Please Complete all the parts:
1. Prepare a monthly master budget for Altec Manufacturing Inc for the year ended December 31, 2022, including the following schedules: (Use the templates provided)
Sales Budget & Schedule of Cash Receipts
Production Budget
Direct Materials Budget & Schedule of Cash Disbursements
Direct Labour Budget
Manufacturing Overhead Budget
Cost of Goods Manufactured Budget
Ending Finished Goods Inventory Budget
Cost of Goods Sold Budget
Selling and Administrative Expense Budget
Cash Budget
2. Prepare a budgeted income statement and a budgeted statement of retained earnings for the year ended December 31, 2022, using absorption costing.
3. Prepare a budgeted balance sheet as at December 31, 2022.
Part 2
For this part, you are required to use Excel Goal Seek and Solver Functions to solve the CEOs questions. Given Context:
Altec Manufacturing Inc. is a company that manufactures and sells a single product, which they call an Altec. For planning and control purposes they utilize a monthly master budget, which is usually developed at least six months in advance of the budget year. Their fiscal year end is December 31. During the summer of 2021, Dave Koppelaar, the Altec controller, spent considerable time with Mary T. Barra, the Manager of Marketing, putting together a sales forecast for the next budget year (January to December, 2022). Unfortunately, their collaboration worked so well they eloped to Las Vegas, were married by an Elvis impersonator, and settled down somewhere in the desert. Prior to their departure they e-mailed letters of resignation and a cryptic sales forecast to the President of Altec. Their sales forecast consisted of these few lines: For the year ended December 31, 2021* For the year ended December 31, 2022: For the year ended December 31, 2023: 70,000 units at $150.00 each 80,000 units at $150.00 each 90,000 units at $150.00 each *Expected sales for the year ended December 31, 2021 are based on actual sales to date and budgeted sales for the duration of the year. Altec's President felt certain that the marriage wouldn't last, and expected David would be back any day. But the end of the year is quickly approaching, and there is still no word from the desert. The President, desperately needing the budget completed, has approached you, a management accounting student, for help in preparing the budget for the coming fiscal year. Your conversations with the President and your investigations of the company's records have revealed the following information: 1) Sales are seasonal, and sometimes correspond with general holidays. History shows that January, February and March the slowest months with only 4% of total sal in each month. Spring break causes April sales to jump to 10% of the annual total before dropping back to 6% in each of May and June. The summer months of July and August each contribute 9% of sales. Fall sales start slowly at only 3% of total sales, but as Christmas shopping picks up momentum, sales climb to 11% in October, move to 15% in November and peak at 19% in December. This pattem of sales is not expected to change in the next two years. 2) From previous experience, management has determined that an ending inventory equal to 38% of the next month's sales is required to fit the buyer's demands. 3) Because sales are seasonal, Altec must rent an additional storage facility from September to December to house the additional inventory on hand. The only related cost is a flat $28,000 per month, payable at the beginning of the month 4) The only raw material used in the production of toodles is space-age acrylic (SAA), a compact material that is purchased in powder form Each product requires 55 kilograms of SAA, at a cost of $0.85 per kilogram. The supplier of SAA tends to be somewhat erratic so Altec finds it necessary to maintain an inventory balance equal to 38% of the following month's production needs as a precaution against stock-outs. Altec pays for 55% of a month's purchases in the month of purchase, 25% in the following month and the remaining 20% two months after the month of purchase. The ending balance of raw materials at December 31, 2021 is 33,000 kilograms. 5) Altec expects that any payments made in the month of purchase will be subject to 2%, net/30 terms. The purchase discounts are reported as one metric on their administration department's balanced Scorecard. To provide the information for the balanced Scorecard, purchase discounts are included in the selling and administration budget, and are considered a non-cash item 6) Beginning accounts payable will consist of $227,800 arising from the following estimated direct material purchases for November and December of 2021: 7) Altec's manufacturing process is highly automated Employees are paid on a per unit basis. Their total pay each month is, therefore, dependent on production volumes and averages $20.00 per hour before benefits. The employer's portion of employee benefits adds 20% to the hourly rate. All payroll costs are paid in the period in which they are incurred. Each unit spends a total of 75 minutes in production. 