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 Junes 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 1st, 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 30th of 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 10th of 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 1st (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.
Instructions:
You are to use the Excel project template on the course Moodle site, which will enable you to prepare all the budgets and statements listed under the Required section below. The budgets should be linked, using cell references, etc. For instance, total sales revenue on the Income Statement should be referenced from the Sales Budget so that if the projected units sold in June changed, total sales revenue on the Income Statement would change in kind.
Required:
- Sales budget for June
- Production budget for June in units.
- Direct Materials budget for June.
- Direct Labor budget for June.
- Manufacturing Overhead budget for June.
- Cost of Goods Sold budget for June.
- Cash Receipts & Cash Disbursements budget for June
- Cash Budget for June
- Pro-forma financial statements for June
- Multi-step Income Statement
- Link the CGS to the production budget (average cost per unit).
- Reconcile retained earnings at the bottom of income statement.
- Classified Balance Sheet
- 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.
Prepare a master budget for the month of June 2014 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): =10%* *Desired EI in Units is 10% of current's month sales Budgeted Sales, Door Units Sales Price per Unit Total Sales 180 $ 1,100.00 ########### 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 $ Budgeted Sales, Doors Add Desired Ending Inventory Total Units Needed Less Beginning Inventory Budgeted Doors to Produce in June 180 18 198 20 178 Direct Labor Hours per unit Direct Labor Cost per Hour Variable OH per Unit Fixed OH Insight Glass Company Direct Iaterials Budget For the Month Ending June 30, 2014 Insight Glass Company Direct Labor Budget For the Month Ending June 30, 2014 $ Budgeted Units to Produce 178 Direct Material Cost per Unit 360 Direct Materials Needed for Production 64, 080 Add Value of Desired Direct Materials in En $ 10,000.00 Total Direct Materials Needed 74, 080 Less: Value of Direct Materials in Beginnin $ 15,000.00 Budgeted Purchases of Direct Materials 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 Ianufacturing Costs per Unit Insight Glass Company Ianufacturing 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 $ $ $ 360.00 64.00 195.56 619.56 Budgeted Units to Produce VOH per Door Budgeted VOH Budgeted FOH Budgeted Manufacturing Overhead Costs $ $ 178 100.00 17,800.00 17, 010.00 34, 810 Ending Inv. of FG desired ( 18 Total Projected Cost per Un $ 619. 56 Ending Inv. of FG: $ 11, 152. 11 $ $ 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 10 Units Insight Glass Company Selling & Administrative Expense Budget For the Month Ending June 30, 2014 per unit: ####### $ 6, 240.00 $ Doors Produced and sold in June 2014 170 units ####### per unit: ########### General Selling & Admin Depreciation - Building Depreciation - Equipment Total Budgeted S & A expense 18,750.00 8,000.00 10,000.00 36, 750.00 $ 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%): % 12% 575,000.00 5, 750.00 $ Beginning Cash Balance Cash Receipts A/R balance on May 31, 2014 June Sales, 60% collected in same mi 118, 800.00 Income tax rate General Selling & Admin Depreciation - Building Depreciation - Equipment 40% 18, 750.00 8,000.00 10,000.00 $ $ $ ######### Cash Available ######### Income Tax Payable from Balance Shee $ Debt Principal Repayment by Month 20, 080.00 25,000.00 $ A/R collections % in month of sale A/P payment % in month of purchase 60% 70% Cash Payments Accounts Payable fr. May 31 to be p: June Purchases, 70% paid in same moi Direct Labor MOH - Variable MOH - Fixed Selling & Admin Income Taxes Interest Expense Ending Cash before Financing 41, 356.00 11, 392.00 17,800.00 17, 010.00 18, 750.00 20, 080.00 5, 750.00 Dividends per share Number of