Question

You have been hired as the Controller for the crayon department of Crayola Canada (CC). The Crayon

Department in Canada will begin operations on January 01, 2024. The first task you have been assigned is the

creation of the 2024 budget. Your CFO has provided you with some notes detailing the department's

operations (see below) and would like you to use the notes to prepare all ten (10) schedules of the 2024

budget. Crayola Canada has a calendar fiscal year (January December).

Sales

1. Sales will be 30,000 boxes per month except for August (80,000 boxes) and September (120,000 boxes)

2. Monthly sales in 2025 will be 10% higher, than monthly sales in 2024

3. A box of crayons will sell for $11.49 in Jan, Feb, Aug, Sep, Oct, Nov, Dec and $13.49 in Mar, Apr, May, Jun,

Jul

4. 65% of sales are collected in the month of the sale, 25% the following month, and 10% in the second

month after the sale

5. To ensure a consistent supply of crayons, inventory at the end of each month must be 15% of the next

month's total budgeted sales

Costs - Production

6. Each box contains 24 crayons

7. Each crayon is made of three (3) grams of wax

8. Each crayon contains one (1) gram of colored dye

9. Each crayon contains one (1) paper sleeve

10. Each gram of wax costs $0.03

11. Each gram of dye costs $0.06

12. Each paper sleeve costs $0.02

13. The box the crayons are packaged in, costs $0.06

14. All direct material costs are paid for the month after they are purchased (ex: June materials are paid for in July)

15. Each employee can produce 20 crayons a minute

16. Employees are paid $22.50 per hour

17. All employees are paid on the 15th and 30th of every month

18. The production warehouse supervisor receives a salary of $100,000 per year

19. There are 8 (eight) employees who are directly involved with the manufacturing of the crayons

20. The production facility has a fixed-rate utilities contract with Enmax where they will pay $3,800 per

month from May to September and $4,600 per month from October to April

21. Variable Manufacturing Overhead will be $500 per day. The factory operates 365 days per year, so every

day per month must be accounted for

22. The CEO receives a bonus of $0.10 for every box of crayons produced

23. The shipping cost is $0.05 for every box of crayons sold

Costs Equipment

24. CC has two types of assets, production assets and administration assets

25. The depreciation on the administration assets will be $5,000 per month until November 2024, then it will

jump to $8,000 per month when the lunchroom has been renovated (see below)

26. The depreciation on the production assets is $2,200 per month

27. CC will use straight-line depreciation on all production and administration assets

28. CC will purchase manufacturing equipment in January at a cost of $250,000

Accounting 2400 Final Exam Fall 2023

Costs Buildings

29. There are two buildings that CC utilizes in the operations of their company

30. The first building, the administration building is currently being rented for $10,000 per month

31. The second building, the production facility is currently being rented for $8,000 per month

32. In October 2024, CC plans to renovate the lunchroom of their administration building. The renovation will

cost $50,000 and construction will be completed at the end of October. The renovation will be paid for in

cash after the project has been completed

33. Insurance for office building is $2,000 per month

34. Insurance for the production facility is $5,000 per month

Costs - Other

35. The administration team receives salaries totaling $50,000 per month

36. Two marketing campaigns will be run on Canadian television, the first one will run from January to June,

where ads will be run consistently each month for $5,000 per month. The second one will be a Back to

School campaign which will run in August and will cost $15,000 for the month

37. Payment for all marketing campaigns will be made in December 2024

38. CC has access to a line of credit from the Bank of Montreal, which carries an interest rate of 8.0%

Notes

39. CC would like to keep a cash balance of at least $15,000 at the end of every month

40. CC will pay dividends of $200,000 in July 2024

Required

- Read the instructions on the cover of this exam

- Prepare a full, 10-schedule budget