Information Altec Manufacturing Inc (Altec) is a company that manufactures and sells a single product, which they call an Altec For planning and control purposes they utilize a monthly master budget, which is usually developed at least six months in advance of the budget year Their fiscal year end is December 31 As per the request of the CEO of Altec John Hofmann, you as new controller will be preparing the next budget (January to December 2022) Prior to the task, you received a sales forecast from2022 2023 As new controller of Altec, Their sales forecast consisted of these few lines For the year ended December 31, 2021 For the year ended December 31, 2022 For the year ended December 31, 2023 70,000 units at $160 00 each 80,000 units at $160 00 each 90,000 units at $160 00 each Expected sales for the year ended December 31, 2021 are based on actual sales to date and budgeted sales for the duration of the year Altecs President felt certain that the marriage wouldnt last and expected Chris would be back anyday Buttheendoftheyearisquicklyapproaching,andthereisstillnowordfromthe desert ThePresident,desperatelyneedingthebudgetcompleted,hasapproachedyou,a management accounting student, for help in preparing the budget for the coming fiscal year Your conversations with the President and your investigations of the companys records have revealed the following information 1) Sales are seasonal, and sometimes correspond with general holidays Please see the Sales pattern a below January 3 February 5 March 6 April 9 Mary 7 June 9 July 10 August 8 September 6 October 9 November 13 December 15 Total 100 2) From previous experience, management has determined that an ending inventory equal to 38 of the next months sales is required to fit the buyers demands 1 3) Because sales are seasonal, Altec must rent an additional storage facility from September toDecembertohousetheadditionalinventoryonhand Theonlyrelatedcostisaflat $28,000 per month, payable at the beginning of the month 4) The only raw material used in the production of toodles is space age acrylic (SAA), a compact material that is purchased in powder form Each product requires 55 kilograms of SAA, at a cost of $0 85 per kilogram The supplier of SAA tends to be somewhat erratic so Altec finds it necessary to maintain an inventory balance equal to 38 of the following monthsproductionneedsasaprecautionagainststock outs Altecpaysfor55 ofa months purchases in the month of purchase, 25 in the following month and the remaining 20 two months after the month of purchase The ending balance of raw materials at December 31, 2021 is 33,000 kilograms 5) Altec expects that any payments made in the month of purchase will be subject to 2 , net 30terms Thepurchasediscountsarereportedasonemetricontheiradministration departmentsbalancedscorecard Toprovidetheinformationforthebalancedscorecard, purchase discounts are included in the selling and administration budget, and are considered a non cash item 6) Beginning accounts payable will consist of $227,800 arising from the following estimated direct material purchases for November and December of 2021 SAApurchasesinNovember2021 $450,500 SAApurchasesinDecember2021 $306,000 7) Altecs manufacturing process is highly automated Employees are paid on a per unit basis Their total pay each month is, therefore, dependent on production volumes and averages $20 00 per hour before benefits The employers portion of employee benefits adds 20 to the hourly rate All payroll costs are paid in the period in which they are incurred Each unit spends a total of 75 minutes in production 8) Due to the similarity of the equipment in each of the production stages and the companysconcentrationonasingleproduct,manufacturingoverheadisallocatedbasedonvolume (i e theunitsproduced) Thevariableoverheadmanufacturingrateis$25 95perunit, consistingof Utilities $12 00 IndirectMaterials $5 00 Plantmaintenance $4 50 environmental fee $1 95 and Other $2 50 9) The expected fixed manufacturing overhead costs below cover the twelve months ended December 31, 2021 and are based on actual costs to date and budgeted costs for the duration of the year Training and development Property and business taxes Supervisors salary Amortization on equipment Insurance Other $ 47,520 36,000 89,400 227,760 92,460 109,600 $ 602,740 2 a) The property and