_{Hi Please assist I am having trouble with the attached accounting questions. If possible please forward to eminadokip. Thanks!} B-24.02 Pure Comfort manufactures and sells mattresses with adjustable air chambers. Pure Comfort has been producing and selling approximately 500,000 units per year. Each units sells for $600, and there are no variable selling, general, or administrative costs. The company has been approached by a foreign supplier who wishes to provide the air compressor component for $90 per unit. Total annual manufacturing costs, including air compressors, is as follows: Direct materials $ 50,000,000 Direct labor 80,000,000 Variable factory overhead 16,000,000 Fixed factory overhead 35,000,000 If Pure Comfort outsources the air compressor, it is expected that direct materials will be reduced by 20%, direct labor by 30%, and variable factory overhead by 25%. There will be no reduction in fixed factory overhead. (a) Should Pure Comfort outsource the air compressor? (b) If outsourcing the air compressor will free up capacity, and enable Pure Comfort to increase production and sales to 600,000 units per year, would it make sense to outsource? Name: Date: B-24.02 Section: (a) Internal Direct materials - $ - Direct labor - - Variable factory overhead - - Fixed factory overhead - - Outsourced compressors - - Total cost of each option (b) $ Outsource $ - $ - B-24.03 Summit Paintball Supply manufactures paintballs used by recreational gamers. The cost of producing a box of 2,500 paintballs is as follows: Direct materials Direct labor $ 12.50 6.25 Variable factory overhead 18.75 Fixed factory overhead 25.00 Variable selling, general, and administrative costs 18.75 Fixed selling, general, and administrative costs 4.00 The fixed factory overhead and fixed SG&A cost is allocated based on an assumption that the business will produce 400,000 boxes of paintballs per year. The company has capacity to produce 500,000 boxes without impacting either category of fixed cost. (a) The market for paintballs has become very competitive. Management has requested to know the break-even price that can be charged for a box of paintballs, assuming production and sale of 400,000 boxes. (b) Management has received a special order request for 100,000 boxes of "private label" paintballs. The order specifies a per box price of $75. How will profitability be impacted if the order is accepted? Name: Date: (a) (b) Section: B-24.03 I-21.02 Storm Tools has formed a new business unit to produce battery-powered drills. The business unit was formed by the transfer of selected assets and obligations from the parent company. The unit's initial balance sheet on January 1 contained cash ($500,000), plant and equipment ($2,500,000), notes payable to the parent ($1,000,000), and residual equity ($2,000,000). The business unit is expected to repay the note at $50,000 per month, plus all accrued interest at 1/2% per month. Payments are made on the last day of each month. The unit is scheduled to produce 25,000 drills during January, with an increase of 2,500 units per month for the next three months. Each drill requires $40 of raw materials. Raw materials are purchased on account, and paid in the month following the month of purchase. The plant manager has established a goal to end each month with raw materials on hand, sufficient to meet 25% of the following month's planned production. The unit expects to sell 20,000 drills in January; 25,000 in February, 25,000 in March, and 30,000 per month thereafter. The selling price is $100 per drill. Half of the drills will be sold for cash through a website. The others will be sold to retailers on account, who pay 40% in the month of purchase, and 60% in the following month. Uncollectible accounts are not material. Each drill requires 20 minutes of direct labor to assemble. Labor rates are $24 per hour. Variable factory overhead is applied at $9 per direct labor hour. The fixed factory overhead is $25,000 per month; 60% of this amount is related to depreciation of plant and equipment. With the exception of depreciation, all overhead is funded as incurred. Selling, general, and administrative costs are funded in cash as incurred, and consist of fixed components (salaries, $100,000; office, $40,000; and advertising, $75,000) and variable components (15% of sales). Prepare a monthly comprehensive budget plan for Storm's new business unit for January through March. The plan should include the (a) sales and cash collections budget, (b) production budget, (c) direct materials purchases and payments budget, (d) direct labor budget, (e) factory overhead budget, (f) ending finished goods budget (assume total factory overhead is applied to production at the rate of $11.73 per direct labor hour), (g) SG&A budget, and (h) cash budget. Name: Date: I-21.02 Section: STORM TOOLS Sales