equal to $12\%$ of next month's sales. The Finished Goods Inventory on December $31$ of the prior year was $32,500$ units.

REQUIRED:

a$)$ Prepare a sales and cash collections budget for L$.$ C$.$ Body Boards Inc. $($For all budgets show amounts for January, February, March, and the total for quarter, also all budgets need to be to two decimal places$)$

b$)$ Prepare a production budget for L$.$ C$.$ Body Boards Inc.

L$.$ C$.$ Body Boards Inc. Budgeting Project

Step $2$ 

L$.$ C$.$ Body Boards Inc. is now preparing the budget for direct materials purchases, direct labor, and manufacturing overhead.

Each unit production requires $6$ pounds Foam X $\mathrm{.}5-$pound Plastic Z$.$

L$.$C$.$ Body Boards pays $$3\mathrm{.}75$ per pound $$10$ per pound.

Management prefers to maintain ending raw materials inventory equal to materials $30\%$ of needed production for the next month. Raw Material inventory on December $31$ for Foam X was $385,000$ pounds and for Plastic Z was $32,000$ pounds.

All direct materials are purchased on credit. L$.$ C$.$ Body Boards pays $72\%$ of purchases in the month of purchase and $28\%$ the following month. L$.$ C$.$ Body Boards pays all invoices in a timely manner which have credit terms of $1/15$ net $30.$  The accounts payable on December $31$ were $$1,650,000.$

Each unit of production requires $0\mathrm{.}6$ direct labor hours at a cost of $$21\mathrm{.}00$ per hour.

Variable overhead costs are:



Indirect materials $ $0\mathrm{.}27$ per unit

Indirect Labor $ $1\mathrm{.}20$ per unit

Other $ $1\mathrm{.}12$ per unit

Fixed overhead costs per month:

Salaries $$196,000$

Rent $$18,000$

Depreciation $$24,000$

REQUIRED:

a$)$ Prepare two direct materials budgets, one for the Foam X and the other for the Plastic Z for L$.$ C$.$ Body Boards

b$)$ Prepare a single cash disbursements budget for the material purchases for L$.$ C$.$ Body Boards.

c$)$ Prepare a schedule showing the cost of ending inventory for raw materials as of March $31,20$xx

d$)$ Prepare a direct labor budget for L$.$ C$.$ Body Boards Inc. Show the cash disbursements for labor at the bottom of the budget.

e$)$ Prepare a manufacturing overhead budget for L$.$ C$.$ Body Boards Inc. Show cash disbursements for overhead at the bottom of the budget. Show a calculation of the per unit cost of the manufacturing overhead ROUNDED to $3$ decimal places. $($Note you must use the excel round function for this calculation$)$

f$)$ Prepare a schedule for the cost of Finished Goods Inventory as of March $31,20$xx$.$

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L$.$ C$.$ Body Boards Inc. Budgeting Project

Step $3$ 

L$.$ C$.$ Body Boards Inc. expects the following as pertaining to the capital expenditures and cash budgets.

L$.$ C$.$ Body Boards Inc. expects the following monthly Selling and Administrative Expenses

Salaries $$16,000$  Per Unit

Rent $$19,000$ 

Advertising $$85,000$ 

Depreciation $$22,000$ 

Other $$11,500$ 

Sales Commissions $$1\mathrm{.}40$ 

Capital Expenditures

The company plans to purchase selling and administrative equipment totaling $$150,000$ in March $20$XX$.$ 

The company plans to purchase Production equipment totaling $$2,600,000$ in March $20$XX$.$ 

Both will be purchased at the end of March from operating cash flow and will not affect depreciation expenses for the first quarter.

Cash Budget

The company has a credit line of $$3,000,000$ for operations with an interest rate of $12\%$ APR. Interest payments for the month are based on the beginning balance of the line of credit. At the end of every month, the cash balance should be a minimum of $ $50,000.$