Master 12 4 5 7 8 9 a 3. Vaughan Company makes AMAZING SUPER DUPER Widgets. You and your team are about to prepare the detailed budgets for the third quarter, July through September. Using the budget template and information given in this workbook, prepare the master budget for third quarter including: a) a sales budget for each month and the quarter b) a production budget for each month and the quarter c) a RM budget for each month and the quarter d) a DL budget for each month and the quarter e) a FOH budget for each month and the quarter f) an ending FG Inventory budget for 9/30/2021 g) a selling & administrative budget for each month and the quarter h) a cash budget for each month (but not quarter) i) a budgeted income statement for each month and the quarter j) a budgeted balance sheet for 9/30/2021 Do not worry about taxes. Assume that there are no cash dividends to be paid in 2021 and there will be no purchases of P.P and E. 10 11 12 13 14 15 16 32 18 19 B A 8. From here we go to the cash budget. We need to know cash receipts, cash disbursements, Cash flows/deficit and the financing section. Vaughan's cash guidelines are as follows: They have a line of credit that can be accessed in $1,000 increments at an annual interest rate of 18%. Money will be borrowed on the last day of a given month and paid back on the last day of the month when it can be. Minimum cash balance required by Vaughan is $50,000. The beginning cash balance on July 1 is $50,000. Interest is paid when money is paid back. Vaughan Company Cash Budget 3rd Quarter July August September . 1 Beginning Cash Balance Add: Cash Receipts Total Cash Available Less: Disbursements Direct Materials Direct Labor FOH S&A Expenses Total Disbursements Cash Balance (Deficit) Borrowings RePayments Interest Ending Cash Balance 85 156 787 186 109 190 191 9. From here we move on to the Budgeted Income Statement 192 193 194 Vaughan Company Budgeted Income Statement 3rd Quarter Total 3rd Quarter July 195 196 192 August September 198 199 200 Sales Less: CGS Gross Margis Less: S&A Expenses Net Operating Income Less: Interest Expense Net Income 201 202 204 1. Vaughan Company makes AMAZING SUPER DUPER Widgets. Management is now preparing detailed budgets for the third quarter, July through September, and has assembled the following information to assist in budget preparation: Sales Budget The marketing department has estimated sales as follows for the remainder of the year: (Actual sales in June were 6,000 units) 4.000 October 4,000 August 20,000 November 6,000 September 12,000 December 8,000 The selling price of a SUPER DUPER widget is $80 and all sales are on account. Based on past experience, sales are collected in the following pattern: 20% in the month of sale 75% in month following the sale 5% are never collected (uncollectible) Vaughan Company Sales Budget 3rd Quarter Total 3rd Quarter July August September Sales in Unit Selling Price per Unit Total Sales in s 4.000 80 320,000 20,000 80 1,600,000 12.000 80 960,000 38,000 80 2.880,000 1 Cash Collections 34 35 32 June's Cash Collections July's Cash Collections August's Cash Collections September's Cash Collections Total Cash Collections 360,000 64,000 240,000 320,000 1.200,000 192,000 $ 120.000 $ 560,000 5 1,392,000 $ 360,000 304.000 1,520,000 192.000 2.376,000 39 30 2 Production Budget The company maintains a finished goods inventory equal to 10% of the following month's sales. The inventory of finished goods on July 1 is as it should be Vaughan Company Production Budget Total 3rd Quarter July August September 3rd Quarter Budgeted Sales in Units 4.000 20,000 12.000 36.000 Add: Desired Ending Inventory 2000 1.200 400 3,600 Total Needs 6.000 21.200 12.400 39,600 Less Beginning Inventory (400) (2.000) (1.200) (3.600) Required Production 5,600 19,200 11.200 36.000 49 50 51 2 .fc2 3. Raw Materials Purchasing Budget Each unit of SUPER DUPER widget requires 0.6 pounds of WHAM compound. To prevent shortages, the company would like the inventory of WHAM compound on hand at the end of each month to equal 40% of the following month's production needs The