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47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 h. 50% of sales are for cash. Remaining 50% are collected over the next month. December sales were $1,600,000. Cash balance on January 1 equals $150,400. If the rm develops a cash shortage by the end of the month, sufcient cash is borrowed to cover the shortage. Any cash borrowed is repaid one month later, as is the interest due. The interest rate is 12 percent per annum (i.e., 1% per month). Required: Prepare the following budgets for each month (January, February and March) and for the Quarter 1 in total: 1. Sales budget. 2. Production budget. 3. Direct materials purchase budget. 4. Direct labor budget. 5. Overhead budget. 6. Selling and administrative expense budget. 7. Ending FG budget. 8. Cost of goods sold budget. Assume that beginning inventory in January is valued at $70/unit and the company uses FIFO. 9. Budgeted income statement (ignore income taxes) 10. Cash budget. i.e., for each budget you need to prepare four columns: January, February, March and Q1 (total for all three months, i.e., total for the rst quarter) 3 Electra Manufacturing, Inc., produces metal control valves used in the production of oil eld equipment. 4 The control valves are sold to various gas and oil engineering companies throughout the United States. Projected sales in units for the coming four months are as follows: 5 6 January 20000 control valves 7 February 25000 control valves 8 March 30000 control valves 9 April 30000 control valves 10 May 22000 control valves 11 12 13 The following data pertain to production policies and manufacturing specications followed by Electra: 14 15 a. Finished goods inventory on January 1 is 13,000 units. The desired ending inventory for each month is 70 percent of the next month's sales. 16 17 b. The data on material used are as follows: for every valve 6 pounds of metal are used. One pound of metal costs $5. 18 RM inventory on January 1 includes 60,000 pounds of metal. 19 The desired ending RM inventory for each month dictates that sufcient materials are on hand to produce 50 percent of next month's estimated production. 20 21 c. The direct labor used to make one valve is two hours. The average direct labor cost per hour is $14. 22 28 Direct Labor Budget 29 Jan. Feb. Mar Q1 30 Production Unit: 24500 28500 30000 83000 735000 + 31 DLH per unit: 2 2 2 2 32 DL Rate: 14 14 14 14 33 DL Cost 686000 798000 840000 2324000 34 35 MOH Budgeted 7.8 36 Variable OH Jan. Feb Mar Q1 37 Units to be produced 24500 28500 30000 83000 38 Supplies 24500 28500 30000 83000 39 Power 26950 31350 33000 91300 40 Maintenance 51450 59850 63,000 174300 41 Other 88200 102600 108,000 298800 42 Total Variable Overhead 191,100 222300 234,000 647400 43 Fixed OH 44 Mainenance 28000 28000 28,000 84000 45 Supervision 14000 14000 14000 42,000 46 Depreciation 100,000 100,000 100,000 300,000 47 Taxes 7000 7000 7000 21,000 48 Other 56000 56000 56000 168,000 49 Total Fixed Overhead 205000 205000 205000 615,000 50 Total Overhead $396,100 $427,300 $439,000 $1,262,400Sales Budget IN Jan. Feb. Mar Q1 3 Selling Price Per unit: $90.00 $90.00 $90.00 $90.00 4 Expected Sales: 20000 25000 30000 75000 5 Expected Revenues: $1,800,000.00 $2,250,000.00 $2,700,000.00 $6,750,000.00 6 7 Production Budget 0.7 8 Jan. Feb. Mar Q1 April 9 Expected Sales 20000 25000 30000 75000 30000 10 +Desired Ending Inventory 17500 21000 21000 21000 15400 11 Total # of valves Needed 37500 46000 51000 96000 45400 12 Less begning Inventory: 13000 17500 21000 21000 21000 13 Total # of valves to be produced 24500 28500 30000 75000 24400 14 15 DM Budget 5 6 16 Jan. Feb. Mar Q1 17 Unit produced 24500 28500 30000 83000 18 DM per Unit 30 30 30 30 19 Total DM cost 735000 855000 900000 2490000 20 21 Material Purchase Budget 0.5 22 Jan. Feb. Mar Q1 23 DM used in Production 735000 855000 900000 2490000 24 +Cost of Desired Inventory 427500 450000 1245000 1245000 25 -Cost of Beginning Inventory 300000 427500 450000 300000 26 Total Cost of material to be purchased 862500 877500 1695000 343500074 COGS Jan. Feb. Mar. Q1 75 Beg. Inventory 910,000 1,297,928 1,532,853 910,000 76 Add: Cost of Goods Manufactured 1,817,100 2,080,300 2,179,000 6,076,400 77 Total Goods Available for Sale 2,727,100 3,378,228 3,711,853 6,986,400 78 Less: Ending Inventory 1,297,928 1,532,853 1,525,300 1,525,300 79 COGS $1,429,172 $1,845,375 $2,186,553 $5,461,100