Budget For the Three Months January to March January February March Expected Cash Collections From Sales STORM TOOLS Production Budget For the Three Months January to March January February March Name: Date: I-21.02 Section: STORM TOOLS Direct Materials Budget For the Three Months January to March January February March Expected Cash Payments for Materials Purchases STORM TOOLS Direct Labor Budget For the Three Months January to March January February March Name: Date: I-21.02 Section: STORM TOOLS Factory Overhead Budget For the Three Months January to March January February March Per Unit Cost Per Unit Total STORM TOOLS Ending Finished Goods Inventory 31-Mar Units Name: Date: I-21.02 Section: STORM TOOLS Selling, General, and Administrative Budget For the Three Months January to March January February March STORM TOOLS Cash Budget For the Three Months January to March January Beginning cash balance Plus: Customer receipts Available cash Less disbursements: Direct materials Direct labor Factory overhead SG&A Total disbursements Cash surplus/(deficit) Financing: Planned repayment Interest on note (1/2% of unpaid balance) February March Name: Date: Ending cash balance Section: I-21.02 B-24.02 Pure Comfort manufactures and sells mattresses with adjustable air chambers. Pure Comfort has been producing and selling approximately 500,000 units per year. Each units sells for $600, and there are no variable selling, general, or administrative costs. The company has been approached by a foreign supplier who wishes to provide the air compressor component for $90 per unit. Total annual manufacturing costs, including air compressors, is as follows: Direct materials $ 50,000,000 Direct labor 80,000,000 Variable factory overhead 16,000,000 Fixed factory overhead 35,000,000 If Pure Comfort outsources the air compressor, it is expected that direct materials will be reduced by 20%, direct labor by 30%, and variable factory overhead by 25%. There will be no reduction in fixed factory overhead. (a) Should Pure Comfort outsource the air compressor? (b) If outsourcing the air compressor will free up capacity, and enable Pure Comfort to increase production and sales to 600,000 units per year, would it make sense to outsource? Name: Date: B-24.02 Section: (a) Internal Direct materials $ Outsource 50,000,000 $ 40,000,000 Direct labor 80,000,000 56,000,000 Variable factory overhead 16,000,000 12,000,000 Fixed factory overhead 35,000,000 35,000,000 - 45,000,000 Outsourced compressors Total cost of each option $ 181,000,000 $ 188,000,000 Company should manufacture the product as the cost of manufacturing is lesser than outsourcing. (b) Even if the sales increases to 600,000 units it would not be profitable to outsource as the cost of outsourcing is too high than manufacturing. B-24.03 Summit Paintball Supply manufactures paintballs used by recreational gamers. The cost of producing a box of 2,500 paintballs is as follows: Direct materials Direct labor $ 12.50 6.25 Variable factory overhead 18.75 Fixed factory overhead 25.00 Variable selling, general, and administrative costs 18.75 Fixed selling, general, and administrative costs 4.00 The fixed factory overhead and fixed SG&A cost is allocated based on an assumption that the business will produce 400,000 boxes of paintballs per year. The company has capacity to produce 500,000 boxes without impacting either category of fixed cost. (a) The market for paintballs has become very competitive. Management has requested to know the break-even price that can be charged for a box of paintballs, assuming production and sale of 400,000 boxes. (b) Management has received a special order request for 100,000 boxes of "private label" paintballs. The order specifies a per box price of $75. How will profitability be impacted if the order is accepted? Name: Date: B-24.03 Section: (a) Total Fixed Cost = $11,600,000 Total Variable Costs = $22,500,000 Selling Price per unit = $85.25 It is the price to obtain breakeven. (b) Per box variable cost = $56.25 Per box selling price = $75 There is increase in the profit by $18.75 per box, if in case there are no other charges involved in them. For example the fixed costs remains constant and there are no other variable costs associated with then then the contribution will be $1,875,000. I-21.02 Storm Tools has formed a new business unit to produce battery-powered drills. The business unit was formed by the transfer of selected assets and obligations from the parent company. The unit's initial balance sheet on January 1 contained cash ($500,000), plant and equipment ($2,500,000), notes payable to the parent ($1,000,000), and residual equity ($2,000,000). The business unit is expected to repay the note at $50,000 per month, plus all accrued interest at 1/2% per month. Payments are made on the last day of each month. The unit is scheduled