Judd's Reproductions makes reproductions of antique tables and chairs and sells them through three sales outlets. The product line consists of two styles of chairs, two styles of tables, and three styles of cabinets. Although customers often ask Judd Molinari, the owner/manager of Judd's Reproductions, to make other products, he does not intend to expand the product line. The planning group at Judd's Reproductions prepared a master budget for the fiscal year, which corresponds to the calendar year. It is December 2014, and the planners are completing the 2015 master budget. Unit prices are $200, $900, and $1,800 for the chairs, tables, and cabinets, respectively. Customers pay (1) by cash and receive a 5% discount, (2) by credit card (the credit card company takes 3% of the revenue as its fee and remits the balance in the month following the month of sale), or (3) on account (only exporters buy on account). The distribution of cash, credit card, and exporter sales is 25%, 35%, and 40%, respectively. Of the credit sales to exporters, Judd's Reproductions collects 30% in the month following the sale, 50% in the second month following the sale, and 17% in the third month following the sale, with 3% going uncollected. Judd's Reproductions recognizes the expense of cash discounts credit card fees, and bad debts in the month of the sale. Judd's employs 40 people who work in the following areas: 15 in administration, sales, and shipping, 2 in manufacturing supervision (director and a scheduler);9 in manufacturing fabrication and assembly (carpenters), and 14 in manufacturing, finishing, and other areas (helpers, cleaners, and maintenance crew). The standard carpenter hours required to make the parts for and assemble a chair, table, or cabinet are 0.4, 2.5, and 6, respectively. Production personnel have organized the work so that each carpenter hour worked requires 1.5 helper hours. Therefore, production planners maintain a standard ratio on average of 1.5 helpers for every carpenter. The company estimated carpenters and helpers $24 and $14 standard wage rate per hour, respectively (including all benefits and OT). Judd's Reproductions guarantees all employees pay for at least 172 hours per month regardless of the hours of work available. When the employees are not doing their regular jobs, they undertake maintenance, training community service, and customer relations activities. Judd's pays each employee weekly for that week's work. If an employee works 172 hours or less during the month, Judd's still pays the employee for 172 hours at his or her normal hourly rate. The company pays 150% of the normal hourly rate for every hour over 172 that the employee works during the month. Planners add new carpenters if the projected total monthly overtime is more than 5% of the total regular carpenter hours available. Judd's has a policy of no employee layoffs. Any required hiring is done on the first day of each month. For a factory, Judd's Reproductions rents a converted warehouse that costs $600,000 per year. The company pays rent quarterly beginning January 1 of each year. Judd's pays other fixed manufacturing costs, which include manufacturing supervision salaries and amount to $480,000 annually, paid in equal monthly amounts. The capital investment policy is to purchase, each January and July, $5,000 of machinery and equipment per carpenter employed during that month. Judd's recognizes depreciation at the rate of 10% of the year-end balance of the machinery and equipment account. Statistical studies of cost behavior have determined that supplies, variable support, and maintenance costs vary with the number of carpenter hours worked and are $5, $20, and $15 per hour, respectively. The unit standards of wood required for chairs, tables, and cabinets are 1, 8, and 15, respectively. Each unit of wood costs $30. The inventory policy is to make products in the month they will be sold. Two suppliers deliver raw materials and supplies as required. The company pays for all materials, supplies, variable support, and maintenance items on receipt. Annual administration salaries, fixed selling costs, and planned advertising expenditures are $300,000, $360,000, and $600,000, respectively. Judd's Reproductions makes these expenditures in equal monthly amounts. Packaging and shipping costs for chairs, tables, and cabinets are $15, $65, and $135, respectively. Variable selling costs are 6% of each product's list price. Judd's Reproductions pays packaging, shipping, and variable selling costs as incurred. Using its line of credit, Judd's Reproductions maintains a minimum cash balance of $50,000. All line- of-credit transactions occur on the first day of each month. The bank charges interest on the line-of- credit account balance at the rate of 10% per year. Judd's