I SEE THE LIGHT Background Information I SEE THE LIGHT (ISTL) is a subchapter S corporation that manufactures children's lampsightlights for use in bedrooms. These lamps are sold nationwide through a group of independent sales representatives who have an exclusive sales region. The business is in its tenth year and has asked you to assist in planning for next year's operations. The lamps are ceramic figurines of animals, boats, boys and girls playing and singing, all in delightful colors. The owner of the business, Big Al, creates a drawing for the figurine and faxes it to a plant in China where a mold is created and a sample produced and hand painted. If the mold meets the expectations of Big Al an order of 500 lamp parts is placed. Each lamp kit consists of the parts required to complete one lamp; a figurine, a lamp shade and the required electrical components. There are presently 10 different figurines that come in six different colors; 60 models. There are presently 10 workers in the plant. They are responsible for receiving the raw material, manufacturing the product, packing and shipping. In addition to Big Al there are two office workers who are responsible for all administrative duties. Big Al had his accountant prepare the Projected Income Statement and Balance Sheet presented on page two. Big Al heard about your skills in managerial accounting and would like your assistance in the following areas: Part 1 Fixed and Variable Cost Determinations - Unit Cost Calculations Part 2 Cost Volume Relationships - Profit Planning Part 3 Budgets Part 4 Process Costing Part 5 Job Order Costing Part 6 Standard Costing - Variance Analysis Part 7 Capital Decision Making To upload your work to Big Al the file without changing the name. Pay attention to the specific location that Excel saves the file. Return to the bottom of the page that you downloaded the file from; Cybertext.com, The Book List, Building Blocks of Accounting--A Managerial Perspective, Enter password, Upload Your Excel File. If you upload an old version of the file the results will not update. Keep two copies of your spreadsheet in two separate places in case one of Big Al's competitors sends someone to destroy your work or it is lost in transmission. You may find it easier to work on this project if you print a hard copy of all the pages.I See The Light Projected Income Statement For the Period Ending December 31, 20x1 Sales 25,000 lamps @ $45.00 $ 1,125,000.00 Cost of Goods Sold @ $30.00 750,000.00 Gross Profit $ 375,000.00 Selling Expenses: Fixed $ 23,000.00 Variable Commission per unit) @ $3.00 75,000.00 $ 98,000.00 Administrative Expenses: Fixed $ 42,000.00 Variable @ $2.00 50,000.00 92,000.00 Total Selling and Administrative Expenses: 190,000.00 Net Profit 185,000.00 I See The Light Projected Balance Sheet As of December 31, 20x1 Current Assets Cash $ 34,710.00 Accounts Receivable 67,500.00 Inventory Raw Material Lamp Kits 500 @ $16.00 8,000.00 Work in Process 0 Finished Goods 3000 @ $30.00 90,000.00 Total Current Assets $ 200,210.00 Fixed Assets Equipment $ 20,000.00 Accumulated Depreciation 6,800.00 Total Fixed Assets 13,200.00 Total Assets 213,410.00 Current Liabilities Accounts Payable 54,000.00 Total Liabilities 54,000.00 Stockholder's Equity Common Stock $ 12,000.00 Retained Earnings 147,410.00 Total Stockholder's Equity 159,410.00 Total Liabilities and Stockholder's Equity 213,410.00The projected cost of a lamp is calculated based upon the projected increases or decreases to current costs. The present costs to manufacture one lamp are: Lamp Kit: $16.0000000 per lamp Direct Labor. 2.0000000 per lamp (4 lampsfhr.) Variable Overhead: 2.0000000 per lamp Fixed Overhead: 10.0000000 per lamp (based on normal capacity of 25,000 lamps) Cost per lamp: $30.0000000 per lamp Expected increases for 20x2 When calculating projected increases round to TWO ($0.00) decimal places. 1. Material Costs are expected to increase by 3.50% . 2. Labor Costs are expected to increase by 4.50%. 3. Variable Overhead is expected to increase by 5.00%. I 4. Fixed Overhead is expected to increase to $265,000. 5. Fixed Administrative expenses are expected to increase to $60,000. 6. Variable selling expenses (measured on a per lamp basis) are expected to increase by 4.00%. 7. Fixed selling expenses are expected to be $41,000 in 20x2. 