to produce 25,000 drills during January, with an increase of 2,500 units per month for the next three months. Each drill requires $40 of raw materials. Raw materials are purchased on account, and paid in the month following the month of purchase. The plant manager has established a goal to end each month with raw materials on hand, sufficient to meet 25% of the following month's planned production. The unit expects to sell 20,000 drills in January; 25,000 in February, 25,000 in March, and 30,000 per month thereafter. The selling price is $100 per drill. Half of the drills will be sold for cash through a website. The others will be sold to retailers on account, who pay 40% in the month of purchase, and 60% in the following month. Uncollectible accounts are not material. Each drill requires 20 minutes of direct labor to assemble. Labor rates are $24 per hour. Variable factory overhead is applied at $9 per direct labor hour. The fixed factory overhead is $25,000 per month; 60% of this amount is related to depreciation of plant and equipment. With the exception of depreciation, all overhead is funded as incurred. Selling, general, and administrative costs are funded in cash as incurred, and consist of fixed components (salaries, $100,000; office, $40,000; and advertising, $75,000) and variable components (15% of sales). Prepare a monthly comprehensive budget plan for Storm's new business unit for January through March. The plan should include the (a) sales and cash collections budget, (b) production budget, (c) direct materials purchases and payments budget, (d) direct labor budget, (e) factory overhead budget, (f) ending finished goods budget (assume total factory overhead is applied to production at the rate of $11.73 per direct labor hour), (g) SG&A budget, and (h) cash budget. Summary of Given Information: Beginning Balance Sheet Assets Cash Pland & Equipment Total Assets $500,000 $2,500,000 $3,000,000 Notes Payable $1,000,000 I-21.02 Common Stock Total Liabilities and Stockholders' Equity Principle payments Interest rate Production of Drills (units) for January Rate of increase per month Beginning Finished Goods (units) Raw materials required per drill Ending Raw Materials Requirement (% of following month's production) Beginning Raw Materials(units) Unites of Raw Materials Required per unit Budgeted Drill Sales (units) January February March After March Selling price per drill Cash sales percentage Credit sales percentage Percentage credit sales collected in month of sale Percentage credit sales collected in month following sale Direct labor hours required per drill Direct labor rate per hour Variable overhead rate per direct labor hour Fixed overhead per month $2,000,000 $3,000,000 $50,000 0.50% 25,000 2,500 $40 25% 1.00 20,000 25,000 25,000 30,000 $100 50% 50% 40% 60% 0.33 $24 $9 $25,000 I-21.02 Percentage related to depreciation 60% Salaries Office Advertising Variable Selling and Administrative % of Sales $100,000 $40,000 $75,000 Total Factory overhead applied to pr 15% $11.73 Name: Date: I-21.02 Section: STORM TOOLS Sales Budget For the Three Months January to March January Estimated units March 20,000 25,000 25,000 100 100 100 X per unit sales price Total estimated sales February $2,000,000 $2,500,000 $2,500,000 Expected Cash Collections From Sales From current month sales 1,400,000 1,750,000 From prior month sales $600,000 Cash collections from sales 1,400,000 2,350,000 1,750,000 $750,000 2,500,000 STORM TOOLS Production Budget For the Three Months January to March January Estimated units sold Ending finished goods Total units available March 20,000 25,000 25,000 5,000 7,500 12,500 25,000 32,500 37,500 5,000 7,500 27,500 30,000 Less: beginning finished goods Scheduled production February 25,000 Name: Date: I-21.02 Section: STORM TOOLS Direct Materials Budget For the Three Months January to March January Scheduled production Plus: target ending raw material Total units for which material is nee February 25,000 27,500 30,000 6,875 7,500 8,125 31,875 35,000 38,125 6,875 7,500 31,875 28,125 30,625 40 40 40 Less: target beginning raw material Raw materials to purchase X estimated cost of raw material per Cost of raw materials purchases March $1,275,000 $1,125,000 $1,225,000 Expected Cash Payments for Materials Purchases Cash payments for prior month's purchases $1,275,000 $1,125,000 STORM TOOLS Direct Labor Budget For the Three Months January to March January Scheduled production February March 25,000 27,500 30,000 0.33 0.33 0.33 Total direct labor hours 8,333 9,167 10,000 X cost per direct labor hour 24.00 24.00 24.00 X direct labor hours per unit Cost of direct labor $200,000 $220,000 $240,000 Name: Date: I-21.02 Section: STORM TOOLS Factory Overhead Budget For the Three Months January to March January Direct labor hours February 8,333 X variable factory overhead rate