shares outstanding 0.50 100,000 ######### 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 mo $ $ 88,000.00 118, 800.00 Ending Cash Balance ######### Cash Disbursements Total Direct Materials purchases Cash Payments Accounts Payable fr. May 31 to be paid off June Purchases, 70% paid in same mon $ - Direct Labor MOH Variable MOH - Fixed Selling & Admin Income Taxes to be paid (from May) Interest Expense Principal Repayments Dividends Paid Insight Glass Company Proforma Income Statement For the Month Ending June 30, 2014 Sales Revenue COGS Gross Profit #DIV/0! #DIV/0! - Less Operating Expenses General Selling & Admin Depreciation - Building Depreciation - Equipment Total Operating Income #DIV/0! Interest Expense Total Net Income Before Income Taxes #DIV/0! Income Tax Expense @ 40% Net Income #DIV/0! #DIV/0! Reconciliation of Retained Earnings Beginning RE Add: June Net Income #DIV/0! Less Dividends Paid Ending RE #DIV/0! Reconciliation of Retained Earnings Beginning RE Add: June Net Income #DIV/0! Less Dividends Paid Ending RE #DIV/0! Breakeven units $ Unit Sales Price Less VC DM per unit DL per unit VOH per Unit Contribution Margin Per Unit Less FC Manufacturing FOH $ Non Manufacturing G & A Depr - BLD Depr - EQ Total Fixed Costs: BEP = Total Fixed Costs Contribution Margin per unit #DIV/0! inits (round up) Breakeven Point in Units (round up) : Insight Glass Company Proforma Balance Sheet May 31, 2014 June 30, 2014 Change $ $ $ $ $ Current Assets Cash Accounts Receivable Inventory---Raw Material Finished Goods Total Current Assets 43,000 88,000 15, 000 12, 480 158, 480 $ $ (43, 000) (88, 000) (15, 000) #DIV/0! #DIV/0! #DIV/0! #DIV/0! Land, Building and Equipment Land Building (net of depreciation) Equipment (net of depreciation) Total Property, Plant & Equipment 100,000 997, 625 746, 310 1, 843, 935 $ $ $ $ $ 100,000 997, 625 746, 310 1, 843, 935 GA $ $ $ Other Assets Total Assets 125, 585 2, 128, 000 125, 585 #DIV/0! $ #DIV/0! Liabilities $ $ Current Liabilities Accounts Payable Income Tax Payable Total Current Liabilities 28,500 20, 080 48, 580.00 #DIV/0! #DIV/0! (28,500) #DIV/0! #DIV/0! $ $ Long-term debt Total Liabilities 575,000 623, 580 575, 000 #DIV/0! #DIV/0! Liabilities $ $ $ Current Liabilities Accounts Payable Income Tax Payable Total Current Liabilities 28, 500 20, 080 48, 580.00 #DIV/0! #DIV/0! (28,500 #DIV/0! #DIV/0! $ $ Long-term debt Total Liabilities 575,000 623, 580 575,000 #DIV/0! #DIV/0! $ Stockholder's Equity Common Stock: $4 Par Value 100, 000 shares Additional Paid-In Capital Retained Earnings Total Stockholders' Equity $ $ $ 400,000 600,000 504, 420 1, 504, 420 400,000 600,000 #DIV/0! #DIV/0! #DIV/0! #DIV/0! Total Liabilities and Stockholders' Equity $ 2, 128, 000 #DIV/0! #DIV/0! #DIV/0! Prepare a master budget for the month of June 2014 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): =10%* *Desired EI in Units is 10% of current's month sales Budgeted Sales, Door Units Sales Price per Unit Total Sales 180 $ 1,100.00 ########### 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 $ Budgeted Sales, Doors Add Desired Ending Inventory Total Units Needed Less Beginning Inventory Budgeted Doors to Produce in June 180 18 198 20 178 Direct Labor Hours per unit Direct Labor Cost per Hour Variable OH per Unit Fixed OH Insight Glass Company Direct Iaterials Budget For the Month Ending June 30, 2014 Insight Glass Company Direct Labor Budget For the Month Ending June 30, 2014 $ Budgeted Units to Produce 178 Direct Material Cost per Unit 360 Direct Materials Needed for Production 64, 080 Add Value of Desired Direct Materials in En $ 10,000.00 Total Direct Materials Needed 74, 080 Less: Value of Direct Materials in Beginnin $ 15,000.00 Budgeted Purchases of Direct Materials 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 Ianufacturing Costs per Unit Insight Glass Company Ianufacturing 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 $ $ $ 360.00 64.00 195.56 619.56 Budgeted Units to Produce VOH per Door Budgeted VOH Budgeted FOH Budgeted Manufacturing Overhead Costs $ $ 178 100.00 17,800.00 17, 010.00 34, 810 Ending Inv. of FG desired ( 18 Total Projected Cost per Un $ 619. 