Vaughan Company makes AMAZING SUPER DUPER Widgets. Management is now preparing detailed budgets for the third quarter, July through September, and has assembled the following information to assist in budget preparation: Sales Budget The marketing department has estimated sales as follows for the remainder of the year: (Actual sales in June were 5,000 units) 7. Now it is time for the Selling and Administrative Budget. It too will be divided into a variable portion and a fixed portion. Assume that variable S\&A costs are $3 per unit plus bad debt expense. Further assume that monthly Fixed Costs are as follows: Advertising $9,000, Executive Salaries $15,000, Other $5,000, and Office depreciation is $3,000. S&A are paid in the month incurred. The company maintains a finished goods inventory equal to 10% of the following month's sales. The inventory of finished goods on July 1 is as it should be. 3. Raw Materials Purchasing Budget Each unit of SUPER DUPER widget requires 0.6 pounds of WHAM compound. To prevent shortages, the company would like the inventory of WHAM compound on hand at the end of each month to equal 40% of the following month's production needs. The inventory on July 1 is 1,344 pounds. WHAM compound costs $12.00 per pound and Vaughan pays for 50% of its purchases in the month of purchase; the remainder is paid in the following month. \$41,184 of WHAM compound was purchased in June and 50% was paid for in June. \begin{tabular}{|c|c|c|c|c|} \hline Vaughan Company & & 2 & & \\ \hline RM Purchasing Budget & & & & Total \\ \hline 3rd Quarter & July & August & September & 3rd Quar \\ \hline Required Production & 6,100 & 24,000 & 13,900 & \\ \hline RM per Unit & 0.6 & 0.6 & 0.6 & \\ \hline \end{tabular} From here we go to the cash budget. We need to know cash receipts, cash disbursements, Cash flows/deficit, and the financing section. Vaughan's cash guidelines are as follows: They have a line of credit that can be accessed in $1,000 increments at an anual interest rate of 12%. Money will be borrowed on the last day of a given month and paid back on the last day of the month when it can be. Minimum cash balance required by Vaughan is $50,000. The beginning cash balance on July 1 is $50,000. Interest is paid when money is paid back. Next we will prepare our FOH budget. FOH is applied based on DLH. Estimated variable FOH is expected to be $500,000 and estimated DLH are expected to be 250,000 . Fixed FOH is estimated to be $8,800 per month with $5,000 of that amount being depreciation of factory equipment and building. Like DL, assume that FOH is paid in the month incurred. 6. Now we need to prepare the Ending FG Inventory Budget. \begin{tabular}{|c|c|c|c|c|c|} \hline Vaughan Company & & & & & \\ \hline \multicolumn{6}{|c|}{ Ending FG Inventory Budget } \\ \hline 3rd Quarter & Quantity & & Cost & & Total \\ \hline \multicolumn{6}{|l|}{ Cost Per Unit: } \\ \hline Direct Materials & 0.6 & x & $12.00 & $ & 7.20 \\ \hline Direct Labor & 2 & x & $18.00 & $ & 36.00 \\ \hline FOH & 2 & x & $2.30 & $ & 4.60 \\ \hline Unit Cost & & y & & $ & 47.80 \\ \hline Ending Inventory in Units & & & & & 400 \\ \hline Cost Per Unit & & & & $ & 47.80 \\ \hline Ending FG Inventory & & & & $ & 19,120 \\ \hline \end{tabular} 4. The next Budget is the Direct Labor Budget. Let's assume that each unit takes 2 DLH to make and each DLH costs $18. Let's further assume that labor is paid in the month incurred. \begin{tabular}{|c|c|c|c|c|} \hline Vaughan Company & & & & \\ \hline DL Budget & & & & Total \\ \hline 3rd Quarter & July & August & September & 3rd Qua \\ \hline \end{tabular} Vaughan Company makes AMAZING SUPER DUPER Widgets. Management is now preparing detailed budgets for the third quarter, July through September, and has assembled the following information to assist in budget preparation: Sales Budget The marketing department has estimated sales as follows for the remainder of the year: (Actual sales in June were 5,000 units) 7. Now it is time for the Selling and Administrative Budget. It too will be divided into a variable portion and a fixed portion. Assume that variable S\&A costs are $3 per unit plus bad debt expense. Further assume that monthly Fixed Costs are as follows: Advertising $9,000, Executive Salaries $15,000, Other $5,000, and Office depreciation is $3,000. S&A are paid in the month incurred. The company maintains a finished goods inventory equal to 10% of the following month's sales. The inventory of finished goods on July 1 is as it should be. 3. Raw Materials Purchasing Budget Each unit of SUPER DUPER widget requires 0.6 pounds of WHAM compound. To prevent shortages, the company would like the inventory of WHAM compound on hand at the end of each month to equal 40% of the following month's production needs. The inventory on July 1 is 1,344 pounds. WHAM compound costs $12.00 per pound and Vaughan pays for 50% of its purchases in the month of purchase; the remainder is paid in the following month. \$41,184 of WHAM compound was purchased in June and 50% was paid for in June. \begin{tabular}{|c|c|c|c|c|} \hline Vaughan Company & & 2 & & \\ \hline RM Purchasing Budget & & & & Total \\ \hline 3rd Quarter & July & August & September & 3rd Quar \\ \hline Required Production & 6,100 & 24,000 & 13,900 & \\ \hline RM per Unit & 0.6 & 0.6 & 0.6 & \\ \hline \end{tabular} From here we go to the cash budget. We need to know cash receipts, cash disbursements, Cash flows/deficit, and the financing section. Vaughan's cash guidelines are as follows: They have a line of credit that can be accessed in $1,000 increments at an anual interest rate of 12%. Money will be borrowed on the last day of a given month and paid back on the last day of the month when it can be. Minimum cash balance required by Vaughan is $50,000. The beginning cash balance on July 1 is $50,000. Interest is paid when money is paid back. Next we will prepare our FOH budget. FOH is applied based on DLH. Estimated variable FOH is expected to be $500,000 and estimated DLH are expected to be 250,000 . Fixed FOH is estimated to be $8,800 per month with $5,000 of that amount being depreciation of factory equipment and building. Like DL, assume that FOH is paid in the month incurred. 6. Now we need to prepare the Ending FG Inventory Budget. \begin{tabular}{|c|c|c|c|c|c|} \hline Vaughan Company & & & & & \\ \hline \multicolumn{6}{|c|}{ Ending FG Inventory Budget } \\ \hline 3rd Quarter & Quantity & & Cost & & Total \\ \hline \multicolumn{6}{|l|}{ Cost Per Unit: } \\ \hline Direct Materials & 0.6 & x & $12.00 & $ & 7.20 \\ \hline Direct Labor & 2 & x & $18.00 & $ & 36.00 \\ \hline FOH & 2 & x & $2.30 & $ & 4.60 \\ \hline Unit Cost & & y & & $ & 47.80 \\ \hline Ending Inventory in Units & & & & & 400 \\ \hline Cost Per Unit & & & & $ & 47.80 \\ \hline Ending FG Inventory & & & & $ & 19,120 \\ \hline \end{tabular} 4. The next Budget is the Direct Labor Budget. Let's assume that each unit takes 2 DLH to make and each DLH costs $18. Let's further assume that labor is paid in the month incurred. \begin{tabular}{|c|c|c|c|c|} \hline Vaughan Company & & & & \\ \hline DL Budget & & & & Total \\ \hline 3rd Quarter & July & August & September & 3rd Qua \\ \hline \end{tabular}