March 9,167 10,000 $9 $9 $9 Total variable factory overhead $75,000 $82,500 $90,000 Fixed factory overhead $25,000 $25,000 $25,000 Total factory overhead $100,000 $107,500 $115,000 Less: depreciation (60% of fixed ove (15,000) (15,000) (15,000) Cash paid for factory overhead $85,000 $92,500 $100,000 STORM TOOLS Ending Finished Goods Inventory 31-Mar Units Per Unit Cost Per Unit Total Direct material 1.00 $40.00 $40.00 Direct labor 0.33 $24.00 $8.00 Applied factory overhead 0.33 $11.73 $3.91 Total cost per unit $51.91 X units in finished goods inventory 12,500 Ending finished goods inventory $648,875 Name: Date: I-21.02 Section: STORM TOOLS Selling, General, and Administrative Budget For the Three Months January to March January Estimated sales March $2,000,000 $2,500,000 $2,500,000 15% 15% 15% $300,000 $375,000 $375,000 $100,000 $100,000 $100,000 X variable SG&A rate Total variable SG&A February Fixed SG&A: Salaries Office 40,000 40,000 40,000 Advertising 75,000 75,000 75,000 Total Fixed SG&A $215,000 $215,000 $215,000 Total budgeted SG&A $515,000 $590,000 $590,000 STORM TOOLS Cash Budget For the Three Months January to March January Beginning cash balance Plus: Customer receipts Available cash $500,000 February March $1,045,000 $1,162,750 1,400,000 2,350,000 2,500,000 $1,900,000 $3,395,000 $3,662,750 $1,275,000 $1,125,000 Less disbursements: Direct materials Direct labor Factory overhead SG&A Total disbursements Cash surplus/(deficit) 200,000 220,000 240,000 85,000 92,500 100,000 515,000 590,000 590,000 $800,000 $2,177,500 $2,055,000 $1,100,000 $1,217,500 $1,607,750 ($50,000) ($50,000) ($50,000) (5,000) (4,750) (4,500) Financing: Planned repayment Interest on note (1/2% of unpaid balan Name: Date: Ending cash balance I-21.02 Section: $1,045,000 $1,162,750 $1,553,250 Name: Date: Section: Total 70,000 100 $7,000,000 4,900,000 $1,350,000 6,250,000 Total 70,000 25,000 95,000 12,500 82,500 I-21.02 Name: Date: Section: Total 82,500 22,500 105,000 14,375 90,625 40 $3,625,000 $2,400,000 Total 82,500 0.33 27,500 24.00 $660,000 I-21.02 Name: Date: Section: Total 27,500 $9 $247,500 $25,000 $272,500 (15,000) $257,500 I-21.02 Name: Date: Section: Total $7,000,000 15% $1,050,000 $300,000 $120,000 $225,000 $645,000 $1,695,000 $2,707,750 $6,250,000 $8,957,750 $0 $2,400,000 $660,000 $277,500 $1,695,000 $5,032,500 $0 $3,925,250 $0 -$150,000 ($14,250) I-21.02 Name: Date: $3,761,000 Section: I-21.02 B-24.02 Pure Comfort manufactures and sells mattresses with adjustable air chambers. Pure Comfort has been producing and selling approximately 500,000 units per year. Each units sells for $600, and there are no variable selling, general, or administrative costs. The company has been approached by a foreign supplier who wishes to provide the air compressor component for $90 per unit. Total annual manufacturing costs, including air compressors, is as follows: Direct materials $ 50,000,000 Direct labor 80,000,000 Variable factory overhead 16,000,000 Fixed factory overhead 35,000,000 If Pure Comfort outsources the air compressor, it is expected that direct materials will be reduced by 20%, direct labor by 30%, and variable factory overhead by 25%. There will be no reduction in fixed factory overhead. (a) Should Pure Comfort outsource the air compressor? (b) If outsourcing the air compressor will free up capacity, and enable Pure Comfort to increase production and sales to 600,000 units per year, would it make sense to outsource? Name: Date: B-24.02 Section: (a) Internal Direct materials $ Outsource 50,000,000 $ 40,000,000 Direct labor 80,000,000 56,000,000 Variable factory overhead 16,000,000 12,000,000 Fixed factory overhead 35,000,000 35,000,000 - 45,000,000 Outsourced compressors Total cost of each option $ 181,000,000 $ 188,000,000 Company should manufacture the product as the cost of manufacturing is lesser than outsourcing. (b) Even if the sales increases to 600,000 units it would not be profitable to outsource as the cost of outsourcing is too high than manufacturing. B-24.03 Summit Paintball Supply manufactures paintballs used by recreational gamers. The cost of producing a box of 2,500 paintballs is as follows: Direct materials Direct labor $ 12.50 6.25 Variable factory overhead 18.75 Fixed factory overhead 25.00 Variable selling, general, and administrative costs 18.75 Fixed selling, general, and administrative costs 4.00 The fixed factory overhead and fixed SG&A cost is allocated based on an assumption that the business will produce 400,000 boxes of paintballs per year. The company has capacity to produce 500,000 boxes without impacting either category of fixed cost. (a) The market for paintballs has become very competitive. Management has requested to know the break-even price that can be charged for a box of paintballs, assuming production and sale of 400,000 boxes. (b) Management has received