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5.38 Comprehensive master budget in a manufacturing setting Klandon Company manufactures decorative rocks for aquariums. Kim Klandon is preparing the budget for the quarter ended June 30. She has gathered the follow ing information. 1.Klandon’s sales manager reported that the company sold 12,000 bags of rocks in March. He has developed the follow ing sales forecast. The expected sales price is $10 per bag A 20,000 bags May 50,000 bags June 30,000 bags July 25,000 bags August 15,000 ba 2·Sales personnel receive a 5% commission on every bag of rocks sold. The following monthly fixed selling and administrative expenses are planned for the quarter. However these amounts do not include the depreciation increase resulting from the budgeted equipment purchase in June (see part 7) gs Variable Cost/Unit Monthly Fixed Selling and Administrative Costs $10,000 25,000 Depreciation Salaries of sales personnel Advertising Management salaries Miscellaneous Bad debts S .50 1,000 10,000 500 50 Total costs $46,500 $1.00 3.A fter experiencing difficulty in supplying customers in a timely fashion due to inventory shortages, the company established a policy requiring the ending Finished Goods Inventory to equal 20% of the following month’s budgeted sales, in units. On March 31, 4,000 bags were on hand 4.Five pounds of raw materials are required to fill each bag of finished rocks. The company wants to have raw materials on hand at the end of each month equal to 10% ofthe following month’s production needs. On March 31, 13,000 pounds of materials were on hand .5.The raw materials used in production cost $0.40 per pound. Half of the month’s purchases is paid for in the month of purchase, the other half, in the following month. No discount is available 6.The standard labor allowed for one bag of rocks is 15 minutes. The current direct labor rate is $10 per hour
Expert Answer
| 1a | ||||
| Klandon Company | ||||
| Sales Budget | ||||
| For the quarter ended June 30 | ||||
| Month | ||||
| Particulars | April | May | June | Total |
| Budgeted Unit sales | 20,000 | 50,000 | 30,000 | 100000 |
| Sale Price | 10 | 10 | 10 | 10 |
| Budgeted sales | 200000 | 500000 | 300000 | 1000000 |
| 1b. | ||||
| Klandon Company | ||||
| Schedule of expected Cash collections | ||||
| For the quarter ended June 30 | ||||
| Month | ||||
| Particulars | April | May | June | Total |
| Beginning Accounts Receivable | ||||
| March sales | 30,000 | 30,000 | ||
| April Credit Sales | 140000 | 50,000 | 190000 | |
| May Credit Sales | 350000 | 125,000 | 475000 | |
| June Credit sales | 210000 | 210000 | ||
| Total collections | 170,000 | 400,000 | 335,000 | 905,000 |
| Accounts Receivable 300000*25% | 75000 | |||
| 1c. | ||||
| Klandon Company | ||||
| Production Budget | ||||
| For the quarter ended June 30 | ||||
| Month | ||||
| Particulars | April | May | June | Total |
| Budgeted Unit Sales | 20,000 | 50,000 | 30,000 | 100,000 |
| Add: Desired Ending merchandise inventory | 10,000 | 6,000 | 5,000 | 5,000 |
| Total needs | 30,000 | 56,000 | 35,000 | 1,05,000 |
| Less: beginning merchandise inventory | 4,000 | 10,000 | 6,000 | 4,000 |
| Planned production | 26,000 | 46,000 | 29,000 | 1,01,000 |