pays interest on the first day of each month on the line-of-credit balance outstanding at the end of the previous month. On the first of each month, the bank pays interest at the rate of 3% per year on funds exceeding $50,000 in the company's cash account at the end of the previous month. Realized sales for October and November and expected sales for December 2014 appear below: account at the end of the previous month. Realized sales for October and November and expected sales for December 2014 appear below: ITEM Chairs Tables Cabinets Judd's Reproductions Unit Sales 2014 OCTOBER NOVEMBER 900 975 175 90 102 DECEMBER 950 201 95 188 Sales staff estimates the unit demand for 2015 as follows: chairs, 1,000, plus a random number uniformly distributed between 0 and 50, plus 15% of the previous month's sales of chairs, tables, 200, plus a random number uniformly distributed between 0 and 20, plus 15% of the previous months sales, and cabinets, 100, plus a random number uniformly distributed between 0 and 10, plus 15% of the previous month's sales of cabinets. This estimation process resulted in the demand forecasts, sales plan found in the following table: MONTIE January Fenry March April Projected Unit Sales - DEMAND 2015 CHAIRS TABLES 1,020 200 1.191 237 1.179 240 1.195 250 CABINETS 109 120 119 126 January February March April May June July August September October November December 1,020 1,191 1,179 1,195 1,200 1,204 1,194 1,199 1,222 1,219 1,207 1,192 200 237 243 250 252 255 242 253 243 248 244 255 109 120 119 126 122 125 123 121 127 126 126 119 Planners project the Judd's Reproductions balance sheet at January 1, 2015, to be as follows: Judd's Reproductions Balance Sheet January 1, 2015 SO Cash Accounts receivable Machinery (net book value) Total $50,000 Bank loan 575,008 360,000 Shareholder's equity $985.008 Total 985,008 $985.008 The information and data provided in Part 1 and Part II was the first attempt by Judd's for setting an annual Master Budget. However, they have yet to establish an ongoing process of collecting the actual monthly financial results for comparing to the monthly budget, compute variances and take corrective actions. In Part II of the student data we can see as a company Judd's prepares and sets standards for direct material and direct labor on each of the three products produced. Refer to Schedule A Judd's has begun to use this information to investigate possible issues in productivity, material price and wage rate issues. To date, these efforts have been very informal conversations between finance and operations. There is no monthly report or variance analysis prepared to "shine the light" on the standard cost variances nor is there responsibility assigned for investigating and correcting them. Product and purchasing managers have not been involved in any of these variance discussions Further, because they have not finalized their budget process they have never used or investigated the possibility of using a flexible budget. As a result they do not take full advantage of the expected standards in terms of assessing price and quantity/efficiency variances arising from actual costs to highlight performance problems. For the purposes of this case we have compiled the actual cost results that you must use to compare to the pre determined material and labor standards for each of the three products PROTECTED VIEW Beer cantones you to edit to stay in Protected trable do K Jude's Reproduction Amunt Cashow Cash Flow Pan 2015 ENERO Fab Sep Now May FARL Schede Con complete do not change Cathew 11 Cathew 12 where Input Collection from AR F. Come Cashflow Input File Expenses by in 1922, from a Cerruts only one is 25-31 Son Data for A Amour Come Total cash Outlow IT DirectInput From Fler Resource and Staffing schedules 1 Cape Car T 22 How 24 cm Wacht NOT berg Chery Money average from Arual Numbers Adag de the Nath Tu Cash Outiew G 3 SUB 14 2304 110 100 TH THE 175 ST 101 2014 114114 COMPLETED ALO 13 he 14 om WAN HOW TO.. M Yhd Hein Wrested and we were Cash Flow ON LO E F G H ? Data Source Exhit A ExhibA Exhibit A Assignment: Input Sales and costs/expenses from the applicable Exhibits. Compute all totals as identified. Input and compute certain fixed and period costs from the source case data as indicated. Compute 3 0 1 Judd's Reproductions 2 Annual Budget 3 4 Income Statement 2015 (Exhibit H) 5 9 16 Revenue Total Year 12 Chairs S 2844.00 13 Tables 14 Cabinets 15 16 Total 17 18 Variable Expenses 19 Carpenters 20 Herpes 21 Maintenance 22 Support 23 Selling 24 Shipping 25 Supplies 26 7,290 27 20 Tot Variable 20 30 Contribution Margin 31 22 33 Fixed Costs 34 Depreciation 35 Warehouse Rent Other Fadory 39 39 Ove period Costs Admin San 61 Seling 12 Exhibt Exhibe Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Wood Compute