8) Due to the similarity of the equipment in each of the production stages and the company's concentration on a single product, manufacturing overhead is allocated based on volume (i.e. the units produced). The variable overhead manufacturing rate is $25.95 per unit consisting of: Utilities--$12.00; Indirect Materials--$5.00; Plant maintenance-$4.50, environmental fee--$1.95, and Other--$2.50. 9) The expected fixed manufacturing overhead costs below cover the twelve months ended December 31, 2021 and are based on actual costs to date and budgeted costs for the duration of the year. Training and development Property and business taxes Supervisor's salary Amortization on equipment Insurance Other $ 47,520 36,000 89,400 227,760 92.460 109,600 $ 602.740 a) The property and business taxes, levied by the municipality covering the calendar year, are paid in one lump sum on June 30 of each year. The expected payment for next year (2022) is $39,000 b) The annual insurance premium is paid at the beginning of April each year, covering the subsequent 12 months, from April 1 of the current year to March 31 of the next year. The premium is expected to go up to $93,300 on April 1, 2022 c) All other "cash-related fixed manufacturing overhead costs are incurred evenly over the year, paid as incurred, and are not expected to change in 2022. d) Altec uses the straight line method of amortization. 10) In 20x1, the average total cost to manufacture one unit was $93.90 under absorption costing. 11) Selling and administrative expenses (S&A) are known to be a mixed cost; however, there is a lot of uncertainty about what portion is fixed and what is variable. Previous experience has provided the following information Lowest level of sales: Highest level of sales: 42,500 units Total S&A Expenses: $1,273,123 87,500 units Total S&A Expenses: $2,493,073 These costs are paid in the month which they occur. Not included in the above expenses are bad debt expense and the purchases discount. 12) Sales are on a cash and credit basis, with 21% collected during the month of the sale, 42% the following month, and 35% the month thereafter. 2% of sales are uncollectible (bad debt expense) 13) Sales in November and December 2021 are expected to be $1,100,000 and $1,600,000 respectively. Based on the above collection pattern this will result in accounts receivable of $1,617,000 at December 31, 2021 which will be collected in January and February, 2022 14) During the fiscal year ending December 31, 2022, Altec will be required to make monthly income tax installment payments of $10,000. Outstanding income taxes from the year ended Dober 21 2001 tbsidi M200 tontisted to be 250 respectively. Based on the above collection pattem this will result in accounts receivable of $1,617,000 at December 31, 2021 which will be collected in January and February, 2022. 14)During the fiscal year ending December 31, 2022, Altec will be required to make monthly income tax installment payments of $10,000. Outstanding income taxes from the year ended December 31, 2021 must be paid in March 2022. Income tax expense is estimated to be 25% of income before tax. Income taxes for the year ended December 31, 20x2, in excess of installment payments, will be paid in March, 2023. 15) Altec is planning to acquire additional manufacturing equipment for $ 304,750 cash 40% of this amount is to be paid in April 2022, the rest in May 2022. The manufacturing overhead costs shown above already include the amortization on this equipment. 16) Altec. has a policy of paying dividends at the end of each quarter. The president tells you that the board of directors is planning on continuing their policy of declaring dividends of $32,000 per quarter. 17) An arrangement has been made with the local bank that if Altec maintains a minimum balance of $15,000 in their bank account, they will be given a line of credit at a preferred rate of 5% per annum. All borrowings from and repayments to the bank must be in multiples of $1,000 and interest must be paid at the end of each month. All borrowing is considered to occur on the first day of the month, repayments on the last day of the month. Therefore, the amount subject to interest each month is the balance owing at the beginning of the month plus any amounts borrowed at the beginning of the month Note that any amounts repaid that month do not reduce the amount subject to interest that month because they are assumed repaid on the last day of the month. 