a special order request for 100,000 boxes of "private label" paintballs. The order specifies a per box price of $75. How will profitability be impacted if the order is accepted? Name: Date: B-24.03 Section: (a) Total Fixed Cost = $11,600,000 Total Variable Costs = $22,500,000 Selling Price per unit = $85.25 It is the price to obtain breakeven. (b) Per box variable cost = $56.25 Per box selling price = $75 There is increase in the profit by $18.75 per box, if in case there are no other charges involved in them. For example the fixed costs remains constant and there are no other variable costs associated with then then the contribution will be $1,875,000. I-21.02 Storm Tools has formed a new business unit to produce battery-powered drills. The business unit was formed by the transfer of selected assets and obligations from the parent company. The unit's initial balance sheet on January 1 contained cash ($500,000), plant and equipment ($2,500,000), notes payable to the parent ($1,000,000), and residual equity ($2,000,000). The business unit is expected to repay the note at $50,000 per month, plus all accrued interest at 1/2% per month. Payments are made on the last day of each month. The unit is scheduled to produce 25,000 drills during January, with an increase of 2,500 units per month for the next three months. Each drill requires $40 of raw materials. Raw materials are purchased on account, and paid in the month following the month of purchase. The plant manager has established a goal to end each month with raw materials on hand, sufficient to meet 25% of the following month's planned production. The unit expects to sell 20,000 drills in January; 25,000 in February, 25,000 in March, and 30,000 per month thereafter. The selling price is $100 per drill. Half of the drills will be sold for cash through a website. The others will be sold to retailers on account, who pay 40% in the month of purchase, and 60% in the following month. Uncollectible accounts are not material. Each drill requires 20 minutes of direct labor to assemble. Labor rates are $24 per hour. Variable factory overhead is applied at $9 per direct labor hour. The fixed factory overhead is $25,000 per month; 60% of this amount is related to depreciation of plant and equipment. With the exception of depreciation, all overhead is funded as incurred. Selling, general, and administrative costs are funded in cash as incurred, and consist of fixed components (salaries, $100,000; office, $40,000; and advertising, $75,000) and variable components (15% of sales). Prepare a monthly comprehensive budget plan for Storm's new business unit for January through March. The plan should include the (a) sales and cash collections budget, (b) production budget, (c) direct materials purchases and payments budget, (d) direct labor budget, (e) factory overhead budget, (f) ending finished goods budget (assume total factory overhead is applied to production at the rate of $11.73 per direct labor hour), (g) SG&A budget, and (h) cash budget. Summary of Given Information: Beginning Balance Sheet Assets Cash Pland & Equipment Total Assets $500,000 $2,500,000 $3,000,000 Notes Payable $1,000,000 I-21.02 Common Stock Total Liabilities and Stockholders' Equity Principle payments Interest rate Production of Drills (units) for January Rate of increase per month Beginning Finished Goods (units) Raw materials required per drill Ending Raw Materials Requirement (% of following month's production) Beginning Raw Materials(units) Unites of Raw Materials Required per unit Budgeted Drill Sales (units) January February March After March Selling price per drill Cash sales percentage Credit sales percentage Percentage credit sales collected in month of sale Percentage credit sales collected in month following sale Direct labor hours required per drill Direct labor rate per hour Variable overhead rate per direct labor hour Fixed overhead per month $2,000,000 $3,000,000 $50,000 0.50% 25,000 2,500 $40 25% 1.00 20,000 25,000 25,000 30,000 $100 50% 50% 40% 60% 0.33 $24 $9 $25,000 I-21.02 Percentage related to depreciation 60% Salaries Office Advertising Variable Selling and Administrative % of Sales $100,000 $40,000 $75,000 Total Factory overhead applied to pr 15% $11.73 Name: Date: I-21.02 Section: STORM TOOLS Sales Budget For the Three Months January to March January Estimated units March 20,000 25,000 25,000 100 100 100 X per unit sales price Total estimated sales February $2,000,000 $2,500,000 $2,500,000 Expected Cash Collections From Sales From current month sales 1,400,000 1,750,000 From prior month sales $600,000 Cash collections from sales 1,400,000 2,350,000 1,750,000 $750,000 2,500,000 STORM TOOLS Production Budget For the Three Months January to March January Estimated units sold Ending finished goods Total units available March 20,000 25,000 25,000 5,000 