inventory on July 1 is 1,344 pounds. WHAM compound costs $12.00 per pound and Vaughan pays for 80% of its purchases in the month of purchase: the remainder is paid in the following month. $41,184 of WHAM compound was purchased in June and 80% was paid for in June. Vaughan Company RM Purchasing Budget Total 3rd Quarter July August September 3rd Quarter Required Production 5,600 19,200 11.200 36,000 RM Unit per 0.60 0.60 0.60 0.60 Production Needs 3360 11.520 6,720 21.600 Add: Desired Ending Inventory 4,608 2688 1.650 8.976 Total Needs 7.968 14.208 8.400 30,576 Less Beginning laventory (1.344) 4,608 2.688 (8.610) RM to be purchased 6,624 9.600 5,712 21.936 Cost of RM per pound 12 12 12 Cost of RM to be Purchased 5 79.4885 115.2005 60.7845 253.728 12 Cash Disbursements for RM Tune's RM Purchases 81237 July's RM Purchases 635904 15.898 August's RM Purchases 92160 23,010 September's RM Purchases -45.627 Total Disbursements $ 71.8275103 058S 716675 The next Budget is the Direct Labor Budget. Let's assume that each unit takes 2 DLH to make and each DLH costs $15. Let's further assume that laboe is paid in the month incurred. 8.237 79.489 115.200 48,627 251.552 . 1 July August September Total 3rd Quarter 55 Vaughan Company DL Budget 3rd Quarter Budgeted Production in Units DLH per Unit Total DLH needed Cost per DLH Total Direct Labor Cost 5.600 2 36.000 19 200 2 38/400 15 576 000 11.200 15 168.000 11.200 2 22.400 15 336.000 22.000 1.080,000 5. Next we will prepare our FOH budget FOH is applied based on DLH. Estimated variable FOH is expected to be $500,000 and estimated DLH are expected to be 250,000. Fixed FOH is estimated to be 7,200 per month with $5,000 of that amount being depreciation of factory equipment and building. Like DL, assume that FOH is paid in the month incurred. Vaughan Company FOH Budget 3rd Quarter Total 3rd Quarter July August September 72,000 S Budgeted DLH Variable FOH rate Total Budgeted Variable FOH Total Budgeted Fixed FOH Total Budgeted FOH Less: Depreciation Cash Needed for FOH 5 11,200 38,400 25 2 s 22,400 76,800 7,200 7,200 29,600 84,000 (5,000) (5,000) 24,600 S 79,000 $ 22,400 2 44.800 7,200 52.000 (5,000) 47.000 144,000 7,200 165,600 (15,000) 150,600 5 7 S 19 20 21 Total FOH per Budget Budgeted DLH this period Predetermined FOH per DLH 29,600 11.200 2.64 84,000 38,400 219 52,000 s 22,400 2.32 $ 165,600 72.000 2.38 122 123 124 . 6. Now we need to prepare the Ending FG Inventory Budget 125 126 122 Vaughan Company Ending FG Inventory Budget 3rd Quarter Quantity Cost Total 128 12 130 131 S 132 Cost Per Unit Direct Materials Direct Labor FOH Unit Cost NI 0.6 2 2 $12.00 $15.00 52.38 720 30.00 4.76 S S 5 133 134 41.96 335 136 400 137 Ending Inventory in Units Cost Per Urut Ending FG Inventory S 400 41.96 S16,784 $ 138 41.96 16,784.00 7. Now it is time for the Selling and Administrative Budget. It too will be divided into a variable portion and a fixed portion. Assume that variable S&A costs are $3 per unit plus bad debt expense. Further assume that monthly Fixed Costs are as follows: Advertising S4,000, Executive Salaries $20,000, Other $5,000, and Office depreciation is $3,000. S&A are paid in the month incurred. Vaughan Company S&A Budget 3rd Quarter Total 3rd Quarter . July August September 320,000 3 12,000 1,600,000 3 60,000 960,000 3 36,000 1 2,880,000 3 108,000 2 53 34 55 56 Budgeted Sales Variable S&A Expenses Budgeted Variable S&A Exp. Budgeted Fixed S&A Expenses: Advertising Executive Salaries Other Depreciation Total Fixed S&A Expenses Total Budgeted S&A Expenses Less: Depreciation Less: Bad Debt Expense Budgeted Cash S&A Expenses S 157 58 4,000 20,000 5,000 3,000 32,000 44,000 (3,000) (5,000) 36,000$ 4,000 20,000 5,000 3,000 32,000 92,000 (3,000) (5,000) 84,000 $ 4,000 20,000 5,000 3,000 32,000 68,000 (3,000) (5,000) 60,000 $ 12,000 60,000 15,000 9,000 96,000 204,000 (9,000) (15,000) 180,000 159 160 161 162 A 8. From here we go to the cash budget. We need to know cash receipts, cash disbursements, Cash flows/deficit, and the financing section. Vaughan's cash guidelines are as follows: They have a line of credit that