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Olympia Company manufactures tires for fitness bicycles. The tires sell for RM 5 0 each. Olympia is planning its manufacturing operations for 2 0 2
Olympia Company manufactures tires for fitness bicycles. The tires sell for RM each. Olympia is planning its manufacturing operations for by developing a master budget. Toyo Company statement of financial position for December is as below:
Olympia Company
Statement of Financial Position as at December
RM RM
NonCurrent Assets
Property, Plant and Equipment
Less: Accumulated Depreciation
Current Assets
Cash
Accounts Receivable
Raw Materials Inventory
Finished Goods Inventory
Total Assets
Current Liabilities
Accounts Payable
Stockholders Equity
Common Stock
Retained Earnings
Total Liabilities & Stockholders Equity
The relevant budget data for Olympia Company in are as follows:
Budgeted sales are tires for the first quarter and is expected to increase by tires per quarter. Cash sales are expected to be of total sales, with the remaining sales on account.
Finished goods inventory on December consists of tires at RM each.
Desired ending finished goods inventory is of the next quarters sales volume; first quarter sales volume for are expected at tires.
Each unit of tire would require: kg of material at RMkg
Desired ending raw materials inventory is of the next quarters direct materials needed for production; desired ending inventory for December and is kg; indirect materials are insignificant and will not be considered for budgeting purposes.
Each tire requires hours of direct labour; direct labour costs averages at RM per hour.
Variable manufacturing overhead is RM per tire.
Fixed manufacturing overhead includes RM per quarter in depreciation and RM per quarter for insurance.
Fixed selling and administrative expenses include RM per quarter for salaries; RM per quarter for rent; RM per quarter for insurance; and RM per quarter for depreciation.
Variable selling and administrative expenses sales commission is at of each quarters sales value.
Capital expenditures include RM for a new manufacturing equipment, to be purchased and paid in the first quarter.
Cash receipt for sales on account are in the quarter of the sale and in the quarter following the sale. The accounts receivable for December are received in the first quarter of The uncollectible accounts are considered insignificant and not considered for budgeting purposes.
Direct materials purchases are paid for at in the quarter purchased and in the following quarter. The accounts payable for December are paid in the first quarter of
Direct labour, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.
Income tax expense is projected at RM per quarter and is paid in the quarter incurred.
Olympia Company desires to maintain a minimum cash balance of RM and borrows from the local bank as needed. Interest is charged on loans at per year and will be paid immediately upon available cash at the beginning of a quarter based on the amount outstanding from the previous quarter.
Required: Prepare the following budgets for each Quarter and in Total for the year
a Sales Budget
b Production Budget
c Direct Material Budget
d Direct Labour Budget
e Manufacturing Overhead Budget
f Selling & Administrative Budget
g Schedule of Expected Cash Collection
h Schedule of Expected Cash Disbursement
i Cash Budget
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