56 Ending Inv. of FG: $ 11, 152. 11 $ $ 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 10 Units Insight Glass Company Selling & Administrative Expense Budget For the Month Ending June 30, 2014 per unit: ####### $ 6, 240.00 $ Doors Produced and sold in June 2014 170 units ####### per unit: ########### General Selling & Admin Depreciation - Building Depreciation - Equipment Total Budgeted S & A expense 18,750.00 8,000.00 10,000.00 36, 750.00 $ 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%): % 12% 575,000.00 5, 750.00 $ Beginning Cash Balance Cash Receipts A/R balance on May 31, 2014 June Sales, 60% collected in same mi 118, 800.00 Income tax rate General Selling & Admin Depreciation - Building Depreciation - Equipment 40% 18, 750.00 8,000.00 10,000.00 $ $ $ ######### Cash Available ######### Income Tax Payable from Balance Shee $ Debt Principal Repayment by Month 20, 080.00 25,000.00 $ A/R collections % in month of sale A/P payment % in month of purchase 60% 70% Cash Payments Accounts Payable fr. May 31 to be p: June Purchases, 70% paid in same moi Direct Labor MOH - Variable MOH - Fixed Selling & Admin Income Taxes Interest Expense Ending Cash before Financing 41, 356.00 11, 392.00 17,800.00 17, 010.00 18, 750.00 20, 080.00 5, 750.00 Dividends per share Number of shares outstanding 0.50 100,000 ######### 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 mo $ $ 88,000.00 118, 800.00 Ending Cash Balance ######### Cash Disbursements Total Direct Materials purchases Cash Payments Accounts Payable fr. May 31 to be paid off June Purchases, 70% paid in same mon $ - Direct Labor MOH Variable MOH - Fixed Selling & Admin Income Taxes to be paid (from May) Interest Expense Principal Repayments Dividends Paid Insight Glass Company Proforma Income Statement For the Month Ending June 30, 2014 Sales Revenue COGS Gross Profit #DIV/0! #DIV/0! - Less Operating Expenses General Selling & Admin Depreciation - Building Depreciation - Equipment Total Operating Income #DIV/0! Interest Expense Total Net Income Before Income Taxes #DIV/0! Income Tax Expense @ 40% Net Income #DIV/0! #DIV/0! Reconciliation of Retained Earnings Beginning RE Add: June Net Income #DIV/0! Less Dividends Paid Ending RE #DIV/0! Reconciliation of Retained Earnings Beginning RE Add: June Net Income #DIV/0! Less Dividends Paid Ending RE #DIV/0! Breakeven units $ Unit Sales Price Less VC DM per unit DL per unit VOH per Unit Contribution Margin Per Unit Less FC Manufacturing FOH $ Non Manufacturing G & A Depr - BLD Depr - EQ Total Fixed Costs: BEP = Total Fixed Costs Contribution Margin per unit #DIV/0! inits (round up) Breakeven Point in Units (round up) : Insight Glass Company Proforma Balance Sheet May 31, 2014 June 30, 2014 Change $ $ $ $ $ Current Assets Cash Accounts Receivable Inventory---Raw Material Finished Goods Total Current Assets 43,000 88,000 15, 000 12, 480 158, 480 $ $ (43, 000) (88, 000) (15, 000) #DIV/0! #DIV/0! #DIV/0! #DIV/0! Land, Building and Equipment Land Building (net of depreciation) Equipment (net of depreciation) Total Property, Plant & Equipment 100,000 997, 625 746, 310 1, 843, 935 $ $ $ $ $ 100,000 997, 625 746, 310 1, 843, 935 GA $ $ $ Other Assets Total Assets 125, 585 2, 128, 000 125, 585 #DIV/0! $ #DIV/0! Liabilities $ $ Current Liabilities Accounts Payable Income Tax Payable Total Current Liabilities 28,500 20, 080 48, 580.00 #DIV/0! #DIV/0! (28,500) #DIV/0! #DIV/0! $ $ Long-term debt Total Liabilities 575,000 623, 580 575, 000 #DIV/0! #DIV/0! Liabilities $ $ $ Current Liabilities Accounts Payable Income Tax Payable Total Current Liabilities 28, 500 20, 080 48, 580.00 #DIV/0! #DIV/0! (28,500 #DIV/0! #DIV/0! $ $ Long-term debt Total Liabilities 575,000 623, 580 575,000 #DIV/0! #DIV/0! $ Stockholder's Equity Common Stock: $4 Par Value 100, 000 shares Additional Paid-In Capital Retained Earnings Total Stockholders' Equity $ $ $ 400,000 600,000 504, 420 1, 504, 420 400,000 600,000 #DIV/0! #DIV/0! #DIV/0! #DIV/0! Total Liabilities and Stockholders' Equity $ 2, 128, 000 #DIV/0! #DIV/0! #DIV/0
