Insight Glass Company Insight Glass makes sliding glass doors for two local construction companies and wants to prepare a master budget for the next month of operation, June 2014. The sales department estimates that it can sell 180 doors in June. Each door retails for $1,100. In order to avoid delays in shipping, management wants to maintain ending inventory each month equal to 10% of the estimated unit sales in that month. Beginning inventory of finished doors is expected to be 20 units as of June 1, 2014 with a per unit cost of $624. Note: The per unit cost of doors produced during June may vary slightly from the per unit cost of June's beginning Finished Goods Inventory (given as $624). In other words, you will need to arrive at a new per unit cost for the month of June. Each door takes 36 square feet of glass and 4 hours of direct labor. Glass purchases are estimated at $10 per square foot and direct labor averages $16 an hour, including benefits. As of June 19, Insight Glass estimates it will have 1500 square feet of glass in raw materials inventory and would like to have ending inventory of 1000 feet. Variable overhead costs are estimated at $100 per door. Fixed overhead for the month is estimated to be $17,010. Insight Glass anticipates selling and administrative costs of $18,750 monthly and the monthly interest cost on its long-term debt is 1% of the outstanding balance, paid on the 30thof each month. The principal payment on the debt is $25,000 per month. Insight Glass, as a corporation, expects to pay 40% of its net income in income taxes. Monthly estimates are sent to the appropriate taxing authority by the 10thof the next month (therefore, income taxes payable as of 5/31/14 will be paid on 6/10). Monthly depreciation of the building and the equipment is $8,000 and $10,000 respectively (this is the sales/administrative portion of depreciation and not a part of overhead production costs). All sales are on account. However, in estimating cash flows, Insight Glass expects 60% of the current month sales to be received by the end of the month and the balance to be collected in the next month. Therefore, all the Accounts Receivable owing at June 19(which represents 40% of May sales) is expected to be received in June. Glass is purchased on account. Exactly 70% of the purchases are paid in the current month and the balance is paid early in the next month. The balance of Accounts Payable owing at June 1st, will be paid in June. Assume all other expenses (both production and administrative) are paid in the month incurred. The Board of Directors for the company plans to declare and pay a $.50 per share cash dividend during the month of June. Required: 2. 1. Cost of Goods Sold budget for June. Cash Receipts & Cash Disbursements budget for June 3. Cash Budget for June 4. Pro-forma financial statements for June 1. Multi-step Income Statement 1. Link the CGS to the production budget (average cost per unit). 2. Reconcile retained earnings at the bottom of income statement. 2. Classified Balance Sheet 5. Management is unsure of the projected sales figure and would like to know how many units need to be sold for the company to break-even. Insight Glass Company Sales Budget For the Month Ending June 30, 2014 Data Table Part 1 Company Name Insight Glass Company Budgeted Sales, in units Expected sales price Beginning Inv. FG in units): Ending Inv. of FG desired (in units): *Desired El in Units is 10% of current's month sales 180 =10%* Budgeted Sales, Door Units Sales Price per Unit Total Sales $ 1,100.00 $ 198,000.00 Insight Glass Company Production Budget For the Month Ending June 30, 2014 Beg Inv, Direct Material (glass) in sq ft Ending Inv, Glass in sq ft Square feet of glass required per unit Cost Per sq ft glass Direct Material (glass) Cost per unit $ 180 Budgeted Sales, Doors Add Desired Ending Inventory Total Units Needed Less Beginning Inventory Budgeted Doors to Produce in June 18 198 Direct Labor Hours per unit Direct Labor Cost per Hour 20 178 Variable OH per Unit Fixed OH Insight Glass Company Direct Materials Budget For the Month Ending June 30, 2014 Insight Glass Company Direct Labor Budget For the Month Ending June 30, 2014 $ S Budgeted Units to Produce Direct Material Cost per Unit Direct Materials Needed for Production Add Value of Desired Direct Materials in Ending Inv. Total Direct Materials Needed Less: Value of Direct Materials in Beginning Inv. Budgeted Purchases of Direct Materials 178 360 64,080 10,000.00 74,080 15,000.00 59,080 Budgeted Units to Produce Direct Labor Hours per Unit Direct Labor Hours needed Direct Labor Cost per Hour Budgeted Direct Labor Cost 178 4.0 712 16.00 11,392.00 $ $ $ $ $ $ Total Projected Manufacturing Costs per Unit Insight Glass Company Manufacturing Overhead