JeffreyVaughn,presidentofFrame-ItCompany,wasjustconcludingabudgetmeetingwithhisseniorstaff.ItwasNovemberof20x0,andthegroupwasdiscussingpreparationofthefirm'smasterbudgetfor20x1. "I'vedecidedtogoaheadandpurchase the industrial robot we've been talking about. We'll make the acquisition on January 2 of next year, and I expect it will take most of the year to train the personnel and reorganized the production process to take full advantage of the new equipment."
Required: Prepare Frame-It Company's master budget for 20x 1 by completing the following sched- ules and statements. 1. Sales budget: 20x0 20x1 4th Quarter 1st Quarter 2nd Quarter 3rdQuarter 4th Quarter EntireYear S frame unit sales * S sales price S frame sales revenue ..... L frame unit sales .. * L sales price L frame sales revenue .. Total sales revenue .. Cash sales* . Sales on account. $40% of total sales. +60% of total sales. 2. Cash receipts budget: 20x1 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Entire Year Cash sales .. Cash collections from credit sales made during current quarter" ......". Cash collections from credit sales made during previous quarter .. Total cash receipts . *80% of current quarter's credit sales. 20% of previous quarter's credit sales. 3. Production budget: 20x0 20x1 4th 1st 2nd 3rd 4th Entire Quarter Quarter Quarter Quarter Quarter Year S frames: Sales (in units) . Add: Desired ending inventory .. Total units needed .. Less: Expected beginning inventory . . Units to be produced .. L frames Sales (in units) .. Add: Desired ending inventory Total units needed . Less: Expected beginning inventory .". Units to be produced .4. Direct-material budget: 20x0 20x1 4th 1st 2nd 3rd 4th Entire Quarter Quarter Quarter Quarter Quarter Year Metal strips: S frames to be produced.. * Metal quantity per S unit (ft.). Needed for S frame production ... L frames to be produced.. X Metal quantity per L unit (ft.) .. Needed for L frame production .. Total metal needed for production; to be purchased (it.) .." X Price per foot . Cost of metal strips to be purchased... Glass sheets: S frames to be produced. * Glass quantity per S unit (sheets) .. Needed for S frame production .. L frames to be produced. * Glass quantity per L unit (sheets) .. Needed for L frame production .. Total glass needed for production (sheets) .. Add: Desired ending inventory . 10,400 10,400 Total glass needs. Less: Expected beginning inventory. Glass to be purchased . * Price per glass sheet. Cost of glass to be purchased.. Total raw-material purchases (metal and glass). 5. Cash disbursements budget: 20x1 1st 2nd 3rd 4th Entire Quarter Quarter Quarter Quarter Year Raw-material purchases: Cash payments for purchases during the current quarter.. Cash payments for purchases during the preceding quarter .. Total cash payments for raw-material purchases .. Direct labor: Frames produced (S and L) . * Direct-labor hours per frame.. Direct-labor hours to be used. * Rate per direct-labor hour . Total cash payments for direct labor. Production overhead: Indirect material. Indirect labor. Other .. Total cash payments for production overhead.-.sacks Cash payments for selling and administrative expenses . Total cash disbursements..6. Summary cash budget: 20x1 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Entire Year Cash receipts (from schedule 2) Less: Cash disbursements (from schedule 5) Change in cash balance due to operations .. Payment of dividends Proceeds from bank loan (1/2/x1). Purchase of equipment Quarterly installment on loan principal Quarterly interest payment Change in cash balance during the period Cash balance, beginning of period Cash balance, end of period 7. Prepare a budgeted schedule of cost of goods manufactured and sold for the year 20x 1. (Hint: In the budget, actual and applied overhead will be equal.) 8. Prepare Frame-It's budgeted income statement for 20x1. (Ignore income taxes.) 9. Prepare Frame-It's budgeted statement of retained earnings for 20x 1. 10. Prepare Frame-It's budgeted balance sheet as of December 31, 20x 1
