To: Controller@BarnesBoards.com

From: CostAccountant@BarnesBoards.com

Subject: 2021 Budgets

Hello Controller!

I'm almost done putting together the 12/31/2021 budget. I made all of the corrections that you identified last week on the budgets leading up to the income statement. I am now done with a draft of the Budgeted Income Statement. I have also put together the flexible budget for production costs given potential swings in production of 200 units in each direction (with flex budgets detailed for each 100 unit deviation from the static budget). Finally, I finished preparing the performance report as it will be calculated and presented at the end of the year. I made the actual units = 4,650; but, of course, we will see what actual production is at the end of 2021. I included the hypothetical actual of 4,650 units to let you see and review how the calculation will be completed. A PDF with all budgets is attached here Budgets_2021_BarnesBoards.pdf

Cost Accountant

Barnes Boards

_____________________________________________________________________________________________________________________________________________________________________

Upload the following file to complete this assignment

(1) A Microsoft Word file named "e-mail and review."

The word file should contain an e-mail to your cost accountant at Barnes Boards. In the e-mail, you should quickly communicate a general assessment of the work provided to you by your cost accountant. Then, you should provide a point-by-point detailed review in table format. The table will have 4 columns titled "Report," "Error", "Correction Required," and "Effect," respectively.

Below are descriptions of what should be in each column of your review table with an example based on overstated sales on the income statement (this error probably doesn't actually occur in this assignment).

• Report: Identify the report(s) affected by the error (e.g., "Income Statement"). Note that you are only reviewing 3 reports. They are (I) the budgeted income statement (II) the flexible budget for production costs, and (III) the performance report. You believe--based on prior reviews--that all other budgets and schedules are accurate.
• Error: Provide the detailed position of the error within the report (e.g., "Sales"), and a brief description of the error (e.g., budgeted sales of $5,500,000 is inaccurate).
• Correction Required: Provide the correction required and some direction for making the correction, recognizing any expected relations among the reports (e.g., Budgeted sales should be equal to the total on the sales budget ($5,450,000).). Demonstrate your knowledge by explaining the problem to the cost accountant like you would want it explained to you if you made such an error.
• Effect: Calculate and state the effect that the error will have on the reports (e.g., On the Income Statement, Budgeted Sales, Gross Margin, Operating income, and Income before taxes is overstated by $50,000; Budgeted Income Taxes are overstated by $15,000; and Budgeted Net Income is overstated by $35,000. Other reports are not directly affected)

Remember to sign-off on your e-mail.