Budget For the Month Ending June 30, 2014 Direct Materials Direct Labor (for 4 hours) Allocated MOH(for 4 hours) Total Projected Cost per Unit $ $ $ $ 64.00 195.56 259.56 178 100.00 $ Budgeted Units to Produce VOH per Door Budgeted VOH Budgeted FOH Budgeted Manufacturing Overhead Costs Ending Inv. of FG desired (in units) Total Projected Cost per Unit $ Ending Inv. of FG: $ $ $ $ 17,800.00 17,010.00 34,810 259.56 Direct Labor Hours 712 $ 48.89 Predetermined MOH Allocation rate (per hour) = BMOHC/DLHR per unit Insight Glass Company Cost of Goods Sold Budget For the Month Ending June 30, 2014 Beginning Inventory 0 Units Cost per unit: Insight Glass Company Selling & Administrative Expense Budget For the Month Ending June 30, 2014 $ Doors Produced and sold in June 2014 0 units Cost per unit: $ 259.56 $ General Selling & Admin Depreciation - Building Depreciation - Equipment Total Budgeted S & A expense Total Budgeted Cost of Goods Sold $ $ Insight Glass Company Cash Budget For the Month Ending June 30, 2014 Data Table - Part 2 Annual Interest Rate on Debt Debt from Balance Sheet Monthly Interest on debt (=1%): $ Beginning Cash Balance Cash Receipts A/R balance on May 31, 2014 June Sales, 60% collected in same month Income tax rate General Selling & Admin Depreciation - Building Depreciation - Equipment $ Cash Available $ Income Tax Payable from Balance Sheet Debt Principal Repayment by Month A/R collections % in month of sale A/P payment % in month of purchase Cash Payments Accounts Payable fr. May 31 to be paid off June Purchases, 70% paid in same month Direct Labor MOH - Variable MOH - Fixed Selling & Admin Income Taxes Interest Expense Ending Cash before Financing 11,392.00 17,800.00 17,010.00 Dividends per share Number of shares outstanding $ 46,202.00 $ (46,202.00) Cash Reciepts from Customers Total Sales Forecast for June $ 198,000.00 Financing Principal Repayments Dividends declared and paid $ $ Cash Receipts A/R balance on May 31, 2014 June Sales, 60% collected in same month Ending Cash Balance $ (46,202.00) $ Cash Disbursements Total Direct Materials purchases $ 59,080 Cash Payments Accounts Payable fr. May 31 to be paid off June Purchases, 70% paid in same month $ 11,392.00 17,800.00 17,010.00 Direct Labor MOH - Variable MOH - Fixed Selling & Admin Income Taxes to be paid (from May) Interest Expense Principal Repayments Dividends Paid $ $ $ $ $ $ $ $ Insight Glass Company Insight Glass makes sliding glass doors for two local construction companies and wants to prepare a master budget for the next month of operation, June 2014. The sales department estimates that it can sell 180 doors in June. Each door retails for $1,100. In order to avoid delays in shipping, management wants to maintain ending inventory each month equal to 10% of the estimated unit sales in that month. Beginning inventory of finished doors is expected to be 20 units as of June 1, 2014 with a per unit cost of $624. Note: The per unit cost of doors produced during June may vary slightly from the per unit cost of June's beginning Finished Goods Inventory (given as $624). In other words, you will need to arrive at a new per unit cost for the month of June. Each door takes 36 square feet of glass and 4 hours of direct labor. Glass purchases are estimated at $10 per square foot and direct labor averages $16 an hour, including benefits. As of June 19, Insight Glass estimates it will have 1500 square feet of glass in raw materials inventory and would like to have ending inventory of 1000 feet. Variable overhead costs are estimated at $100 per door. Fixed overhead for the month is estimated to be $17,010. Insight Glass anticipates selling and administrative costs of $18,750 monthly and the monthly interest cost on its long-term debt is 1% of the outstanding balance, paid on the 30thof each month. The principal payment on the debt is $25,000 per month. Insight Glass, as a corporation, expects to pay 40% of its net income in income taxes. Monthly estimates are sent to the appropriate taxing authority by the 10thof the next month (therefore, income taxes payable as of 5/31/14 will be paid on 6/10). Monthly depreciation of the building and the equipment is $8,000 and $10,000 respectively (this is the sales/administrative portion of depreciation and not a part of overhead production costs). All sales are on account. However, in estimating cash flows, Insight Glass expects 60% of the current month sales to be received by the end of the month and the balance to be collected in the next month. Therefore, all the Accounts Receivable owing at June 19(which represents 40% of May sales) is expected to be received in June. Glass is purchased on account. Exactly 70% of the purchases are paid in the current month and the balance is paid early in the next month. The balance of Accounts Payable owing at June 1st, will be paid in June. Assume all other expenses (both production and administrative) are paid in the month incurred. The Board of Directors for the company plans to declare and pay a $.50 per share cash dividend during the month of June. Required: 2. 