8. Variable administrative expenses (measured a per lamp basis) are expected to increase by 4.00%. On the following schedule develop the following figures: 1- 20x2 Projected Variable Manufacturing Unit Cost of a lamp. 2- 20x2 Projected Variable Unit Cost per lamp. 3- 20x2 Projected Fixed Costs. Variable Manufacturing Unit Cost 20x1 Cost Projected Percent 20x2 Cost Rounded to 2 Decimal Places Increase Lamp Kit 16 3.50% $16.56 {4.01} Labor 4.50% $2.09 (4.02) N N Variable Overhead 5.00% 2. 10 (4.03} Projected Variable Manufacturing Cost Per Unit $20.75 (4.04} Total Variable Cost Per Unit 20x1 Cost Projected Percent 20x2 Cost Rounded to 2 Decimal Places Increase Variable Selling (4.05) Variable Administrative (4.06} Projected Variable Manufacturing Unit Cost (4.04) Projected Total Variable Cost Per Unit (4.07} Schedule of Fixed Costs 20x1 Cost Projected 20x2 Cost Percent Increase Fixed Overhead (4.08} (normal capacity of lamps @ _) Fixed Selling (4.09} Fixed Administrative {4. 10} Projected Total Fixed Costs (4.11}PART 2 Cost Volume Relationships - Profit Planning Big Al is about to begin work on the budget for 20x2 and they have requested that you prepare an analysis based on the following assumptions. Note: Remember, that we cannot sell part of a lamp, therefore to find the number of units you have to round up to the next complete unit. Furthuremore, to find the required sales in dollars it may be easier to find the number of units and then multiply by the selling price per unit. (5.01} Contribution Margin Ratio (Round to four places,% is two of those places ##.##%) (5.02) For 20x2 the selling price per lamp will be $45.00. The desired net income in 20x2 is $187,500 . What would sales in units have to be in 20x2 to reach the profit goal? Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit if needed) (5.03} For 20x2 the selling price per lamp will be $45.00. If the fixed cost increase by $45,000.00 how many lamps must be sold to breakeven? Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit if needed) (5.04)4. For 20x2 the selling price per lamp will be $45.00. If the variable cost increase by $4.50 a unit how many lamps must be sold to breakeven? Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit if needed) (6.01} 5. For 20x2 the selling price per lamp will be $45.00. If the variable cost decreased by $4.50 a unit how many lamps must be sold to breakeven? Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit if needed) (6.02} 6. If for 20x2 the selling price per lamp is increased to $49.50 a unit how many lamps must be sold to breakeven? Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit if needed) (6.03) 7. If for 20x2 the selling price per lamp is decreased to $40.50 a unit how many lamps must be sold to breakeven? Breakeven sales in units (Since we cannot sell part of a unit round up to the next unit if needed) (6.04)PART 3 Budgets Division N has decided to develop its budget based upon projected sales of 41,000 lamps at $50.00 per lamp. The company has requested that you prepare a master budget for the year. This budget is to be used for planning and control of operations and should be composed of: 1. Production Budget 2. Materials Budget 3. Direct Labor Budget 4. Factory Overhead Budget 5. Selling and Administrative Budget 6. Cost oI Goods Sold Budget 7. Budgeted Income Statement 8. Cash Budget Notes for Budgeting: The company wants to maintain the same number of units in the beginning and ending inventories of work-in-process, and electrical parts while increasing the inventory of Lamp Kits to 750 pieces and decreasing the finished goods by 20%. Complete the Iollowing budgets 1 Emducmudaet Planned Sales Desired Ending Inventory of Finished Goods Total Needed Less: Beginning Inventory Total Production {7.01} 2 Materials Budget Lamp Kits Needed for Production {8-01} Desired Ending Inventory {8.02} Total Needed {8-03} Less: Beginning Inventory {3-04} Total Purchases Cost per piece _ {8-05} Cost of Purchases (Round to two places. $##.##) {8.06} 3 Direct Labor Budget _ Labor Cost Per Lamp {8.07} Production _ Total Labor Cost (Round to two places, $##.##) {8.08} 4 Faaio Overhead Bud at Variable Factory Overhead: Variable Factory Overhead Cost Per Unit Number of Units to be Produced Total Variable Factory Overhead (Round to two places, $##.##) {8.09} Fixed Factory Overhead {8.10} Total Factory Overhead (Round to two places, $##.