can be accessed in $1,000 increments at an annual interest rate of 18%. Money will be borrowed on the last day of a given month and paid back on the last day of the month when it can be. Minimum cash balance required by Vaughan is $50,000. The beginning cash balance on July 1 is $50,000. Interest is paid when money is paid back. July August September S 50,000 $ 160,573 S 50,515 424,000 174,000 560,000 720,573 1,392,000 1.442,515 0 Vaughan Company Cash Budget 3rd Quarter Beginning Cash Balance Add: Cash Receipts Total Cash Available Less: Disbursements Direct Materials Direct Labor FOH S&A Expenses Total Disbursements Cash Balance (Deficit) Borrowings RePayments Interest Ending Cash Balance 1 39 34 (71,827) (108,058) (71,667) (168,000) (576,000) (336,000) (29,600) (84.000) (52,000) (44,000) (92,000) (68,000) (313.427) (860,058) (527,667) 160,573 (139,485) 914.848 190,000 190,000 2,850 $ 160,573 5 50,515$ 721.998 85 187 188 189 190 191 9. From here we move on to the Budgeted Income Statement 192 199 194 135 194 197 Vaughan Company Budgeted Income Statement 3rd Quarter Total 3rd Quarter July August September 198 199 200 Sales Less: CGS Gross Margin Less: S&A Expenses Net Operating Income Less: Interest Expense Net Income 201 202 203 10. And last but not least, we have the budgeted Balance Sheet! We need to know what our balance sheet looked like on July 1, so here goes: . Vaughan Company Balance Sheet 7/1/Year 2xxx 1 2 Liabilities & SE: A/P (given) $ 8,237 13 14 15 16 Assets: Cash (given) A/R (given) RM Inventory (1,344 * $12.00) FG Inventory (400 * 41.80) Land Building & Equipment Less A/D Total Assets $ 50,000 360,000 16,128 16,720 15,000 200,000 (45,000) $ 612,848 217 210 400,000 204,611 612,848 Common Stock Retained Earrings Total Liab & SE: $ 219 220 221 222 223 Vaughan Company Budgeted Balance Sheet 9/30/Year 2XXX 224 205 225 Liabilities & SE: 227 A/P 228 229 230 231 Assets: Cash A/R RM Inventory FG Inventory Land Building&Equipment Less A/D Total Assets 232 233 Common Stock Retained Earnings Total Liab & SE: 234 235 236 Master 12 4 5 7 8 9 a 3. Vaughan Company makes AMAZING SUPER DUPER Widgets. You and your team are about to prepare the detailed budgets for the third quarter, July through September. Using the budget template and information given in this workbook, prepare the master budget for third quarter including: a) a sales budget for each month and the quarter b) a production budget for each month and the quarter c) a RM budget for each month and the quarter d) a DL budget for each month and the quarter e) a FOH budget for each month and the quarter f) an ending FG Inventory budget for 9/30/2021 g) a selling & administrative budget for each month and the quarter h) a cash budget for each month (but not quarter) i) a budgeted income statement for each month and the quarter j) a budgeted balance sheet for 9/30/2021 Do not worry about taxes. Assume that there are no cash dividends to be paid in 2021 and there will be no purchases of P.P and E. 10 11 12 13 14 15 16 32 18 19 B A 8. From here we go to the cash budget. We need to know cash receipts, cash disbursements, Cash flows/deficit and the financing section. Vaughan's cash guidelines are as follows: They have a line of credit that can be accessed in $1,000 increments at an annual interest rate of 18%. Money will be borrowed on the last day of a given month and paid back on the last day of the month when it can be. Minimum cash balance required by Vaughan is $50,000. The beginning cash balance on July 1 is $50,000. Interest is paid when money is paid back. Vaughan Company Cash Budget 3rd Quarter July August September . 