7,500 12,500 25,000 32,500 37,500 5,000 7,500 27,500 30,000 Less: beginning finished goods Scheduled production February 25,000 Name: Date: I-21.02 Section: STORM TOOLS Direct Materials Budget For the Three Months January to March January Scheduled production Plus: target ending raw material Total units for which material is nee February 25,000 27,500 30,000 6,875 7,500 8,125 31,875 35,000 38,125 6,875 7,500 31,875 28,125 30,625 40 40 40 Less: target beginning raw material Raw materials to purchase X estimated cost of raw material per Cost of raw materials purchases March $1,275,000 $1,125,000 $1,225,000 Expected Cash Payments for Materials Purchases Cash payments for prior month's purchases $1,275,000 $1,125,000 STORM TOOLS Direct Labor Budget For the Three Months January to March January Scheduled production February March 25,000 27,500 30,000 0.33 0.33 0.33 Total direct labor hours 8,333 9,167 10,000 X cost per direct labor hour 24.00 24.00 24.00 X direct labor hours per unit Cost of direct labor $200,000 $220,000 $240,000 Name: Date: I-21.02 Section: STORM TOOLS Factory Overhead Budget For the Three Months January to March January Direct labor hours February 8,333 X variable factory overhead rate March 9,167 10,000 $9 $9 $9 Total variable factory overhead $75,000 $82,500 $90,000 Fixed factory overhead $25,000 $25,000 $25,000 Total factory overhead $100,000 $107,500 $115,000 Less: depreciation (60% of fixed ove (15,000) (15,000) (15,000) Cash paid for factory overhead $85,000 $92,500 $100,000 STORM TOOLS Ending Finished Goods Inventory 31-Mar Units Per Unit Cost Per Unit Total Direct material 1.00 $40.00 $40.00 Direct labor 0.33 $24.00 $8.00 Applied factory overhead 0.33 $11.73 $3.91 Total cost per unit $51.91 X units in finished goods inventory 12,500 Ending finished goods inventory $648,875 Name: Date: I-21.02 Section: STORM TOOLS Selling, General, and Administrative Budget For the Three Months January to March January Estimated sales March $2,000,000 $2,500,000 $2,500,000 15% 15% 15% $300,000 $375,000 $375,000 $100,000 $100,000 $100,000 X variable SG&A rate Total variable SG&A February Fixed SG&A: Salaries Office 40,000 40,000 40,000 Advertising 75,000 75,000 75,000 Total Fixed SG&A $215,000 $215,000 $215,000 Total budgeted SG&A $515,000 $590,000 $590,000 STORM TOOLS Cash Budget For the Three Months January to March January Beginning cash balance Plus: Customer receipts Available cash $500,000 February March $1,045,000 $1,162,750 1,400,000 2,350,000 2,500,000 $1,900,000 $3,395,000 $3,662,750 $1,275,000 $1,125,000 Less disbursements: Direct materials Direct labor Factory overhead SG&A Total disbursements Cash surplus/(deficit) 200,000 220,000 240,000 85,000 92,500 100,000 515,000 590,000 590,000 $800,000 $2,177,500 $2,055,000 $1,100,000 $1,217,500 $1,607,750 ($50,000) ($50,000) ($50,000) (5,000) (4,750) (4,500) Financing: Planned repayment Interest on note (1/2% of unpaid balan Name: Date: Ending cash balance I-21.02 Section: $1,045,000 $1,162,750 $1,553,250 Name: Date: Section: Total 70,000 100 $7,000,000 4,900,000 $1,350,000 6,250,000 Total 70,000 25,000 95,000 12,500 82,500 I-21.02 Name: Date: Section: Total 82,500 22,500 105,000 14,375 90,625 40 $3,625,000 $2,400,000 Total 82,500 0.33 27,500 24.00 $660,000 I-21.02 Name: Date: Section: Total 27,500 $9 $247,500 $25,000 $272,500 (15,000) $257,500 I-21.02 Name: Date: Section: Total $7,000,000 15% $1,050,000 $300,000 $120,000 $225,000 $645,000 $1,695,000 $2,707,750 $6,250,000 $8,957,750 $0 $2,400,000 $660,000 $277,500 $1,695,000 $5,032,500 $0 $3,925,250 $0 -$150,000 ($14,250) I-21.02 Name: Date: $3,761,000 Section: I-21.02 B-24.02 Pure Comfort manufactures and sells mattresses with adjustable air chambers. Pure Comfort has been producing and selling approximately 500,000 units per year. Each units sells for $600, and there are no variable selling, general, or administrative costs. The company has been approached by a foreign supplier who wishes to provide the air compressor component for $90 per unit. Total annual manufacturing costs, including air compressors, is as follows: Direct materials $ 50,000,000 Direct labor 80,000,000 Variable factory overhead 16,000,000 Fixed factory overhead 35,000,000 If Pure Comfort outsources the air compressor, it is expected that direct materials will be reduced by 20%, direct labor by 30%, and variable factory overhead by 25%. There will be no reduction in fixed factory overhead. (a) Should Pure Comfort outsource the air compressor? (b) If outsourcing the air compressor will free up capacity, and enable Pure Comfort to increase production and sales to 600,000 units per year, would it make sense to outsource? Name: Date: B-24.02 Section: (a) Internal Direct materials $ Outsource 50,000,000 $ 40,000,000 Direct labor 80,000,000 56,000,000 Variable factory overhead 16,000,000 12,000,000 