business taxes, levied by the municipality covering the calendar year, are paid in one lump sum on June 30 of each year The expected payment for next year (2022) is $39,000 b) TheannualinsurancepremiumispaidatthebeginningofAprileachyear,coveringthe subsequent 12 months, from April 1 of the current year to March 31 of the next year The premium is expected to go up to $93,300 on April 1, 2022 c) All other cash related fixed manufacturing overhead costs are incurred evenly over the year, paid as incurred, and are not expected to change in 2022 d) Altecusesthestraightlinemethodofamortization 10) In 20x1, the average total cost to manufacture one unit was $93 90 under absorption costing 11) Selling and administrative expenses (S A) are known to be a mixed cost however, there is alotofuncertaintyaboutwhatportionisfixedandwhatisvariable Previousexperience has provided the following information Lowest level of sales 42,500 units Total S A Expenses $1,273,123 Highest level of sales 87,500 units Total S A Expenses $2,493,073 Thesecostsarepaidinthemonthinwhichtheyoccur Notincludedintheaboveexpenses are bad debt expense and the purchases discount 12) Sales are on a cash and credit basis, with 21 collected during the month of the sale, 42 the following month, and 35 the month thereafter 2 of sales are uncollectible (bad debt expense) 13) Sales in November and December 2021 are expected to be $1,100,000 and $1,600,000 respectively Basedontheabovecollectionpatternthiswillresultinaccountsreceivableof $1,617,000 at December 31, 2021 which will be collected in January and February, 2022 14) During the fiscal year ending December 31, 2022, Altec will be required to make monthly income tax installment payments of $10,000 Outstanding income taxes from the year ended December 31, 2021 must be paid in March 2022 Income tax expense is estimated to be25 ofincomebeforetax IncometaxesfortheyearendedDecember31,20x2,in excess of installment payments, will be paid in March, 2023 15) Altec is planning to acquire additional manufacturing equipment for $304,750 cash 40 of this amount is to be paid in April 2022, the rest, in May 2022 The manufacturing overhead costs shown above already include the amortization on this equipment 16) Altec has a policy of paying dividends at the end of each quarter The president tells you that the board of directors is planning on continuing their policy of declaring dividends of $32,000 per quarter 17) An arrangement has been made with the local bank that if Altec maintains a minimum balance of $15,000 in their bank account, they will be given a line of credit at a preferred 3 rateof5 perannum Allborrowingsfromandrepaymentstothebankmustbeinmultiples of $1,000 and interest must be paid at the end of each month All borrowing is considered to occur on the first day of the month, repayments on the last day of the month Therefore, the amount subject to interest each month is the balance owing at the beginning of the month plus any amounts borrowed at the beginning of the month Note that any amounts repaid that month do not reduce the amount subject to interest that month because they are assumed repaid on the last day of the month 18) A listing of the estimated balances in the companys ledger accounts as of December 31, 2021 is given below (this is the ending balance sheet for 2021) Cash Accounts receivable Inventory raw materials Inventory finished goods Prepaid insurance Capital assets (net) Bank loan payable Accounts payable Income tax payable Common Shares Retained earnings $ $ 15,680 1,617,000 28,050 28,170 23,115 1,328,000 $ 3,040,015 102,000 227,800 11,200 1,200,000 1,610,500 $ 3,04,015 questions Prepare a monthly master budget for Altec Manufacturing Inc for the year ended December 31, 2022, including the following schedules (Use the templates provided) Sales Budget Schedule of Cash Receipts Production Budget Direct Materials Budget Schedule of Cash Disbursements Direct Labour Budget Manufacturing Overhead Budget Cost of Goods Manufactured Budget Ending Finished Goods Inventory Budget Cost of Goods Sold Budget Selling and Administrative Expense Budget Cash Budget Prepare a budgeted income statement and a budgeted statement of r etained earnings for the year ended December 31, 2022, using absorption costing Prepare a budgeted balance sheet as at December 31, 2022