| 3. Raw material Budget | ||||
| Klandon Company | ||||
| Raw Material Purchase Budget | ||||
| For the quarter ended June 30,2015 | ||||
| Month | ||||
| Particulars | April | May | June | Total |
| Planned production units (a) | 26,000 | 46,000 | 29,000 | 1,01,000 |
| *Direct Material required per unit (b) | 5 | 5 | 5 | 5 |
| Direct Material Required for production (c ) | 1,30,000 | 2,30,000 | 1,45,000 | 5,05,000 |
| Budgeted ending Direct Material (d) | 23,000 | 14,500 | 11,500 | 11,500 |
| Beginning Direct Material (e ) | 13,000 | 23,000 | 14,500 | 13,000 |
| Budgeted direct material purchase f= c+d-e | 1,40,000 | 2,21,500 | 1,42,000 | 5,03,500 |
| Cost per pound (g) | $0.40 | $0.40 | $0.40 | $0.40 |
| BudgetedDM purchases | $56,000 | $88,600 | $56,800 | 2,01,400 |
| Klandon Company | ||||
| Schedule of expected Cash payments | ||||
| For the quarter ended June 30 | ||||
| Month | ||||
| Particulars | April | May | June | Total |
| Beginning Accounts Payable (a) | $12,000 | $12,000 | ||
| April Purchases (b) | $28,000 | $28,000 | $56,000 | |
| May Purchases (c ) | $44,300 | $44,300 | $88,600 | |
| June Purchases (d) | $28,400 | $28,400 | ||
| Total payments (a+b+c+d) | $40,000 | $72,300 | $72,700 | $1,85,000 |
| 4. Direct labour Budget | ||||
| Klandon Company | ||||
| Direct Labour Budget | ||||
| For the quarter ended June 30,2015 | ||||
| Month | ||||
| Particulars | April | May | June | Total |
| Planned production units (a) | 26,000 | 46,000 | 29,000 | 1,01,000 |
| *Direct labour required per unit (b) | 0.3 | 0.3 | 0.3 | 0.3 |
| Budgeted Direct labour hours | 6,500 | 11,500 | 7,250 | 25,250 |
| Cost per direct labour hour | 10 | 10 | 10 | 10 |
| Budgeted Direct labour Cost | $65,000 | $1,15,000 | $72,500 | $2,52,50 |
| Factory overhead Budget | ||||
| No. of Units produced | 26,000 | 46,000 | 29,000 | 101,000 |
| Variable cost per unit | ||||
| Indirect Material | 0.05 | 0.05 | 0.05 | 0.05 |
| Indirect labor | 0.2 | 0.2 | 0.2 | 0.2 |
| Utilities | 0.1 | 0.1 | 0.1 | 0.1 |
| Maintenance | 0.15 | 0.15 | 0.15 | 0.15 |
| Variable overhead rate | 0.50 | 0.50 | 0.50 | 0.50 |
| Total variable cost `F | 13000 | 23000 | 14500 | 50500 |
| Fixed overhead | ||||
| Depreciation | 8000 | 8000 | 8000 | 24000 |
| Indirect Material | 1000 | 1000 | 1000 | 3000 |
| Indirect labor | 10000 | 10000 | 10000 | 30000 |
| Utilities | 20000 | 20000 | 20000 | 60000 |
| Property Taxes | 5000 | 5000 | 5000 | 15000 |
| Maintenance | $6,000 | 6000 | 6000 | $18,000 |
| Total Fixed overhead Z | $50,000 | $50,000 | $50,000 | $150,000 |
| Total manufacturing overhead F+Z | $63,000 | $73,000 | $64,500 | $200,500 |
| Cash manufacturing overhead less dep | $55,000 | $65,000 | $56,500 | $176,500 |
| Selling & Adm Cost Budget | ||||
| Variable cost | ||||
| Sales | 20,000 | 50,000 | 30,000 | 100,000 |
| Variable cost per unit (10*5%)+.5+.5 | 1.5 | $1.50 | $1.50 | $1.50 |
| Total Variable cost | $30,000 | $75,000 | $45,000 | $150,000 |
| Fixed Selling & Adm Cost | ||||
| Depreciation D | $10,000 | $10,000 | $10,800 | $30,800 |
| Salaries of Sales Personnel | $25,000 | $25,000 | $25,000 | $25,000 |
| Advertising | $1,000 | $1,000 | $1,000 | $1,000 |
| Management salaries | $10,000 | $10,000 | $10,000 | $10,000 |
