using Google Sheets to do a number of important budgets for a manufacturing business
Page 1 of 7 ZOOM + DATA: The East Division of Kensic Company manufactures a vital component that is used in one of Kensic's major product lines. The East Division has been experiencing some difficulty in coordinating activities between its various departments, which has resulted in some shortages of the component at critical times. To overcome the shortages, the manager of East Division has decided to initiate a monthly budgeting system that is integrated between departments. The first budget is to be for the second quarter of the current year (April, May and June). To assist in developing the budget figures, the divisional controller has accumulated the following information.Page 2 of 7 ZOOM + accumulated me tonowing momatom Sales: Sales through the first three months of the current year were 30,000 units. Actual sales in units for January, February, and March, and planned sales in units over the next five months, are given below: January (actual) 6,000 February (actual) 10,000 March (actual) 14,000 April (planned) 20,000 May (planned) 34,000 June (planned) 51,000 July (planned) 45,000 August (planned) 30,000 In total, the East Division expects to produce and sell 250,000 units during the current year. Direct Material: Two different materials are used in production of the component. Data regarding these materials are given below: Material 208: Materials per Finished Component: 4 pounds Cost per pound: $5.00 Inventory at March 13: 46,000 poundsPage 3 of 7 ZOOM + 71 Material 311: Materials per Finished Component: 9 feet Cost per foot: $2.00 Inventory at March 31: 69,000 feet Material No. 208 is sometimes in short supply. Therefore, the East Division requires that enough of the material be on hand at the end of each month to provide for 50% of the following month's production needs. Material No. 311 is easier to get, so only one-third of the following month's production needs must be on hand at the end of each month. Direct Labor: The East Division has three department through which the components must past before they are completed. Information relating to direct labor in these departments is given below. Department: Shaping Direct Labor Hours per Finished Component: .25 Cost per Direct Labor Hour. $18.00 Department: Assembly Direct Labor Hours per Finished Component: .70 Cost per Direct Labor Hour. $16.00 Department: Finishing Direct Labor Hours per Finished Component: .10Page 4 of 7 ZOOM + 71 Cost per Direct Labor Hour. $20.00 Direct labor is adjusted to the workload each month. Manufacturing Overhead: East Division manufactured 32,000 components during the first three months of the current year. The actual variable overhead costs incurred during this three-month period are shown below. Each Division's controller believes that the variable overhead costs incurred during the last nine months of the year will be at the same rate per component as experienced during the first three months. Utilities $57,000 Indirect Labor $31,000 Supplies $16,000 Other $8,000 Total variable overhead $112,000 The East Division has planned fixed manufacturing overhead costs for the entire year as follows: Supervision $872,000 Property Taxes $143,000 Depreciation $2,910,000 Insurance $631,000 Other $72,000 Total fixed manufacturing Overhead $4,628,000Page 5 of 7 ZOOM + 71 Finished Goods Inventory: The desired monthly ending inventory of completed components is 20% of the next month's estimated sales. The East Division has 4,000 units in the finished goods inventory on March 31. Selling and Administrative Expenses: Selling and Administrative Expenses are budgeted at $400,000 per month plus 1% of total credit sales for the month. REQUIRED: 1. Prepare a production budget for the East Division for the second quarter ending June 30. Show computations by month and in total for the quarter. (10 pts.) 2. Prepare a direct materials purchases budget in units and dollars for each type of material for the second quarter ending June 30. Again show computations by month and in total for the quarter. (10 pts.) 3. Prepare a schedule of cash payments for direct materials for the second quarter. Assume that all direct materials are purchased on account and the East Division pays for %% of the amount purchased in the month of purchase and the other %% in the month following the purchase. The balance in the Accounts Payable account at 3/31 was $351,200. (10 pts.) 4. Prepare a direct labor budget in hours and in dollars for the second quarter ending June 30. Again show computations by month in total for the quarter. (5 pts.)Page 6 of 7 ZOOM + 71 5. Prepare a manufacturing overhead budget for the second quarter. Show computations by month and in total for the quarter. (5 pts.) _ 6. Compute a new "selling price per unit" for the East Division that will enable them to accumulate a balance of $100,000 in their cash account by the end of the second quarter. Assume that the cash balance at March 31 was $10,000. (5 pts.) 7. Using the selling price per unit computed in #6 prepare a sales budget for the second quarter. Show computations by month and in total for the quarter. (5 pts.) 8. Prepare a schedule of expected cash collections for the second quarter using the selling price per unit calculated in question #6. Assume that the East Division collects on its credit sales as follows; 70% in the month of sale, 20% in the month following the credit sale, 10% in the second month following the credit sale. To compute the balance in Accounts Receivable at 3/31 assume that the selling price per unit prior to 3/31 was $75.00. (10 pts.) 9. Prepare a cash budget for the second quarter in month and in total for the East Division. (15 pts.)