18) A listing of the estimated balances in the company's ledger accounts as of December 31, 2021 is given below this is the ending balance sheet for 2021): Cash Accounts receivable Inventory-raw materials Inventory-finished goods Prepaid insurance Capital assets (net) $ 15,680 1,617,000 28,050 28.170 23,115 1.328,000 $ 3,040,015 $ Bank loan payable Accounts payable Income tax payable Capital stock 102,000 227,800 11,200 1,200,000 Retained earings 1,610,500 $ 3,04,015 Required: Part 1 (8 points) 1. Prepare a monthly master budget for Altec Manufacturing Inc for the year ended December 31, 2022, including the following schedules: (Use the templates provided) Sales Budget & Schedule of Cash Receipts Production Budget Direct Materials Budget & Schedule of Cash Disbursements Direct Labour Budget Manufacturing Overhead Budget Altec Manufacturing Inc. is a company that manufactures and sells a single product, which they call an Altec. For planning and control purposes they utilize a monthly master budget, which is usually developed at least six months in advance of the budget year. Their fiscal year end is December 31. During the summer of 2021, Dave Koppelaar, the Altec controller, spent considerable time with Mary T. Barra, the Manager of Marketing, putting together a sales forecast for the next budget year (January to December, 2022). Unfortunately, their collaboration worked so well they eloped to Las Vegas, were married by an Elvis impersonator, and settled down somewhere in the desert. Prior to their departure they e-mailed letters of resignation and a cryptic sales forecast to the President of Altec. Their sales forecast consisted of these few lines: For the year ended December 31, 2021* For the year ended December 31, 2022: For the year ended December 31, 2023: 70,000 units at $150.00 each 80,000 units at $150.00 each 90,000 units at $150.00 each *Expected sales for the year ended December 31, 2021 are based on actual sales to date and budgeted sales for the duration of the year. Altec's President felt certain that the marriage wouldn't last, and expected David would be back any day. But the end of the year is quickly approaching, and there is still no word from the desert. The President, desperately needing the budget completed, has approached you, a management accounting student, for help in preparing the budget for the coming fiscal year. Your conversations with the President and your investigations of the company's records have revealed the following information: 1) Sales are seasonal, and sometimes correspond with general holidays. History shows that January, February and March the slowest months with only 4% of total sal in each month. Spring break causes April sales to jump to 10% of the annual total before dropping back to 6% in each of May and June. The summer months of July and August each contribute 9% of sales. Fall sales start slowly at only 3% of total sales, but as Christmas shopping picks up momentum, sales climb to 11% in October, move to 15% in November and peak at 19% in December. This pattem of sales is not expected to change in the next two years. 2) From previous experience, management has determined that an ending inventory equal to 38% of the next month's sales is required to fit the buyer's demands. 3) Because sales are seasonal, Altec must rent an additional storage facility from September to December to house the additional inventory on hand. The only related cost is a flat $28,000 per month, payable at the beginning of the month 4) The only raw material used in the production of toodles is space-age acrylic (SAA), a compact material that is purchased in powder form Each product requires 55 kilograms of SAA, at a cost of $0.85 per kilogram. The supplier of SAA tends to be somewhat erratic so Altec finds it necessary to maintain an inventory balance equal to 38% of the following month's production needs as a precaution against stock-outs. Altec pays for 55% of a month's purchases in the month of purchase, 25% in the following month and the remaining 20% two months after the month of purchase. The ending balance of raw materials at December 31, 2021 is 33,000 kilograms. 5) Altec expects that any payments made in the month of purchase will be subject to 2%, net/30 terms. The purchase discounts are reported as one metric on their administration department's balanced Scorecard. To provide the information for the balanced Scorecard, purchase discounts are included in the selling and administration budget, and are considered a non-cash item 6) Beginning accounts payable will consist of $227,800 arising from the following estimated direct material purchases for November and December of 2021: 7) Altec's manufacturing process is highly automated Employees are paid on a per unit basis. Their total pay each month is, therefore, dependent on production volumes and averages $20.00 per hour before benefits. The employer's portion of employee benefits adds 20% to the hourly rate. All payroll costs are paid in the period in which they are incurred. Each unit spends a total of 75 minutes in production. 8) Due to the similarity of the equipment in each of the production stages and the company's concentration on a single product, manufacturing overhead is allocated based on volume (i.e. the units produced). The variable overhead manufacturing rate is $25.95 per unit consisting of: Utilities--$12.00; Indirect Materials--$5.00; Plant maintenance-$4.50, environmental fee--$1.95, and Other--$2.50. 