Question
Jacobs Incorporated manufactures a product with a selling price of $55 per unit. Units and monthly cost data follow: Variable: Selling and administrative: $4.60 per
Jacobs Incorporated manufactures a product with a selling price of $55 per unit. Units and monthly cost data follow:
Variable:
Selling and administrative: $4.60 per unit
Direct materials: $15.25 per unit manufactured
Direct labor: $12.50 per unit manufactured
Variable manufacturing overhead: $7.00 per unit manufactured
Fixed:
Selling and administrative: $60,000 per month
Manufacturing (including depreciation of $10,000): 45,000 per month
Jacobs Incorporated pays all bills in the month incurred. All sales are on account with 60 percent collected the month of sale and the balance collected the following month. There are no sales discounts or bad debts.
Jacobs Incorporated desires to maintain an ending finished goods inventory equal to 25 percent of the following months sales and a raw materials inventory equal to 16 percent of the following months production. January 1, 2018 inventories are in line with these policies.
Actual unit sales for December 2017 and budgeted unit sales for January, February and March of 2018 are as follows:
month | december | january | february | march |
Sales-units | 9600 | 8100 | 9925 | 12125 |
Sales dollars | $ 528,000.00 | $ 445,500.00 | $ 545,875.00 | $ 666,875.00 |
Additional Information:
The January 1 beginning cash is projected as $5,125.
The company requires a minimum cash balance of $5,000 and may borrow any amount needed from a local bank at a monthly interest rate of 4%. The company borrows money at the beginning of the month and repayments are made at the end of the month. Interest payments are due monthly.
For the purpose of operational budgeting, units in the January 1 inventory of finished goods are valued at variable manufacturing cost.
Each unit of finished product requires one unit of raw materials.
Jacobs Inc intends to pay a cash dividend of $30,000 in January.
Complete the following budgets (each should be on a separate tab in excel):
Please double check my work for questions a, b, c and need help to fill in the blanks on questions d & e. Thanks!
a. A production budget for January and February.
Production Budget | |||
For the Months of January and February of 2018 | |||
Particulars | January | February | March |
Requirements for current sales (Unit) | 8100 | 9925 | 12125 |
Desired ending inventory | 2481 | 3031 | |
Total Requirements | 10581 | 12956 | 12125 |
Less: Beginning Inventory | 2025 | 2481 | 3031 |
Production Requirements (units) | 8556 | 10475 | 9094 |
b. A purchases budget in units for January.
Purchases Budget | ||
For the month of January 2018 | ||
Particulars | January | February |
Current Requirements (units) | 8100 | 9925 |
Desired Ending Inventory | 1676 | 1455 |
Total Requirements | 9776 | 11380 |
Less: Beginning Inventory | 1296 | 1588 |
Purchases (units) | 8480 | 9792 |
Purchases (dollars at $10 each) | $84,800.00 | $97,920.00 |
c. A manufacturing cost budget for January.
Manufacturing Cost Budget | |
For the month of January 2018 | |
Particulars | January |
Direct Materials | $130,482.81 |
Direct Labor | $106,953.13 |
Variable Manufacturing Overhead | $59,893.75 |
Total Variable Cost | $297,329.69 |
Fixed Manufacturing Overhead | $45,000.00 |
Total Manufacturing Overhead | $342,329.69 |
d. A cash budget for January.
Cash Budget | ||
For the month of January 2018 | ||
Particulars | January | |
Beginning Balance | $5,125.00 | |
Receipts: | ||
December Sales | $290,400.00 | |
January Sales | $245,025.00 | |
Total Cash Available | $535,425.00 | |
Disbursements: | ||
Purchases | ||
Direct Labor | ||
Variable Manufacturing Overhead | ||
Fixed Manufacturing Overhead (exclude depreciation) | ||
Variable Selling and Administrative | ||
Fixed Selling and Administrative | ||
Dividend | ||
Ending Balance |
e. A budgeted contribution income statement for January.
Budgeted Contribution Income Statement | ||
For the month of January 2018 | ||
Particulars | Amount | |
Sales | ||
Less: Variable Cost | ||
Cost of Goods Sold | ||
Selling and Administrative | ||
Contribution | ||
Less Fixed Costs | ||
Manufacturing Overhead | ||
Selling and Administrative | ||
Net Income |
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