| Mis | $500 | $500 | $500 | $500 |
| Fixed Selling & Adm Cost | $46,500 | $46,500 | $47,300 | $67,300 |
| Total selling & Adm cost S | $76,500 | $121,500 | $92,300 | $217,300 |
| selling & Adm cost without Dep S-D | $66,500 | $111,500 | $81,500 | $186,500 |
| Depreciation on new equipment for June=48000/60 | 800 | |||
| April | May J | June | Total | |
| Beginning Cash balance | 40000 | $30,500 | $32,780 | 40000 |
| Cash receipt | 170,000 | 400,000 | 335,000 | 905,000 |
| Total cash available | 210000 | 430500 | 367780 | 945000 |
| Less: Cash Disbursements | ||||
| Payment of Inventory | $40,000 | $72,300 | $72,700 | $185,000 |
| Payment of labor | $65,000 | $1,15,000 | $72,500 | $137,500 |
| Payment of Manu. Overhead | $55,000 | $65,000 | $56,500 | $176,500 |
| Payment of selling & Adm exp | $66,500 | $111,500 | $81,500 | $259,500 |
| Dividend paymnet | $49,000 | $49,000 | ||
| Income tax payable | $50,000 | $50,000 | ||
| Office equipment | 48000 | $48,000 | ||
| Total cash Disbursements | $325,500 | $248,800 | $331,200 | $905,500 |
| Excess /(deficiency) of cash receipts over cash disbursements | ($115,500) | $181,700 | $36,580 | $39,500 |
| Minimum Cash balance (working) | 30000 | 30000 | 30000 | 30000 |
| Financing | ||||
| Borrowed | 146000 | $146,000 | ||
| Repaid | -146000 | ($146,000) | ||
| Interest Repaid (2%) | -2920 | ($2,920) | ||
| Ending Cash balance | $30,500 | $32,780 | $36,580 | $36,580 |
| Income Statement as on 3o June 2016 | ||||
| April | May | June | Total | |
| Sales | 200000 | 500000 | 300000 | 1000000 |
| Less Variable cost | ||||
| Cost of Good Sold (5*S) | 100000 | 250000 | 150000 | 500000 |
| Selling & adm. Expenses (1.5*S) | 30000 | 75000 | 45000 | 150000 |
| Total variable expenses | 130000 | 325000 | 195000 | 650000 |
| Contribution | 70000 | 175000 | 105000 | 350000 |
| Fixed Expenses | ||||
| Fixed manufactring expenses | 50000 | 50000 | 50000 | 150000 |
| Selling & adm. Expenses | $46,500 | $46,500 | $47,300 | $67,300 |
| Total fixed expenses | 96500 | 96500 | 97300 | 217300 |
| Net Operatin g income | -26500 | 78500 | 7700 | 132700 |
| Interest On Short Term Loan | 1460 | 1460 | 2920 | |
| Profit before tax | -27960 | 77040 | 7700 | 129780 |
| Income tax (30%) | 38934 | |||
| Net Income | 90846 | |||
| Cost per unit =(5*.4)+(10*.25)+.5 | 5.0 | |||
| Please enter the totalcoloumn amount of Income statement April May and June is just shown for your understanding | ||||
| Statement of Retained earnings | ||||
| Opening balance | 137200 | |||
| Add: Net Income for the year | 38934 | |||
| Closing balance | 176134 | |||
| BalANCE Sheet as on 30 June | ||||
| Assets | ||||
| Cash | 36580 | |||
| Accounts Receivable | 75000 | |||
| Finsihed Goods Inventory | 11088 | |||
| Raw material Inventory (11500*.4) | 4600 | |||
| Property & Equipment | 249000 | |||
| Less: Accumulated Depreciation | 80800 | 168200 | ||
| 295468 | ||||
| Liabilities & Stockholder equity | ||||
| Accounts payable | 28400 | |||
| IncomeTxa payable | 38934 | |||
| Total Laibilities | 67334 | |||
| Stockholder Equity | ||||
| Common Stock | 52000 | |||
| Retained earnings | 176134 | |||
| Total Stockholder Equity | 228134 | |||
| TotalLiabilities & Stockholder Equity | 295468 | |||