Compute Compute HOW TO... Compute Budget instructions Budget Instructions To compute depreciation for the income statement, read the following Instructions: The capital investment policy is to purchase, each lanuary and lol. 55.000 of machinery and equipment per carpenter employed during the month ces depreciation at the sale of 10% of the of the machinery Budget structor Budgetcon 4 Ang Badeb Chico Credit Cards we encore EL EL EDE 1,063 Total and Period Costs Interest income and interest expense correct on complete the cash flow schedule, however, when applied to the complete Incomeament you properly show the Hect on profitonin profit while the other reducesprofil 51 Compa) 3450 452 Ne you have founding errors please show the correct number and comment on the reconciled amounts Direct input from terenced schedule Dectingut tromicin Handout Background Data Salmiplan A) Prodplan B DL staff FlexResourc) SalesExp(E) ARTICOWG tate[H L18 G A H J M o N 0 P R 1 BCD Assignment 2 Judd's Reproductions Complete the 12/31/2015 balance for all Four accounts, 3 Annual Budget Balance Sheet Comparative Balance Sheet 2015 (Exhibit 1) Annual Activity 12/31/2015 50.000 7 B ? 1/1/2015 Source From schedule G 575.0011 Annual activity. Net Change in AR 360,000 360,000 Show addition to PPE less DepreciabonCash and incorne Statoment) 10 11 Cash 12 13 Accounts Receivable 14 15 PPLE 10 17 Total Assets 18 19 23 Bank Loan 21 22 23 Shareholders Equity 21 985,000 $1,665,460 Complete $$86,008 $1,665,460 NO Al Balances are accused onderhey must be paid Direct input from referenced schedule Calculation Com Dorot change Sales ARI D A Judd's Reproductions Annual Budget 3 CM Product Mix F Contribution Margin Tables 1 Source: 10.00 Labor hours per charm Padi Pantai Warrior Labor hours per chatom Prodcution Plan Wagon Deepers 15 Male per comprot Plan Marcos perros Data Sales Price Chas 13 200 00 Variable Direct Costs Drewbora 5 24003 000 Direct Labore $ 14001 Direct dp 5 30.00 $ 3D Other Variante Packaging Cranes y pro $ 11.00 teling (Vares by prodotto 12.00 Sicoles 35 per 2.00 S. (20 per Cup 8.00 Maintenance is per 600 Total Variatie Costa OTO Combinar 5 10000 CM 595 Une's Sold Sold of Tai 761 12.50 Per una Perunt on Data Papercharples Costpart) Hou Proton Puch Sport Center Chara Produtos Perpercar Mat Cost Care How to managers se 22 BY 14 202 1570 1 TRGO VO 1331 5 1 Wehed Average CM 0 333 35 38 30 40 41 42 45 Judd's Reproductions makes reproductions of antique tables and chairs and sells them through three sales outlets. The product line consists of two styles of chairs, two styles of tables, and three styles of cabinets. Although customers often ask Judd Molinari, the owner/manager of Judd's Reproductions, to make other products, he does not intend to expand the product line. The planning group at Judd's Reproductions prepared a master budget for the fiscal year, which corresponds to the calendar year. It is December 2014, and the planners are completing the 2015 master budget. Unit prices are $200, $900, and $1,800 for the chairs, tables, and cabinets, respectively. Customers pay (1) by cash and receive a 5% discount, (2) by credit card (the credit card company takes 3% of the revenue as its fee and remits the balance in the month following the month of sale), or (3) on account (only exporters buy on account). The distribution of cash, credit card, and exporter sales is 25%, 35%, and 40%, respectively. Of the credit sales to exporters, Judd's Reproductions collects 30% in the month following the sale, 50% in the second month following the sale, and 17% in the third month following the sale, with 3% going uncollected. Judd's Reproductions recognizes the expense of cash discounts credit card fees, and bad debts in the month of the sale. Judd's employs 40 people who work in the following areas: 15 in administration, sales, and shipping, 2 in manufacturing supervision (director and a scheduler);9 in manufacturing fabrication and assembly (carpenters), and 14 in manufacturing, finishing, and other areas (helpers, cleaners, and maintenance crew). The standard carpenter hours required to make the parts for and assemble a chair, table, or cabinet are 0.4, 2.5, and 6, respectively. Production personnel have organized the work so that each carpenter hour worked requires 1.5 helper hours. Therefore, production planners maintain a standard ratio on average of 1.5 helpers for every carpenter. The company estimated carpenters and helpers $24 and $14 standard wage rate per hour, respectively (including all benefits and OT). Judd's Reproductions guarantees all employees pay for at least 172 hours per month regardless of the hours of work available. When the employees are not doing their regular jobs, they undertake maintenance, training community service, and customer relations