1. Cost of Goods Sold budget for June. Cash Receipts & Cash Disbursements budget for June 3. Cash Budget for June 4. Pro-forma financial statements for June 1. Multi-step Income Statement 1. Link the CGS to the production budget (average cost per unit). 2. Reconcile retained earnings at the bottom of income statement. 2. Classified Balance Sheet 5. Management is unsure of the projected sales figure and would like to know how many units need to be sold for the company to break-even. Insight Glass Company Sales Budget For the Month Ending June 30, 2014 Data Table Part 1 Company Name Insight Glass Company Budgeted Sales, in units Expected sales price Beginning Inv. FG in units): Ending Inv. of FG desired (in units): *Desired El in Units is 10% of current's month sales 180 =10%* Budgeted Sales, Door Units Sales Price per Unit Total Sales $ 1,100.00 $ 198,000.00 Insight Glass Company Production Budget For the Month Ending June 30, 2014 Beg Inv, Direct Material (glass) in sq ft Ending Inv, Glass in sq ft Square feet of glass required per unit Cost Per sq ft glass Direct Material (glass) Cost per unit $ 180 Budgeted Sales, Doors Add Desired Ending Inventory Total Units Needed Less Beginning Inventory Budgeted Doors to Produce in June 18 198 Direct Labor Hours per unit Direct Labor Cost per Hour 20 178 Variable OH per Unit Fixed OH Insight Glass Company Direct Materials Budget For the Month Ending June 30, 2014 Insight Glass Company Direct Labor Budget For the Month Ending June 30, 2014 $ S Budgeted Units to Produce Direct Material Cost per Unit Direct Materials Needed for Production Add Value of Desired Direct Materials in Ending Inv. Total Direct Materials Needed Less: Value of Direct Materials in Beginning Inv. Budgeted Purchases of Direct Materials 178 360 64,080 10,000.00 74,080 15,000.00 59,080 Budgeted Units to Produce Direct Labor Hours per Unit Direct Labor Hours needed Direct Labor Cost per Hour Budgeted Direct Labor Cost 178 4.0 712 16.00 11,392.00 $ $ $ $ $ $ Total Projected Manufacturing Costs per Unit Insight Glass Company Manufacturing Overhead Budget For the Month Ending June 30, 2014 Direct Materials Direct Labor (for 4 hours) Allocated MOH(for 4 hours) Total Projected Cost per Unit $ $ $ $ 64.00 195.56 259.56 178 100.00 $ Budgeted Units to Produce VOH per Door Budgeted VOH Budgeted FOH Budgeted Manufacturing Overhead Costs Ending Inv. of FG desired (in units) Total Projected Cost per Unit $ Ending Inv. of FG: $ $ $ $ 17,800.00 17,010.00 34,810 259.56 Direct Labor Hours 712 $ 48.89 Predetermined MOH Allocation rate (per hour) = BMOHC/DLHR per unit Insight Glass Company Cost of Goods Sold Budget For the Month Ending June 30, 2014 Beginning Inventory 0 Units Cost per unit: Insight Glass Company Selling & Administrative Expense Budget For the Month Ending June 30, 2014 $ Doors Produced and sold in June 2014 0 units Cost per unit: $ 259.56 $ General Selling & Admin Depreciation - Building Depreciation - Equipment Total Budgeted S & A expense Total Budgeted Cost of Goods Sold $ $ Insight Glass Company Cash Budget For the Month Ending June 30, 2014 Data Table - Part 2 Annual Interest Rate on Debt Debt from Balance Sheet Monthly Interest on debt (=1%): $ Beginning Cash Balance Cash Receipts A/R balance on May 31, 2014 June Sales, 60% collected in same month Income tax rate General Selling & Admin Depreciation - Building Depreciation - Equipment $ Cash Available $ Income Tax Payable from Balance Sheet Debt Principal Repayment by Month A/R collections % in month of sale A/P payment % in month of purchase Cash Payments Accounts Payable fr. May 31 to be paid off June Purchases, 70% paid in same month Direct Labor MOH - Variable MOH - Fixed Selling & Admin Income Taxes Interest Expense Ending Cash before Financing 11,392.00 17,800.00 17,010.00 Dividends per share Number of shares outstanding $ 46,202.00 $ (46,202.00) Cash Reciepts from Customers Total Sales Forecast for June $ 198,000.00 Financing Principal Repayments Dividends declared and paid $ $ Cash Receipts A/R balance on May 31, 2014 June Sales, 60% collected in same month Ending Cash Balance $ (46,202.00) $ Cash Disbursements Total Direct Materials purchases $ 59,080 Cash Payments Accounts Payable fr. May 31 to be paid off June Purchases, 70% paid in same month $ 11,392.00 17,800.00 17,010.00 Direct Labor MOH - Variable MOH - Fixed Selling & Admin Income Taxes to be paid (from May) Interest Expense Principal Repayments Dividends Paid $ $ $ $ $ $ $ $