9) The expected fixed manufacturing overhead costs below cover the twelve months ended December 31, 2021 and are based on actual costs to date and budgeted costs for the duration of the year. Training and development Property and business taxes Supervisor's salary Amortization on equipment Insurance Other $ 47,520 36,000 89,400 227,760 92.460 109,600 $ 602.740 a) The property and business taxes, levied by the municipality covering the calendar year, are paid in one lump sum on June 30 of each year. The expected payment for next year (2022) is $39,000 b) The annual insurance premium is paid at the beginning of April each year, covering the subsequent 12 months, from April 1 of the current year to March 31 of the next year. The premium is expected to go up to $93,300 on April 1, 2022 c) All other "cash-related fixed manufacturing overhead costs are incurred evenly over the year, paid as incurred, and are not expected to change in 2022. d) Altec uses the straight line method of amortization. 10) In 20x1, the average total cost to manufacture one unit was $93.90 under absorption costing. 11) Selling and administrative expenses (S&A) are known to be a mixed cost; however, there is a lot of uncertainty about what portion is fixed and what is variable. Previous experience has provided the following information Lowest level of sales: Highest level of sales: 42,500 units Total S&A Expenses: $1,273,123 87,500 units Total S&A Expenses: $2,493,073 These costs are paid in the month which they occur. Not included in the above expenses are bad debt expense and the purchases discount. 12) Sales are on a cash and credit basis, with 21% collected during the month of the sale, 42% the following month, and 35% the month thereafter. 2% of sales are uncollectible (bad debt expense) 13) Sales in November and December 2021 are expected to be $1,100,000 and $1,600,000 respectively. Based on the above collection pattern this will result in accounts receivable of $1,617,000 at December 31, 2021 which will be collected in January and February, 2022 14) During the fiscal year ending December 31, 2022, Altec will be required to make monthly income tax installment payments of $10,000. Outstanding income taxes from the year ended Dober 21 2001 tbsidi M200 tontisted to be 250 respectively. Based on the above collection pattem this will result in accounts receivable of $1,617,000 at December 31, 2021 which will be collected in January and February, 2022. 14)During the fiscal year ending December 31, 2022, Altec will be required to make monthly income tax installment payments of $10,000. Outstanding income taxes from the year ended December 31, 2021 must be paid in March 2022. Income tax expense is estimated to be 25% of income before tax. Income taxes for the year ended December 31, 20x2, in excess of installment payments, will be paid in March, 2023. 15) Altec is planning to acquire additional manufacturing equipment for $ 304,750 cash 40% of this amount is to be paid in April 2022, the rest in May 2022. The manufacturing overhead costs shown above already include the amortization on this equipment. 16) Altec. has a policy of paying dividends at the end of each quarter. The president tells you that the board of directors is planning on continuing their policy of declaring dividends of $32,000 per quarter. 17) An arrangement has been made with the local bank that if Altec maintains a minimum balance of $15,000 in their bank account, they will be given a line of credit at a preferred rate of 5% per annum. All borrowings from and repayments to the bank must be in multiples of $1,000 and interest must be paid at the end of each month. All borrowing is considered to occur on the first day of the month, repayments on the last day of the month. Therefore, the amount subject to interest each month is the balance owing at the beginning of the month plus any amounts borrowed at the beginning of the month Note that any amounts repaid that month do not reduce the amount subject to interest that month because they are assumed repaid on the last day of the month. 18) A listing of the estimated balances in the company's ledger accounts as of December 31, 2021 is given below this is the ending balance sheet for 2021): Cash Accounts receivable Inventory-raw materials Inventory-finished goods Prepaid insurance Capital assets (net) $ 15,680 1,617,000 28,050 28.170 23,115 1.328,000 $ 3,040,015 $ Bank loan payable Accounts payable Income tax payable Capital stock 102,000 227,800 11,200 1,200,000 Retained earings 1,610,500 $ 3,04,015 Required: Part 1 (8 points) 1. Prepare a monthly master budget for Altec Manufacturing Inc for the year ended December 31, 2022, including the following schedules: (Use the templates provided) Sales Budget & Schedule of Cash Receipts Production Budget Direct Materials Budget & Schedule of Cash Disbursements Direct Labour Budget Manufacturing Overhead Budget