activities. Judd's pays each employee weekly for that week's work. If an employee works 172 hours or less during the month, Judd's still pays the employee for 172 hours at his or her normal hourly rate. The company pays 150% of the normal hourly rate for every hour over 172 that the employee works during the month. Planners add new carpenters if the projected total monthly overtime is more than 5% of the total regular carpenter hours available. Judd's has a policy of no employee layoffs. Any required hiring is done on the first day of each month. For a factory, Judd's Reproductions rents a converted warehouse that costs $600,000 per year. The company pays rent quarterly beginning January 1 of each year. Judd's pays other fixed manufacturing costs, which include manufacturing supervision salaries and amount to $480,000 annually, paid in equal monthly amounts. The capital investment policy is to purchase, each January and July, $5,000 of machinery and equipment per carpenter employed during that month. Judd's recognizes depreciation at the rate of 10% of the year-end balance of the machinery and equipment account. Statistical studies of cost behavior have determined that supplies, variable support, and maintenance costs vary with the number of carpenter hours worked and are $5, $20, and $15 per hour, respectively. The unit standards of wood required for chairs, tables, and cabinets are 1, 8, and 15, respectively. Each unit of wood costs $30. The inventory policy is to make products in the month they will be sold. Two suppliers deliver raw materials and supplies as required. The company pays for all materials, supplies, variable support, and maintenance items on receipt. Annual administration salaries, fixed selling costs, and planned advertising expenditures are $300,000, $360,000, and $600,000, respectively. Judd's Reproductions makes these expenditures in equal monthly amounts. Packaging and shipping costs for chairs, tables, and cabinets are $15, $65, and $135, respectively. Variable selling costs are 6% of each product's list price. Judd's Reproductions pays packaging, shipping, and variable selling costs as incurred. Using its line of credit, Judd's Reproductions maintains a minimum cash balance of $50,000. All line- of-credit transactions occur on the first day of each month. The bank charges interest on the line-of- credit account balance at the rate of 10% per year. Judd's pays interest on the first day of each month on the line-of-credit balance outstanding at the end of the previous month. On the first of each month, the bank pays interest at the rate of 3% per year on funds exceeding $50,000 in the company's cash account at the end of the previous month. Realized sales for October and November and expected sales for December 2014 appear below: account at the end of the previous month. Realized sales for October and November and expected sales for December 2014 appear below: ITEM Chairs Tables Cabinets Judd's Reproductions Unit Sales 2014 OCTOBER NOVEMBER 900 975 175 90 102 DECEMBER 950 201 95 188 Sales staff estimates the unit demand for 2015 as follows: chairs, 1,000, plus a random number uniformly distributed between 0 and 50, plus 15% of the previous month's sales of chairs, tables, 200, plus a random number uniformly distributed between 0 and 20, plus 15% of the previous months sales, and cabinets, 100, plus a random number uniformly distributed between 0 and 10, plus 15% of the previous month's sales of cabinets. This estimation process resulted in the demand forecasts, sales plan found in the following table: MONTIE January Fenry March April Projected Unit Sales - DEMAND 2015 CHAIRS TABLES 1,020 200 1.191 237 1.179 240 1.195 250 CABINETS 109 120 119 126 January February March April May June July August September October November December 1,020 1,191 1,179 1,195 1,200 1,204 1,194 1,199 1,222 1,219 1,207 1,192 200 237 243 250 252 255 242 253 243 248 244 255 109 120 119 126 122 125 123 121 127 126 126 119 Planners project the Judd's Reproductions balance sheet at January 1, 2015, to be as follows: Judd's Reproductions Balance Sheet January 1, 2015 SO Cash Accounts receivable Machinery (net book value) Total $50,000 Bank loan 575,008 360,000 Shareholder's equity $985.008 Total 985,008 $985.008 The information and data provided in Part 1 and Part II was the first attempt by Judd's for setting an annual Master Budget. However, they have yet to establish an ongoing process of collecting the actual monthly financial results for comparing to the monthly budget, compute variances and take corrective actions. In Part II of the student data we can see as a company Judd's prepares and sets standards for direct material and direct labor on each of the three products produced. Refer to Schedule A Judd's has begun to use this information to