Barnes Boards Sales Budget For the year ending 12/31/2021 Quarter 2 400 Units Unit selling price $ Sales $ Quarter 1 600 1,000 $ 600,000 $ 950 $ 380,000 $ Quarter 3 1,200 1,225 $ 1,470,000 $ Quarter 4 2,500 1,200 $ 3,000,000 $ Total 4,700 1,160 5,450,000 Unit sales Desired ending inventory Total needed Less Beg. inventory Units produced Barnes Boards Production Budget For the year ending 12/31/2021 Quarter 1 Quarter 2 Quarter 3 600 400 1,200 80 240 500 680 1,700 100 80 240 580 560 1,460 Quarter 4 2,500 120 2,620 500 2,120 Total 4,700 120 4,820 100 4,720 640 Barnes Boards Direct Materials Purchases Budget For the year ending 12/31/2021 Quarter 1 580 Quarter 2 560 Units produced Quarter 3 1,460 Quarter 4 2,120 Total 4,720 DM per unit Wood (board feet) Grip tape (tape feet) Hardware sets Wheel sets 3.25 3.50 1.05 1.05 3.25 3.50 1.05 1.05 3.25 3.50 1.05 1.05 3.25 3.50 1.05 1.05 3.25 3.50 1.05 1.05 Production needs Wood (board feet) Grip tape (tape feet) Hardware sets Wheel sets 1,885 2,030 609 1,820 1,960 588 588 4,745 5,110 1,533 1,533 6,890 7,420 2,226 2,226 15,340 16,520 4,956 4,956 609 Desired ending inventory Wood (board feet) Grip tape (tape feet) Hardware sets Wheel sets 182 196 59 59 475 511 153 153 689 742 223 223 283 305 91 91 283 305 91 91 Less: Beg. inventory Wood (board feet) Grip tape (tape feet) Hardware sets Wheel sets 255 275 82 82 182 196 59 59 475 511 153 153 689 742 223 223 255 275 82 82 DM to purchase Wood (board feet) Grip tape (tape feet) Hardware sets Wheel sets 4,959 5,341 1,812 1,951 586 586 2,113 2,275 682 682 6,484 6,983 2,094 2,094 15,368 16,550 4,965 4,965 1,603 1,603 DM avg. cost per foot/set Wood (board feet) Grip tape (tape feet) Hardware sets Wheel sets $ $ $ 3.10 $ 0.65 $ 8.00 $ 16.00 $ 3.10 $ 0.65 $ 8.00 $ 16.00 $ 3.10 $ 0.65 $ 8.00 $ 16.00 $ 3.10 $ 0.65 $ 8.00$ 16.00 $ 3.10 0.65 8.00 16.00 Total purchase cost $ 20,949 $ 24,397 $ 57,317 $ 74,895 $ 177,558 Barnes Boards Direct Labor Budget For the year ending 12/31/2021 Units produced DL per unit Direct labor hrs needed Avg. cost per DLH Total direct labor cost Quarter 1 580 1.50 870 25.00 $ 21,750 $ Quarter 2 560 1.50 840 25.00 $ 21,000 $ Quarter 3 1,460 1.50 2,190 25.00 $ 54,750 $ Quarter 4 2,120 1.50 3,180 25.00 $ 79,500 $ Total 4,720 1.50 7,080 25.00 177,000 $ $ Budgeted direct labor hours Variable overhead rate $ Budgeted variable overhead $ Budgeted fixed overhead $ Total overhead cost $ Barnes Boards Overhead Budget For the year ending 12/31/2021 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total 870 840 2,190 3,180 7,080 13.00 $ 13.00 $ 13.00 $ 13.00 $ 13.00 11,310 $ 10,920 $ 28,470 $ 41,340 $ 92,040 215,000 $ 215,000 $ 215,000 $ 215,000$ 860,000 226,310 $ 225,920 $ 243,470 $ 256,340 $ 952,040 Barnes Boards Ending Finished Goods Inventory Budget For the year ending 12/31/2021 $ $ 37.62 37.50 Unit Costs: Direct materials Direct labor Overhead Budgeted variable overhead Budgeted fixed overhead Total cost per unit $ $ 19.50 182.20 $ 201.70 276.82 $ Budgeted units in ending inventory Total ending inventory cost 120 33,219 $ Barnes Boards COGS Budget For the year ending 12/31/2021 Direct Materials $ Direct Labor $ Overhead $ Total manufacturing cost $ Add: Beginning inventory, finished goods $ Less: Ending inventory, finished goods $ Cost of goods sold $ 177,558 177,000 952,040 1,306,598 27,682 33,219 1,301,062 Barnes Boards Marketing/Sales and Administrative Expense Budget For the year ending 12/31/2021 Quarter 1 Salaries $ 60,000 $ Insurance $ 1,350 $ Depreciation $ 3,600 $ Other $ 1,200 $ Total sales and administrative expense $ 66,150 $ Quarter 2 60,000 $ 1,350 $ 3,600 $ 1,200 $ 66,150 $ Quarter 3 60,000 $ 1,350 $ 3,600 $ 1,200 $ 66,150 $ Quarter 4 60,000 $ 1,350 $ 3,600$ 1,200 $ 66,150 $ Total 240,000 5,400 14,400 4,800 264,600 Barnes Boards Budgeted Income Statement For the year ending 12/31/2021 Sales $ 5,450,000 Less: Cost of goods sold $ 1,306,598 Gross margin $ 4,143,402 Less: Marketing and administrative expenses $ 66,150 Operating Income $ 4,077,252 Less: Interest expense $ 719,053 Net Income $ 3,358,199 Less: Income taxes (at 30%) $ 1,007,460 Income before taxes $ 2,350,739 Barnes Boards Flexible Budget for Production Costs For the year ending 12/31/2021 Variable Cost per unit Production in units 4620 4720 4520 4820 4920 Production Costs: Variable: Direct Materials Direct Labor Variable Overhead Total Variable Costs Total fixed overhead Total production costs $ $ $ $ 37.62 $ 170,035 $ 173,250 $ 177,000 $ 181,320 $ 185,082 37.50 $ 169,500 $ 173,796 $ 177,558 $ 180,750 $ 184,500 19.50 $ 88,140 $ 90,090 $ 92,040 $ 93,990 $ 95,940 94.62 $ 427,675 $ 437,136 $ 446,598 $ 456,060 $ 465,522 $ 840,000 $ 850,000 $ 860,000 $ 870,000 $ 880,000 $1,267,675 $1,287,136 $1,306,598 $1,326,060 $1,345,522 Barnes Boards Performance Report: Production Costs For the year ending 12/31/2021 Variance F/U Actual 4650 Flex Budget 4650 Units Production Costs: Variable: Direct Materials Direct Labor Variable Overhead Total Variable Costs Total fixed overhead Total production costs $ $ $ F U F 171,946 $ 182,765 $ 100,923 $ 455,634 $ 845,637 $ 1,301,271 $ 174,925 $ 174,375 $ 90,675 $ 439,975 $ 847,246 $ 1,287,221 $ 2,979 8,390 10,248 15,659 1,609 14,050 Al U $ $ F U Barnes Boards Sales Budget For the year ending 12/31/2021 Quarter 2 400 Units Unit selling price $ Sales $ Quarter 1 600 1,000 $ 600,000 $ 950 $ 380,000 $ Quarter 3 1,200 1,225 $ 1,470,000 $ Quarter 4 2,500 1,200 $ 3,000,000 $ Total 4,700 1,160 5,450,000 Unit sales Desired ending inventory Total needed Less Beg. inventory Units produced Barnes Boards Production Budget For the year ending 12/31/2021 Quarter 1 Quarter 2 Quarter 3 600 400 1,200 80 240 500 680 1,700 100 80 240 580 560 1,460 Quarter 4 2,500 120 2,620 500 2,120 Total 4,700 120 4,820 100 4,720 640 Barnes Boards Direct Materials Purchases Budget For the year ending 12/31/2021 Quarter 1 580 Quarter 2 560 Units produced Quarter 3 1,460 Quarter 4 2,120 Total 4,720 DM per unit Wood (board feet) Grip tape (tape feet) Hardware sets Wheel sets 3.25 3.50 1.05 1.05 3.25 3.50 1.05 1.05 3.25 3.50 1.05 1.05 3.25 3.50 1.05 1.05 3.25 3.50 1.05 1.05 Production needs Wood (board feet) Grip tape (tape feet) Hardware sets Wheel sets 1,885 2,030 609 1,820 1,960 588 588 4,745 5,110 1,533 1,533 6,890 7,420 2,226 2,226 15,340 16,520 4,956 4,956 609 Desired ending inventory Wood (board feet) Grip tape (tape feet) Hardware sets Wheel sets 182 196 59 59 475 511 153 153 689 742 223 223 283 305 91 91 283 305 91 91 Less: Beg. inventory Wood (board feet) Grip tape (tape feet) Hardware sets Wheel sets 255 275 82 82 182 196 59 59 475 511 153 153 689 742 223 223 255 275 82 82 DM to purchase Wood (board feet) Grip tape (tape feet) Hardware sets Wheel sets 4,959 5,341 1,812 1,951 586 586 2,113 2,275 682 682 6,484 6,983 2,094 2,094 15,368 16,550 4,965 4,965 1,603 1,603 DM avg. cost per foot/set Wood (board feet) Grip tape (tape feet) Hardware sets Wheel sets $ $ $ 3.10 $ 0.65 $ 8.00 $ 16.00 $ 3.10 $ 0.65 $ 8.00 $ 16.00 $ 3.10 $ 0.65 $ 8.00 $ 16.00 $ 3.10 $ 0.65 $ 8.00$ 16.00 $ 3.10 0.65 8.00 16.00 Total purchase cost $ 20,949 $ 24,397 $ 57,317 $ 74,895 $ 177,558 Barnes Boards Direct Labor Budget For the year ending 12/31/2021 Units produced DL per unit Direct labor hrs needed Avg. cost per DLH Total direct labor cost Quarter 1 580 1.50 870 25.00 $ 21,750 $ Quarter 2 560 1.50 840 25.00 $ 21,000 $ Quarter 3 1,460 1.50 2,190 25.00 $ 54,750 $ Quarter 4 2,120 1.50 3,180 25.00 $ 79,500 $ Total 4,720 1.50 7,080 25.00 177,000 $ $ Budgeted direct labor hours Variable overhead rate $ Budgeted variable overhead $ Budgeted fixed overhead $ Total overhead cost $ Barnes Boards Overhead Budget For the year ending 12/31/2021 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total 870 840 2,190 3,180 7,080 13.00 $ 13.00 $ 13.00 $ 13.00 $ 13.00 11,310 $ 10,920 $ 28,470 $ 41,340 $ 92,040 215,000 $ 215,000 $ 215,000 $ 215,000$ 860,000 226,310 $ 225,920 $ 243,470 $ 256,340 $ 952,040 Barnes Boards Ending Finished Goods Inventory Budget For the year ending 12/31/2021 $ $ 37.62 37.50 Unit Costs: Direct materials Direct labor Overhead Budgeted variable overhead Budgeted fixed overhead Total cost per unit $ $ 19.50 182.20 $ 201.70 276.82 $ Budgeted units in ending inventory Total ending inventory cost 120 33,219 $ Barnes Boards COGS Budget For the year ending 12/31/2021 Direct Materials $ Direct Labor $ Overhead $ Total manufacturing cost $ Add: Beginning inventory, finished goods $ Less: Ending inventory, finished goods $ Cost of goods sold $ 177,558 177,000 952,040 1,306,598 27,682 33,219 1,301,062 Barnes Boards Marketing/Sales and Administrative Expense Budget For the year ending 12/31/2021 Quarter 1 Salaries $ 60,000 $ Insurance $ 1,350 $ Depreciation $ 3,600 $ Other $ 1,200 $ Total sales and administrative expense $ 66,150 $ Quarter 2 60,000 $ 1,350 $ 3,600 $ 1,200 $ 66,150 $ Quarter 3 60,000 $ 1,350 $ 3,600 $ 1,200 $ 66,150 $ Quarter 4 60,000 $ 1,350 $ 3,600$ 1,200 $ 66,150 $ Total 240,000 5,400 14,400 4,800 264,600 Barnes Boards Budgeted Income Statement For the year ending 12/31/2021 Sales $ 5,450,000 Less: Cost of goods sold $ 1,306,598 Gross margin $ 4,143,402 Less: Marketing and administrative expenses $ 66,150 Operating Income $ 4,077,252 Less: Interest expense $ 719,053 Net Income $ 3,358,199 Less: Income taxes (at 30%) $ 1,007,460 Income before taxes $ 2,350,739 Barnes Boards Flexible Budget for Production Costs For the year ending 12/31/2021 Variable Cost per unit Production in units 4620 4720 4520 4820 4920 Production Costs: Variable: Direct Materials Direct Labor Variable Overhead Total Variable Costs Total fixed overhead Total production costs $ $ $ $ 37.62 $ 170,035 $ 173,250 $ 177,000 $ 181,320 $ 185,082 37.50 $ 169,500 $ 173,796 $ 177,558 $ 180,750 $ 184,500 19.50 $ 88,140 $ 90,090 $ 92,040 $ 93,990 $ 95,940 94.62 $ 427,675 $ 437,136 $ 446,598 $ 456,060 $ 465,522 $ 840,000 $ 850,000 $ 860,000 $ 870,000 $ 880,000 $1,267,675 $1,287,136 $1,306,598 $1,326,060 $1,345,522 Barnes Boards Performance Report: Production Costs For the year ending 12/31/2021 Variance F/U Actual 4650 Flex Budget 4650 Units Production Costs: Variable: Direct Materials Direct Labor Variable Overhead Total Variable Costs Total fixed overhead Total production costs $ $ $ F U F 171,946 $ 182,765 $ 100,923 $ 455,634 $ 845,637 $ 1,301,271 $ 174,925 $ 174,375 $ 90,675 $ 439,975 $ 847,246 $ 1,287,221 $ 2,979 8,390 10,248 15,659 1,609 14,050 Al U $ $ F U