Fixed factory overhead 35,000,000 35,000,000 - 45,000,000 Outsourced compressors Total cost of each option $ 181,000,000 $ 188,000,000 Company should manufacture the product as the cost of manufacturing is lesser than outsourcing. (b) Even if the sales increases to 600,000 units it would not be profitable to outsource as the cost of outsourcing is too high than manufacturing. B-24.03 Summit Paintball Supply manufactures paintballs used by recreational gamers. The cost of producing a box of 2,500 paintballs is as follows: Direct materials Direct labor $ 12.50 6.25 Variable factory overhead 18.75 Fixed factory overhead 25.00 Variable selling, general, and administrative costs 18.75 Fixed selling, general, and administrative costs 4.00 The fixed factory overhead and fixed SG&A cost is allocated based on an assumption that the business will produce 400,000 boxes of paintballs per year. The company has capacity to produce 500,000 boxes without impacting either category of fixed cost. (a) The market for paintballs has become very competitive. Management has requested to know the break-even price that can be charged for a box of paintballs, assuming production and sale of 400,000 boxes. (b) Management has received a special order request for 100,000 boxes of "private label" paintballs. The order specifies a per box price of $75. How will profitability be impacted if the order is accepted? Name: Date: B-24.03 Section: (a) Total Fixed Cost = $11,600,000 Total Variable Costs = $22,500,000 Selling Price per unit = $85.25 It is the price to obtain breakeven. (b) Per box variable cost = $56.25 Per box selling price = $75 There is increase in the profit by $18.75 per box, if in case there are no other charges involved in them. For example the fixed costs remains constant and there are no other variable costs associated with then then the contribution will be $1,875,000. I-21.02 Storm Tools has formed a new business unit to produce battery-powered drills. The business unit was formed by the transfer of selected assets and obligations from the parent company. The unit's initial balance sheet on January 1 contained cash ($500,000), plant and equipment ($2,500,000), notes payable to the parent ($1,000,000), and residual equity ($2,000,000). The business unit is expected to repay the note at $50,000 per month, plus all accrued interest at 1/2% per month. Payments are made on the last day of each month. The unit is scheduled to produce 25,000 drills during January, with an increase of 2,500 units per month for the next three months. Each drill requires $40 of raw materials. Raw materials are purchased on account, and paid in the month following the month of purchase. The plant manager has established a goal to end each month with raw materials on hand, sufficient to meet 25% of the following month's planned production. The unit expects to sell 20,000 drills in January; 25,000 in February, 25,000 in March, and 30,000 per month thereafter. The selling price is $100 per drill. Half of the drills will be sold for cash through a website. The others will be sold to retailers on account, who pay 40% in the month of purchase, and 60% in the following month. Uncollectible accounts are not material. Each drill requires 20 minutes of direct labor to assemble. Labor rates are $24 per hour. Variable factory overhead is applied at $9 per direct labor hour. The fixed factory overhead is $25,000 per month; 60% of this amount is related to depreciation of plant and equipment. With the exception of depreciation, all overhead is funded as incurred. Selling, general, and administrative costs are funded in cash as incurred, and consist of fixed components (salaries, $100,000; office, $40,000; and advertising, $75,000) and variable components (15% of sales). Prepare a monthly comprehensive budget plan for Storm's new business unit for January through March. The plan should include the (a) sales and cash collections budget, (b) production budget, (c) direct materials purchases and payments budget, (d) direct labor budget, (e) factory overhead budget, (f) ending finished goods budget (assume total factory overhead is applied to production at the rate of $11.73 per direct labor hour), (g) SG&A budget, and (h) cash budget. Summary of Given Information: Beginning Balance Sheet Assets Cash Pland & Equipment Total Assets $500,000 $2,500,000 $3,000,000 Notes Payable $1,000,000 I-21.02 Common Stock Total Liabilities and Stockholders' Equity Principle payments Interest rate Production of Drills (units) for January Rate of increase per month Beginning Finished Goods (units) Raw materials required per drill Ending Raw Materials Requirement (% of following month's production) Beginning Raw Materials(units) Unites of Raw Materials Required per unit Budgeted Drill Sales (units) January February March After March Selling price per drill