1 Beginning Cash Balance Add: Cash Receipts Total Cash Available Less: Disbursements Direct Materials Direct Labor FOH S&A Expenses Total Disbursements Cash Balance (Deficit) Borrowings RePayments Interest Ending Cash Balance 85 156 787 186 109 190 191 9. From here we move on to the Budgeted Income Statement 192 193 194 Vaughan Company Budgeted Income Statement 3rd Quarter Total 3rd Quarter July 195 196 192 August September 198 199 200 Sales Less: CGS Gross Margis Less: S&A Expenses Net Operating Income Less: Interest Expense Net Income 201 202 204 1. Vaughan Company makes AMAZING SUPER DUPER Widgets. Management is now preparing detailed budgets for the third quarter, July through September, and has assembled the following information to assist in budget preparation: Sales Budget The marketing department has estimated sales as follows for the remainder of the year: (Actual sales in June were 6,000 units) 4.000 October 4,000 August 20,000 November 6,000 September 12,000 December 8,000 The selling price of a SUPER DUPER widget is $80 and all sales are on account. Based on past experience, sales are collected in the following pattern: 20% in the month of sale 75% in month following the sale 5% are never collected (uncollectible) Vaughan Company Sales Budget 3rd Quarter Total 3rd Quarter July August September Sales in Unit Selling Price per Unit Total Sales in s 4.000 80 320,000 20,000 80 1,600,000 12.000 80 960,000 38,000 80 2.880,000 1 Cash Collections 34 35 32 June's Cash Collections July's Cash Collections August's Cash Collections September's Cash Collections Total Cash Collections 360,000 64,000 240,000 320,000 1.200,000 192,000 $ 120.000 $ 560,000 5 1,392,000 $ 360,000 304.000 1,520,000 192.000 2.376,000 39 30 2 Production Budget The company maintains a finished goods inventory equal to 10% of the following month's sales. The inventory of finished goods on July 1 is as it should be Vaughan Company Production Budget Total 3rd Quarter July August September 3rd Quarter Budgeted Sales in Units 4.000 20,000 12.000 36.000 Add: Desired Ending Inventory 2000 1.200 400 3,600 Total Needs 6.000 21.200 12.400 39,600 Less Beginning Inventory (400) (2.000) (1.200) (3.600) Required Production 5,600 19,200 11.200 36.000 49 50 51 2 .fc2 3. Raw Materials Purchasing Budget Each unit of SUPER DUPER widget requires 0.6 pounds of WHAM compound. To prevent shortages, the company would like the inventory of WHAM compound on hand at the end of each month to equal 40% of the following month's production needs The inventory on July 1 is 1,344 pounds. WHAM compound costs $12.00 per pound and Vaughan pays for 80% of its purchases in the month of purchase: the remainder is paid in the following month. $41,184 of WHAM compound was purchased in June and 80% was paid for in June. Vaughan Company RM Purchasing Budget Total 3rd Quarter July August September 3rd Quarter Required Production 5,600 19,200 11.200 36,000 RM Unit per 0.60 0.60 0.60 0.60 Production Needs 3360 11.520 6,720 21.600 Add: Desired Ending Inventory 4,608 2688 1.650 8.976 Total Needs 7.968 14.208 8.400 30,576 Less Beginning laventory (1.344) 4,608 2.688 (8.610) RM to be purchased 6,624 9.600 5,712 21.936 Cost of RM per pound 12 12 12 Cost of RM to be Purchased 5 79.4885 115.2005 60.7845 253.728 12 Cash Disbursements for RM Tune's RM Purchases 81237 July's RM Purchases 635904 15.898 August's RM Purchases 92160 23,010 September's RM Purchases -45.627 Total Disbursements $ 71.8275103 058S 716675 The next Budget is the Direct Labor Budget. Let's assume that each unit takes 2 DLH to make and each DLH costs $15. Let's further assume that laboe is paid in the month incurred. 8.237 79.489 115.200 48,627 251.552 . 1 July August September Total 3rd Quarter 55 Vaughan Company DL Budget 3rd Quarter Budgeted Production in Units DLH per Unit Total DLH needed Cost per DLH Total Direct Labor Cost 5.600 2 36.000 19 200 2 38/400 15 576 000 11.200 15 168.000 11.200 2 22.400 15 336.000 22.000 1.080,000 5. Next we will prepare our FOH budget FOH is applied based on DLH. Estimated variable FOH is expected to be $500,000 and estimated DLH are expected to be 250,000. Fixed FOH is estimated to be 7,200 per month with $5,000 of that amount being depreciation of factory equipment and building. Like DL, assume that FOH is paid in the month incurred. Vaughan Company FOH Budget 3rd Quarter Total 3rd Quarter July August September 72,000 S Budgeted DLH Variable FOH rate Total Budgeted Variable FOH Total Budgeted Fixed FOH Total Budgeted FOH Less: Depreciation Cash Needed for FOH 5 11,200 38,400 25 2 s 22,400 76,800 7,200 7,200 29,600 84,000 (5,000) (5,000) 24,600 S 79,000 $ 22,400 2 44.800 7,200 52.000 (5,000) 47.000 144,000 7,200 165,600 (15,000) 150,600 5 7 S 19 20 21 Total FOH per Budget Budgeted DLH this period Predetermined FOH per DLH 29,600 11.200 2.64 84,000 38,400 219 52,000 s 22,400 2.32 $ 165,600 72.000 2.38 122 123 124 . 