Homework 6 - Chapter 8

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Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows:

	Sales in Units
April		84,000
May		90,000
June		124,000
July		97,000

The company is now in the process of preparing a production budget for the second quarter. Past experience has shown that end-of-month inventory levels must equal 20% of the following months sales. The inventory at the end of March was 16,800 units.

Required:

Prepare a production budget for the second quarter; in your budget, show the number of units to be produced each month and for the quarter in total.

Three grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $1.70 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3:

	Year 2		Year 3
	First	Second	Third	Fourth		First
Budgeted production, in bottles	64,000	94,000	154,000	104,000		74,000

Musk oil has become so popular as a perfume ingredient that it has become necessary to carry large inventories as a precaution against stock-outs. For this reason, the inventory of musk oil at the end of a quarter must be equal to 20% of the following quarters production needs. Some 38,400 grams of musk oil will be on hand to start the first quarter of Year 2.

Required:

Prepare a direct materials budget for musk oil, by quarter and in total, for Year 2.(Round "Unit cost of raw materials" answers to 2 decimal places.)

The production manager of Rordan Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Units to be produced	12,000	9,000	7,200	11,300

Each unit requires 0.65 direct labor-hours, and direct laborers are paid $20 per hour.

Required:
1.	Complete the companys direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.(Round "Direct labor time per unit (hours)" answers to 2 decimal places.)

2.

Complete the companys direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is not adjusted each quarter. Instead, assume that the companys direct labor workforce consists of permanent employees who are guaranteed to be paid for at least 7,000 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 7,000 hours anyway. Any hours worked in excess of 7,000 hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct labor.(Input all amounts as positive values.)

The direct labor budget of Yuvwell Corporation for the upcoming fiscal year contains the following details concerning budgeted direct labor-hours:

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Budgeted direct labor-hours	11,600	10,000	10,300	11,100

The companys variable manufacturing overhead rate is $6.50 per direct labor-hour and the companys fixed manufacturing overhead is $84,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $21,000 per quarter.

Required:
1.	Complete the companys manufacturing overhead budget for the upcoming fiscal year.

2.	Compute the company's manufacturing overhead rate (including both variable and fixed manufacturing overhead) for the upcoming fiscal year.

The budgeted unit sales of Weller Company for the upcoming fiscal year are provided below:

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Budgeted unit sales	18,000	22,000	17,000	16,000

The companys variable selling and administrative expense per unit is $1.70. Fixed selling and administrative expenses include advertising expenses of $11,000 per quarter, executive salaries of $38,000 per quarter, and depreciation of $17,000 per quarter. In addition, the company will make insurance payments of $4,000 in the first quarter and $4,000 in the third quarter. Finally, property taxes of $8,200 will be paid in the second quarter.

Required:

Prepare the companys selling and administrative expense budget for the upcoming fiscal year.(Round "Variable cost" answers to 2 decimal places.)

Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year. Management has prepared the following summary of its budgeted cash flows:

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Total cash receipts	$250,000	$400,000	$280,000	$300,000
Total cash disbursements	$309,000	$279,000	$269,000	$289,000

The companys beginning cash balance for the upcoming fiscal year will be $34,000. The company requires a minimum cash balance of $10,000 and may borrow any amount needed from a local bank at a quarterly interest rate of 3%. The company may borrow any amount at the beginning of any quarter and may repay its loans, or any part of its loans, at the end of any quarter. Interest payments are due on any principal at the time it is repaid. For simplicity, assume that interest is not compounded.

Required:

Complete the company's cash budget for the upcoming fiscal year.(Cash deficiency, repayments, and interest, should be indicated by a minus sign.)

Gig Harbor Boating is the wholesale distributor of a small recreational catamaran sailboat. Management has prepared the following summary data to use in its annual budgeting process:

Budgeted unit sales	600
Selling price per unit	$2,020
Cost per unit	$1,670
Variable selling and administrative expenses (per unit)	$55
Fixed selling and administrative expenses (per year)	$107,000
Interest expense for the year	$18,000

Required:

Prepare the companys budgeted income statement using an absorption income statement format shown below.

The management of Mecca Copy, a photocopying center located on University Avenue, has compiled the following data to use in preparing its budgeted balance sheet for next year:

	Ending Balances
Cash		?
Accounts receivable	$	9,300
Supplies inventory	$	3,000
Equipment	$	40,000
Accumulated depreciation	$	16,200
Accounts payable	$	3,000
Common stock	$	5,000
Retained earnings		?

The beginning balance of retained earnings was $29,000, net income is budgeted to be $19,000, and dividends are budgeted to be $5,600.

Required:

Prepare the companys budgeted balance sheet.(Amounts to be deducted should be indicated by aminus sign.)

A cash budget, by quarters, is given below for a retail company (000 omitted). The company requires a minimum cash balance of at least $7,000 to start each quarter. Fill in the missing amounts.(Enter your answers in thousands of dollars. Cash deficiencies and Repayments should be indicated by a minus sign.)