roncos Corp. manufactures wooden frames with bronco medallion for framing the college

degrees awarded by Western Michigan University. Each Bronco frame sells for $$150$ and

requires:

$5$ linear feet of special Oak wood that costs $$4\mathrm{.}00$ per foot

$$ Other direct material package $($each package includes one Bronco Medallion, a glass face,

and a cardboard cutout$)$ that costs $$25$ each package $($bought from an outside supplier$)$

$30$ minutes of labor hours to build $($Labor cost averages $$15\mathrm{.}00$ per hour$)$

Bronco Corp. has the following inventory policies:

$$ Ending finished goods inventory should be $25\%$ of next month$$s sales.

$$ Ending inventory of Oak wood should be $30\%$ of next month$$s production need.

$$ Ending inventory of other direct material package should be $20\%$ of next month$$s

production need. $($the supply chain for the other direct material packages is quite efficient

and therefore, company maintains a smaller inventory of these packages as compared to

Oak wood inventory$)$

As per the Marketing and Sales department of the Bronco Corp., sales are high in the month of

graduation and the month following the graduation during Fall and Spring each year. Therefore,

months of December, January, April, and May are considered high demand months. In a

November budget meeting of the current year, the Sales Manager provided following estimates

of unit sales for the upcoming months $($December current year $$ May next year$)$:

December $2,100$ frames

January $1,600$ frames

February $900$ frames

March $660$ frames

April $2,100$ frames

May $1,900$ frames

Variable manufacturing overhead is incurred at a rate of $$12\mathrm{.}50$ per frame produced. Annual

fixed manufacturing overhead is estimated to be $$300,000($$$25,000$ per month$)$ for expected

production of $20,000$ frames for the year. Fixed selling and administrative expenses are

estimated at $$28,000$ per month and variable selling and administrative expenses are estimated at

$$14\mathrm{.}00$ per unit sold.

Of its sales each month, $80\%$ is collected in the same month and remaining $20\%$ in the month

following the sales.

Of the purchase of Oak wood, $60\%$ is paid for during the month of purchase and remaining $40\%$

is paid in the following month. Budgeted Oak wood purchase for December is $$34,200.$ Other

direct material package purchases are all paid for in the month of purchase itself. Also, all other

operating costs are paid during the month incurred. Monthly fixed manufacturing overhead

includes $$5,000$ in depreciation. During January, Bronco Corp. plans to pay $$110,000$ for a piece

of equipment to replace an old equipment.

Bronco had $$61,000$ cash on hand on January $1.$ The company has a policy to maintain a

monthly minimum cash balance of $$50,000.$ The company may borrow any amount using the

credit line provided by their bank to pay for deficits and maintain the minimum required balance

of cash. Borrowings or any part of the borrowings may be paid off in the month there is excess

cash available $($Ignore interest on borrowings$).$

Requirements:

$1.$ Using the information provided above prepare the following budgets for the first quarter

$($January $-$ March$)$ for Bronco Corporation. Include each month and quarter $1($January$-$

March$)$ total for each budget.

a$.$ Sales budget

b$.$ Production budget

c$.$ Direct Materials budgets $($Hint: You will need TWO Direct Material Purchases

budgets $$ one for the Oak wood and another for the Direct Material Package.$)$

d$.$ Direct labor budget

e$.$ Manufacturing Overheads budget

f$.$ Budgeted Cost of Goods Sold $($COGS$)$

g$.$ Selling and administrative expenses budget