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 17, 2024

Information: Altec Manufacturing Inc. (Altec) is a company that manufactures and sells a single product, which they call an Altec. For planning and control purposes

Information:

Altec Manufacturing Inc. (Altec) is a company that manufactures and sells a single product, which they call an Altec. For planning and control purposes they utilize a monthly master budget, which is usually developed at least six months in advance of the budget year. Their fiscal year end is December 31.

As per the request of the CEO of Altec John Hofmann, you as new controller will be preparing the next budget (January to December 2022). Prior to the task, you received a sales forecast from2022-2023. As new controller of Altec,

Their sales forecast consisted of these few lines:

For the year ended December 31, 2021*:
For the year ended December 31, 2022:
For the year ended December 31, 2023:

70,000 units at $160.00 each 80,000 units at $160.00 each 90,000 units at $160.00 each

*Expected sales for the year ended December 31, 2021 are based on actual sales to date and budgeted sales for the duration of the year.

Altecs President felt certain that the marriage wouldnt last and expected Chris would be back anyday. Buttheendoftheyearisquicklyapproaching,andthereisstillnowordfromthe desert. ThePresident,desperatelyneedingthebudgetcompleted,hasapproachedyou,a management accounting student, for help in preparing the budget for the coming fiscal year. Your conversations with the President and your investigations of the companys records have revealed the following information:

1) Sales are seasonal, and sometimes correspond with general holidays. Please see the Sales pattern a below:

January 3% February 5% March 6% April 9% Mary 7% June 9% July 10% August 8% September 6% October 9% November 13% December 15% Total 100%
2) From previous experience, management has determined that an ending inventory equal to 38% of the next months sales is required to fit the buyers demands.

3) Because sales are seasonal, Altec must rent an additional storage facility from September toDecembertohousetheadditionalinventoryonhand. Theonlyrelatedcostisaflat $28,000 per month, payable at the beginning of the month.
4) The only raw material used in the production of toodles is space-age acrylic (SAA), a compact material that is purchased in powder form. Each product requires 55 kilograms of SAA, at a cost of $0.85 per kilogram. The supplier of SAA tends to be somewhat erratic so Altec finds it necessary to maintain an inventory balance equal to 38% of the following monthsproductionneedsasaprecautionagainststock-outs. Altecpaysfor55%ofa months purchases in the month of purchase, 25% in the following month and the remaining 20% two months after the month of purchase. The ending balance of raw materials at December 31, 2021 is 33,000 kilograms.
5) Altec expects that any payments made in the month of purchase will be subject to 2%, net/30terms. Thepurchasediscountsarereportedasonemetricontheiradministration departmentsbalancedscorecard. Toprovidetheinformationforthebalancedscorecard, purchase discounts are included in the selling and administration budget, and are considered a non-cash item.
6) Beginning accounts payable will consist of $227,800 arising from the following estimated direct material purchases for November and December of 2021:

SAApurchasesinNovember2021: $450,500 SAApurchasesinDecember2021: $306,000
7) Altecs manufacturing process is highly automated. Employees are paid on a per unit basis. Their total pay each month is, therefore, dependent on production volumes and averages $20.00 per hour before benefits. The employers portion of employee benefits adds 20% to the hourly rate. All payroll costs are paid in the period in which they are incurred.

Each unit spends a total of 75 minutes in production.
8) Due to the similarity of the equipment in each of the production stages and the companysconcentrationonasingleproduct,manufacturingoverheadisallocatedbasedonvolume (i.e.theunitsproduced). Thevariableoverheadmanufacturingrateis$25.95perunit, consistingof: Utilities--$12.00;IndirectMaterials--$5.00;Plantmaintenance--$4.50; environmental fee--$1.95; and Other--$2.50.
9) The expected fixed manufacturing overhead costs below cover the twelve months ended December 31, 2021 and are based on actual costs to date and budgeted costs for the duration of the year.