investigate possible issues in productivity, material price and wage rate issues. To date, these efforts have been very informal conversations between finance and operations. There is no monthly report or variance analysis prepared to "shine the light" on the standard cost variances nor is there responsibility assigned for investigating and correcting them. Product and purchasing managers have not been involved in any of these variance discussions Further, because they have not finalized their budget process they have never used or investigated the possibility of using a flexible budget. As a result they do not take full advantage of the expected standards in terms of assessing price and quantity/efficiency variances arising from actual costs to highlight performance problems. For the purposes of this case we have compiled the actual cost results that you must use to compare to the pre determined material and labor standards for each of the three products PROTECTED VIEW Beer cantones you to edit to stay in Protected trable do K Jude's Reproduction Amunt Cashow Cash Flow Pan 2015 ENERO Fab Sep Now May FARL Schede Con complete do not change Cathew 11 Cathew 12 where Input Collection from AR F. Come Cashflow Input File Expenses by in 1922, from a Cerruts only one is 25-31 Son Data for A Amour Come Total cash Outlow IT DirectInput From Fler Resource and Staffing schedules 1 Cape Car T 22 How 24 cm Wacht NOT berg Chery Money average from Arual Numbers Adag de the Nath Tu Cash Outiew G 3 SUB 14 2304 110 100 TH THE 175 ST 101 2014 114114 COMPLETED ALO 13 he 14 om WAN HOW TO.. M Yhd Hein Wrested and we were Cash Flow ON LO E F G H ? Data Source Exhit A ExhibA Exhibit A Assignment: Input Sales and costs/expenses from the applicable Exhibits. Compute all totals as identified. Input and compute certain fixed and period costs from the source case data as indicated. Compute 3 0 1 Judd's Reproductions 2 Annual Budget 3 4 Income Statement 2015 (Exhibit H) 5 9 16 Revenue Total Year 12 Chairs S 2844.00 13 Tables 14 Cabinets 15 16 Total 17 18 Variable Expenses 19 Carpenters 20 Herpes 21 Maintenance 22 Support 23 Selling 24 Shipping 25 Supplies 26 7,290 27 20 Tot Variable 20 30 Contribution Margin 31 22 33 Fixed Costs 34 Depreciation 35 Warehouse Rent Other Fadory 39 39 Ove period Costs Admin San 61 Seling 12 Exhibt Exhibe Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Wood Compute Compute Compute HOW TO... Compute Budget instructions Budget Instructions To compute depreciation for the income statement, read the following Instructions: The capital investment policy is to purchase, each lanuary and lol. 55.000 of machinery and equipment per carpenter employed during the month ces depreciation at the sale of 10% of the of the machinery Budget structor Budgetcon 4 Ang Badeb Chico Credit Cards we encore EL EL EDE 1,063 Total and Period Costs Interest income and interest expense correct on complete the cash flow schedule, however, when applied to the complete Incomeament you properly show the Hect on profitonin profit while the other reducesprofil 51 Compa) 3450 452 Ne you have founding errors please show the correct number and comment on the reconciled amounts Direct input from terenced schedule Dectingut tromicin Handout Background Data Salmiplan A) Prodplan B DL staff FlexResourc) SalesExp(E) ARTICOWG tate[H L18 G A H J M o N 0 P R 1 BCD Assignment 2 Judd's Reproductions Complete the 12/31/2015 balance for all Four accounts, 3 Annual Budget Balance Sheet Comparative Balance Sheet 2015 (Exhibit 1) Annual Activity 12/31/2015 50.000 7 B ? 1/1/2015 Source From schedule G 575.0011 Annual activity. Net Change in AR 360,000 360,000 Show addition to PPE less DepreciabonCash and incorne Statoment) 10 11 Cash 12 13 Accounts Receivable 14 15 PPLE 10 17 Total Assets 18 19 23 Bank Loan 21 22 23 Shareholders Equity 21 985,000 $1,665,460 Complete $$86,008 $1,665,460 NO Al Balances are accused onderhey must be paid Direct input from referenced schedule Calculation Com Dorot change Sales ARI D A Judd's Reproductions Annual Budget 3 CM Product Mix F Contribution Margin Tables 1 Source: 10.00 Labor hours per charm Padi Pantai Warrior Labor hours per chatom Prodcution Plan Wagon Deepers 15 Male per comprot Plan Marcos perros Data Sales Price Chas 13 200 00 Variable Direct Costs Drewbora 5 24003 000 Direct Labore $ 14001 Direct dp 5 30.00 $ 3D Other Variante Packaging Cranes y pro $ 11.00 teling (Vares by prodotto 12.00 Sicoles 35 per 2.00 S. (20 per Cup 8.00 Maintenance is per 600 Total Variatie Costa OTO Combinar 5 10000 CM 595 Une's Sold Sold of Tai 761 12.50 Per una Perunt on Data Papercharples Costpart) Hou Proton Puch Sport Center Chara Produtos Perpercar Mat Cost Care How to managers se 22 BY 14 202 1570 1 TRGO VO 1331 5 1 Wehed Average CM 0 333 35 38 30 40 41 42 45