6. Now we need to prepare the Ending FG Inventory Budget 125 126 122 Vaughan Company Ending FG Inventory Budget 3rd Quarter Quantity Cost Total 128 12 130 131 S 132 Cost Per Unit Direct Materials Direct Labor FOH Unit Cost NI 0.6 2 2 $12.00 $15.00 52.38 720 30.00 4.76 S S 5 133 134 41.96 335 136 400 137 Ending Inventory in Units Cost Per Urut Ending FG Inventory S 400 41.96 S16,784 $ 138 41.96 16,784.00 7. Now it is time for the Selling and Administrative Budget. It too will be divided into a variable portion and a fixed portion. Assume that variable S&A costs are $3 per unit plus bad debt expense. Further assume that monthly Fixed Costs are as follows: Advertising S4,000, Executive Salaries $20,000, Other $5,000, and Office depreciation is $3,000. S&A are paid in the month incurred. Vaughan Company S&A Budget 3rd Quarter Total 3rd Quarter . July August September 320,000 3 12,000 1,600,000 3 60,000 960,000 3 36,000 1 2,880,000 3 108,000 2 53 34 55 56 Budgeted Sales Variable S&A Expenses Budgeted Variable S&A Exp. Budgeted Fixed S&A Expenses: Advertising Executive Salaries Other Depreciation Total Fixed S&A Expenses Total Budgeted S&A Expenses Less: Depreciation Less: Bad Debt Expense Budgeted Cash S&A Expenses S 157 58 4,000 20,000 5,000 3,000 32,000 44,000 (3,000) (5,000) 36,000$ 4,000 20,000 5,000 3,000 32,000 92,000 (3,000) (5,000) 84,000 $ 4,000 20,000 5,000 3,000 32,000 68,000 (3,000) (5,000) 60,000 $ 12,000 60,000 15,000 9,000 96,000 204,000 (9,000) (15,000) 180,000 159 160 161 162 A 8. From here we go to the cash budget. We need to know cash receipts, cash disbursements, Cash flows/deficit, and the financing section. Vaughan's cash guidelines are as follows: They have a line of credit that can be accessed in $1,000 increments at an annual interest rate of 18%. Money will be borrowed on the last day of a given month and paid back on the last day of the month when it can be. Minimum cash balance required by Vaughan is $50,000. The beginning cash balance on July 1 is $50,000. Interest is paid when money is paid back. July August September S 50,000 $ 160,573 S 50,515 424,000 174,000 560,000 720,573 1,392,000 1.442,515 0 Vaughan Company Cash Budget 3rd Quarter Beginning Cash Balance Add: Cash Receipts Total Cash Available Less: Disbursements Direct Materials Direct Labor FOH S&A Expenses Total Disbursements Cash Balance (Deficit) Borrowings RePayments Interest Ending Cash Balance 1 39 34 (71,827) (108,058) (71,667) (168,000) (576,000) (336,000) (29,600) (84.000) (52,000) (44,000) (92,000) (68,000) (313.427) (860,058) (527,667) 160,573 (139,485) 914.848 190,000 190,000 2,850 $ 160,573 5 50,515$ 721.998 85 187 188 189 190 191 9. From here we move on to the Budgeted Income Statement 192 199 194 135 194 197 Vaughan Company Budgeted Income Statement 3rd Quarter Total 3rd Quarter July August September 198 199 200 Sales Less: CGS Gross Margin Less: S&A Expenses Net Operating Income Less: Interest Expense Net Income 201 202 203 10. And last but not least, we have the budgeted Balance Sheet! We need to know what our balance sheet looked like on July 1, so here goes: . Vaughan Company Balance Sheet 7/1/Year 2xxx 1 2 Liabilities & SE: A/P (given) $ 8,237 13 14 15 16 Assets: Cash (given) A/R (given) RM Inventory (1,344 * $12.00) FG Inventory (400 * 41.80) Land Building & Equipment Less A/D Total Assets $ 50,000 360,000 16,128 16,720 15,000 200,000 (45,000) $ 612,848 217 210 400,000 204,611 612,848 Common Stock Retained Earrings Total Liab & SE: $ 219 220 221 222 223 Vaughan Company Budgeted Balance Sheet 9/30/Year 2XXX 224 205 225 Liabilities & SE: 227 A/P 228 229 230 231 Assets: Cash A/R RM Inventory FG Inventory Land Building&Equipment Less A/D Total Assets 232 233 Common Stock Retained Earnings Total Liab & SE: 234 235 236