Training and development Property and business taxes Supervisors salary Amortization on equipment Insurance

Other

47,520 36,000 89,400

227,760 92,460 109,600 $ 602,740

a) The property and business taxes, levied by the municipality covering the calendar year, are paid in one lump sum on June 30 of each year. The expected payment for next year (2022) is $39,000.

b) TheannualinsurancepremiumispaidatthebeginningofAprileachyear,coveringthe subsequent 12 months, from April 1 of the current year to March 31 of the next year. The premium is expected to go up to $93,300 on April 1, 2022.

c) All other cash-related fixed manufacturing overhead costs are incurred evenly over the year, paid as incurred, and are not expected to change in 2022.

d) Altecusesthestraightlinemethodofamortization.

10) In 20x1, the average total cost to manufacture one unit was $93.90 under absorption costing.
11) Selling and administrative expenses (S&A) are known to be a mixed cost; however, there is alotofuncertaintyaboutwhatportionisfixedandwhatisvariable. Previousexperience has provided the following information:

Lowest level of sales: 42,500 units Total S&A Expenses: $1,273,123 Highest level of sales: 87,500 units Total S&A Expenses: $2,493,073

Thesecostsarepaidinthemonthinwhichtheyoccur. Notincludedintheaboveexpenses are bad debt expense and the purchases discount.
12) Sales are on a cash and credit basis, with 21% collected during the month of the sale, 42% the following month, and 35% the month thereafter. 2% of sales are uncollectible (bad debt expense).
13) Sales in November and December 2021 are expected to be $1,100,000 and $1,600,000 respectively. Basedontheabovecollectionpatternthiswillresultinaccountsreceivableof $1,617,000 at December 31, 2021 which will be collected in January and February, 2022.
14) During the fiscal year ending December 31, 2022, Altec will be required to make monthly income tax installment payments of $10,000. Outstanding income taxes from the year ended December 31, 2021 must be paid in March 2022. Income tax expense is estimated to be25%ofincomebeforetax. IncometaxesfortheyearendedDecember31,20x2,in excess of installment payments, will be paid in March, 2023.
15) Altec is planning to acquire additional manufacturing equipment for $304,750 cash. 40% of this amount is to be paid in April 2022, the rest, in May 2022. The manufacturing overhead costs shown above already include the amortization on this equipment.
16) Altec. has a policy of paying dividends at the end of each quarter. The president tells you that the board of directors is planning on continuing their policy of declaring dividends of $32,000 per quarter.
17) An arrangement has been made with the local bank that if Altec maintains a minimum balance of $15,000 in their bank account, they will be given a line of credit at a preferred

rateof5%perannum. Allborrowingsfromandrepaymentstothebankmustbeinmultiples of $1,000 and interest must be paid at the end of each month.

All borrowing is considered to occur on the first day of the month, repayments on the last day of the month. Therefore, the amount subject to interest each month is the balance owing at the beginning of the month plus any amounts borrowed at the beginning of the month. Note that any amounts repaid that month do not reduce the amount subject to interest that month because they are assumed repaid on the last day of the month.

18) A listing of the estimated balances in the companys ledger accounts as of December 31, 2021 is given below (this is the ending balance sheet for 2021):

Cash Accounts receivable Inventory-raw materials Inventory-finished goods Prepaid insurance Capital assets (net)

Bank loan payable Accounts payable Income tax payable Common Shares Retained earnings

15,680 1,617,000 28,050 28,170 23,115 1,328,000 $ 3,040,015

102,000 227,800 11,200 1,200,000 1,610,500

$ 3,04,015

questions:

Prepare a monthly master budget for Altec Manufacturing Inc for the year ended December 31, 2022, including the following schedules: (Use the templates provided)

Sales Budget & Schedule of Cash Receipts Production Budget Direct Materials Budget & Schedule of Cash Disbursements Direct Labour Budget Manufacturing Overhead Budget Cost of Goods Manufactured Budget Ending Finished Goods Inventory Budget Cost of Goods Sold Budget Selling and Administrative Expense Budget Cash Budget
Prepare a budgeted income statement and a budgeted statement of r etained earnings for the year ended December 31, 2022, using absorption costing.
Prepare a budgeted balance sheet as at December 31, 2022.