Cash sales percentage Credit sales percentage Percentage credit sales collected in month of sale Percentage credit sales collected in month following sale Direct labor hours required per drill Direct labor rate per hour Variable overhead rate per direct labor hour Fixed overhead per month $2,000,000 $3,000,000 $50,000 0.50% 25,000 2,500 $40 25% 1.00 20,000 25,000 25,000 30,000 $100 50% 50% 40% 60% 0.33 $24 $9 $25,000 I-21.02 Percentage related to depreciation 60% Salaries Office Advertising Variable Selling and Administrative % of Sales $100,000 $40,000 $75,000 Total Factory overhead applied to pr 15% $11.73 Name: Date: I-21.02 Section: STORM TOOLS Sales Budget For the Three Months January to March January Estimated units March 20,000 25,000 25,000 100 100 100 X per unit sales price Total estimated sales February $2,000,000 $2,500,000 $2,500,000 Expected Cash Collections From Sales From current month sales 1,400,000 1,750,000 From prior month sales $600,000 Cash collections from sales 1,400,000 2,350,000 1,750,000 $750,000 2,500,000 STORM TOOLS Production Budget For the Three Months January to March January Estimated units sold Ending finished goods Total units available March 20,000 25,000 25,000 5,000 7,500 12,500 25,000 32,500 37,500 5,000 7,500 27,500 30,000 Less: beginning finished goods Scheduled production February 25,000 Name: Date: I-21.02 Section: STORM TOOLS Direct Materials Budget For the Three Months January to March January Scheduled production Plus: target ending raw material Total units for which material is nee February 25,000 27,500 30,000 6,875 7,500 8,125 31,875 35,000 38,125 6,875 7,500 31,875 28,125 30,625 40 40 40 Less: target beginning raw material Raw materials to purchase X estimated cost of raw material per Cost of raw materials purchases March $1,275,000 $1,125,000 $1,225,000 Expected Cash Payments for Materials Purchases Cash payments for prior month's purchases $1,275,000 $1,125,000 STORM TOOLS Direct Labor Budget For the Three Months January to March January Scheduled production February March 25,000 27,500 30,000 0.33 0.33 0.33 Total direct labor hours 8,333 9,167 10,000 X cost per direct labor hour 24.00 24.00 24.00 X direct labor hours per unit Cost of direct labor $200,000 $220,000 $240,000 Name: Date: I-21.02 Section: STORM TOOLS Factory Overhead Budget For the Three Months January to March January Direct labor hours February 8,333 X variable factory overhead rate March 9,167 10,000 $9 $9 $9 Total variable factory overhead $75,000 $82,500 $90,000 Fixed factory overhead $25,000 $25,000 $25,000 Total factory overhead $100,000 $107,500 $115,000 Less: depreciation (60% of fixed ove (15,000) (15,000) (15,000) Cash paid for factory overhead $85,000 $92,500 $100,000 STORM TOOLS Ending Finished Goods Inventory 31-Mar Units Per Unit Cost Per Unit Total Direct material 1.00 $40.00 $40.00 Direct labor 0.33 $24.00 $8.00 Applied factory overhead 0.33 $11.73 $3.91 Total cost per unit $51.91 X units in finished goods inventory 12,500 Ending finished goods inventory $648,875 Name: Date: I-21.02 Section: STORM TOOLS Selling, General, and Administrative Budget For the Three Months January to March January Estimated sales March $2,000,000 $2,500,000 $2,500,000 15% 15% 15% $300,000 $375,000 $375,000 $100,000 $100,000 $100,000 X variable SG&A rate Total variable SG&A February Fixed SG&A: Salaries Office 40,000 40,000 40,000 Advertising 75,000 75,000 75,000 Total Fixed SG&A $215,000 $215,000 $215,000 Total budgeted SG&A $515,000 $590,000 $590,000 STORM TOOLS Cash Budget For the Three Months January to March January Beginning cash balance Plus: Customer receipts Available cash $500,000 February March $1,045,000 $1,162,750 1,400,000 2,350,000 2,500,000 $1,900,000 $3,395,000 $3,662,750 $1,275,000 $1,125,000 Less disbursements: Direct materials Direct labor Factory overhead SG&A Total disbursements Cash surplus/(deficit) 200,000 220,000 240,000 85,000 92,500 100,000 515,000 590,000 590,000 $800,000 $2,177,500 $2,055,000 $1,100,000 $1,217,500 $1,607,750 ($50,000) ($50,000) ($50,000) (5,000) (4,750) (4,500) Financing: Planned repayment Interest on note (1/2% of unpaid balan Name: Date: Ending cash balance I-21.02 Section: $1,045,000 $1,162,750 $1,553,250 Name: Date: Section: Total 70,000 100 $7,000,000 4,900,000 $1,350,000 6,250,000 Total 70,000 25,000 95,000 12,500 82,500 I-21.02 Name: Date: Section: Total 82,500 22,500 105,000 14,375 90,625 40 $3,625,000 $2,400,000 Total 82,500 0.33 27,500 24.00 $660,000 I-21.02 Name: Date: Section: Total 27,500 $9 $247,500 $25,000 $272,500 (15,000) $257,500 I-21.02 Name: Date: Section: Total $7,000,000 15% $1,050,000 $300,000 $120,000 $225,000 $645,000 $1,695,000 $2,707,750 $6,250,000 $8,957,750 $0 $2,400,000 $660,000 $277,500 $1,695,000 $5,032,500 $0 $3,925,250 $0 -$150,000 ($14,250) I-21.02 Name: Date: $3,761,000 Section: I-21.02