Need 10-13

Hawkins Engineerings management wants to prepare budgets for one of its products, GalaxyRS, for July 2019. The firm sells the product for $800 per unit and has the following expected sales (in units) for these months in 2019:

April May June July August September

6,000 4,000 5,600 6,500 6,800 7,800

Typically, cash sales for Hawkins represent 20% of sales while credit sales represent 80%. Hawkins bills customers on the first day of the month following the month of sale. Experience has shown that 85% of the companys billings will be collected during the month of sale, 10% by the end of the month after the sale and 5% will ultimately be uncollectible.

The production process requires the following:

Standard Costs:

Galaxy-80 4 lbs $1.25/lb

RS-360 2 lbs $5.00/lb

Direct labor

Skill level 1 0.01 hours $50/hour

Skill level 2 0.10 hours $20/hour

Variable manufacturing overhead is budgeted at $1,200 per batch (of 100 units) plus $80 per direct labor hour. In addition to variable overhead, the firm has a monthly fixed factory overhead of $60,000, of which $25,000 is depreciation expense. The firm pays all manufacturing labor and factory overhead when incurred.

The firms policy is to maintain an ending finished goods inventory each month equal to 10% of the following months budgeted sales, but in no case less than 500 units. All materials inventories are to be maintained at 5% of the production needs for the next month, but not to exceed 1,000 pounds. The firm expects all inventories at the end of June to be within the guidelines.

The purchase terms for materials are 3/10, n/30. Hawkings makes all payments within the discount period. Experience has shown that 80% of the purchases are paid in the month of the purchase and the remainder are paid in the month immediately following. In June 2019, the firm budgeted purchases of $30,000 for Galaxy-80 and $20,000 for RS-360.

Total budgeted marketing, distribution, customer service and administrative costs for 2019 are 1,850,000. Of this amount, $1,200,000 is considered fixed and includes depreciation expense of $150,000. The remainder varies with sales. The budgeted total sales for 2019 are $4 million. All marketing and administrative costs are paid in the month incurred.

Additional information follows:

Cash balance $40,000

Management desires to maintain an end-of-month minimum cash balance of $40,000. The firm has an agreement with a local bank to borrow its short-term needs in multiples of $1,000 up to $100,000 at an annual interest rate of 12%. Borrowings are assumed to occur at the end of the month. Bank borrowing at July 1 is $0.

Required:

On the basis of the preceding data and projections, prepare the following budgets:

1.Sales budget for July

2.Production budget for July

3.Production budget for August

4.Direct materials used budget for July (in units and dollars)

5.Direct materials purchased budget for July (in units and dollars)

6.Direct manufacturing labor budget for July

7.Manufacturing overhead budget for July

8.Operating costs budget for July

9.Cost of goods sold budget for July

10.Budgeted income statement for July

11.Cash collections schedule for July

12.Cash disbursements schedule for July

13.Cash budget for July

1.) Sales Budget for July
		July
Budgeted Selling price/unit		$ 800.00
Budgeted Sales		$ 6,500.00
The Total Budgeted Sales		$ 5,200,000.00
2.) Production Budget for July
		July (Units)
Add: Closing Inventory of Finished the goods (6800x0.1)=(680)		680
Budgeted Sales Units		6,500
Units Needed		7,180
Less: Opening inventory of finished the goods (6500x0.1)=(650)		-650
Production units for month		6,530
3.) Production Budget for August
		August (units)
Budgeted Sales Units		6,800
Add: Closing inventory of finsihed the goods (7800x0.1)=(780)		780
Units Needed		7,580
Less; Opening inventory of finished goods		-680
the Production units for month		6,900
4.) The Direct Material Used Budget for July
		Galaxy - 80	RS - 360
The Direct materials/unit		4 pound	2 pound
The Total Direct Materials Used		(6530unitsx4lbs)	6530x2lbs
Cost of Material/pound		1.25/lbs	5/lbs
The Total Cost of Material Used		$ 32,650.00	$ 65,300.00
5.) Direct Material Purchase Budget for July
		Galaxy - 80	RS - 360
Requirements for Production		26,120 lbs	13,060 lbs
Add: Desired closing inventory		1,380	690
Total Requirements		27,500	13,750
Less: Opening inventory (27500-26194)(13750-13097)		-1,306	-653
Quantity to be purchased		26,194	13,097
Purchase Price		$1.25 per lbs	$5 per lbs
Total Purchase Cost		$ 32,742.50	$ 65,485.00
6.) Direct Manufacturing Labor Budget
Particulars		Per Unit	Total
Production			6,530 units
Skilled Labor - Level 1		0.01hrs/unit	$3,265 (6,530 units *0.01hr/unit*$50/hr)
Skilled Labor - Level 2		0.10hrs/unit	$13,060 (6,530 units*0.10hr/unit*$20.0/hr)
Total Manufacturing Labor Cost			$ 16,325.00
7.) Manufacturing Overhead Budget
Particulars		Rate	Total
Production			6,530 untis
Variable Manufacturing Overheads		$1,200/100 Units	$78,360 (6,530units*$1200/100units)
		$80/ direct labor Hr	$57,464 (718.3hrs*$80/hr)
Fixed Manuractuing Overheads - Depreciation			$ 25,000.00
Fixed Manufacturing Overhads - Others			$ 35,000.00
Total			$ 195,824.00
8.) Operating Costs Budget for July
Particulars		Costs ($)
Direct Material		$ 97,950.00
Direct Labor		$ 16,325.00
Variable Manufacturing Overhead		$ 135,824.00
Fixed Manufacturing Overheads(excluding dep)		$ 35,000.00
Fixed Man. Overheads - Depreciation		$ 25,000.00
Total Operating Costs		$ 310,099.00
9.) Costs of Goods Sold Budget for July
Particulars		Costs ($)
Direct Material		$ 97,950.00
Direct Labor		$ 16,325.00
Manufactuing Overheads		$ 195,824.00
Total		$ 310,099.00
Add: Opening Stock(650 Units		$ 30,868.00
Total		$ 340,967.00
Less; Closing Stock (680 units		$ (32,293.00)
Cost of Goods Sold (inc selling & admin)		$ 1,253,674.00