##) {8.1 1} 4 Factory Overhead Budget Overhead Allocation rate based on: 1. Number of Units Total Factory Overhead / Number of Units (Round to two places, $##.##) (9.01} 5 Cost of making one unit next year Cost of one Lamp Kit Labor Cost Per Lamp {9.02} Factory overhead per unit Total cost of one unit (9.03} (Round to two places, $##.##) 6 Selling and Admin. Budget Fixed Selling Variable Selling (Round to two places, $##.##) (9.04) Fixed Administrative Variable Administrative (Round to two places, $##.##) (9.05} Total Selling and Administrative (Round to two places, $##.##) (9.06} VUSLUL Goods Sold Round dollars to two Budget places, $##.## Beginning Inventory, Finished Goods {9.07} Production Costs: Materials: Lamp Kits: Beginning Inventory Purchased Available for Use Ending Inventory of Lamp Kits (9.08} Lamp Kits Used In Production Total Materials: (9.09} Labor {9.10} Overhead (9.11} Cost of Goods Available {9.12} Less: Ending Inventory, Finished Goods (9.13) Cost of Goods Sold (9.14}7 Budgeted Income Statement Sales Cost of Goods Sold Gross Profit Selling Expenses & Admin. Expenses Net Income (10.01} 8 Cash Budget actual cash receipts and disbursements will follow the pattern below: (Note: Receivables and Payables of 12/31/x1 will have a cash impact in 20x2.) . 16.00% of sales for the year are made in November and December. Since our customers have 60 day terms those funds will be collected be collected in January and February. 83.00% of material purchases will be paid during the year, the remaining portion will be paid in Januay or February. 3. All other manufacturing and operating costs are paid for when incurred. The budgeted depreciation expense is equal to 0.6% of the fixed manufacturing, selling and administrative expenses. 5. Minimum Cash Balance needed for 20x2, $180,000 . I See The Light Projected Cash Budget For the Year Ending December 31, 20x2 Round dollars to two places, $##.## Beginning Cash Balance Cash Inflows: Sales Collections Account Receivable (Sales last year not collected) {10.02} Sales made and collected in 20x2 (10.03} Cash Available (10.04) Cash Outflows: Purchases Accounts Payable (Purchases last year) Purchases made and paid for in 20x2 (10.05} Other Manufacturing Costs Direct Labor Total Manufacturing Overhead Selling and Administrative Less: Depreciation (10.06} Total Cash Outflows (10.07} geted Cash Balance before financing (10.08} Needed Minimum Balance Amount to be borrowed (if any) (10.09} Budgeted Cash Balance (10.10}PART 4 Process Costing - Weighted Average General Information The I See The Light Company has a related company that produces the figurines. They use process costing in the molding department. The factory overhead is applied at a rate of 50% of direct labor dollars. The material is added at the beginning of the process. The labor and overhead costs are assumed to be added uniformly throughout. Month of January Selected information for January is presented below. Note that the applied overhead rate was 50% of direct labor costs in the molding department. Molding Department Goods in-process as of January 1 were 3,600 figurines at a cost of $56,487.75. Of this amount, $5,904.00 was from raw materials added, $33,722.50 for labor and $16,861.25 for overhead. These 3,600 figurines were assumed to be 70.00% complete as to labor and overhead. During January, 23,500 units were started, $36,372.00 of materials and $54,222.50 of labor costs were incurred. The 4,500 figurines that were in-process at the end of January were assumed to be 90.00% complete to labor and overhead. All figurines in January passed inspection. MOLDING Physical Flow of Units Work-in-Process - Beginning Units Started this Period Units to Account for Total transferred out (12.01} Work-in-Process - Ending (12.02) Total Accounted for Equivalent Units Material (Round to two places, ##,####.##) {12.03} Equivalent Units Conversion (Round to two places, ##,####.##) {12.04} Total cost of Material (Round to two places, ##.###.## (12.05} Total cost of Conversion (Round to two places, ##.####.##) [12.06} Total cost to account for (Round to two places, ##.####.##) (12.07} Cost per equivalent unit of Material (Round to two places, ###.##) (12.08} Cost per equivalent unit of Conversion (Round to two places, ###.##) {12.09} Cost of the ending inventory, material and convesion (Round to two places, $###,###.##) {12.10} Cost of the units transferred, material and convesion (Round to two places, $###,###.## ) {12.11}