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EXERCISE 7.

5) Southern Plastics Company SA produces three lines of plastic pens: Fine Point, Midpoint and Punto Grande. The CEO is interested in hiring an expert to fill the post of head of budgets, but first want to make sure that person knows the art to put in evidence which to draw:

It asks: a) The Production Budget b) The Budget Raw Material Requirements c) Materials Purchase Budget d) The Budget Direct Labor e) The Budget Indirect Manufacturing Costs f) The Budget and Administrative Expense g) The budget Ending Stocks h) Cost of Goods Sold Budget This relevant information is provided: FEATHERS FINE POINT 1 gr 2 grs

MATERIALS component A Component B

midpoint 1 gr 3 grs

component C Hours Direct Labor Cost per hour of MOD I budgeted Sales Sem 2001

5 grs 0.05 $ 20.00 500000

5 grs 0.03 $ 20.00 800000

The B component cost is $ 2000 per kg. Kilogram the cost of A is considered to be equal to 5% of the cost of a kilogram of B, the cost of the component C is estimated as the cost of component A

MATERIALS Component B Component A Component C

COST $ 2,000.00 x kgr $ 100.00 x kgr $ 100.00 x kgr

COST $ 2.00 0.1 0.1

Component B = Component A = Component A =

$ $

2,000.00 x kgr 5% Component B 100.00

The Sales department believes it would be desirable to have an inventory for the period 700000 feathers, composed as follows: 25% Fine Point, Midpoint 60% and 15% of Great Point.

Inventory Final = FINE POINT= MIDPOINT = GREAT POINT=

700000 plumas 25% Inv. Final 60% Inv. Final 15% Inv. Final FEATHERS FINE POINT 175000

INVENTORY Inventory Final

MIDPOINT 420000

arrojn feathers, that is for each line the same percentage as the sales department for final inventory estimates.

Inventory Initial= FINE POINT= MIDPOINT = GREAT POINT=

500000 plumas 25% Inv. Final 60% Inv. Final 15% Inv. Final

FEATHERS

INVENTORY Inventory Initial

FINE POINT 125000

MIDPOINT 300000

Unit costs for each product line were $ 5.00 for Fine Point, $ 7.00 for middle and $ 12.00 for large point last year. Last Year: Cost UNIT COST FINE POINT $ 5.00 MIDPOINT $ 7.00

MATERIALS Inventory Initial Desired Ending Inventory

FINE POINT 1050000 gr 900000 grs

MIDPOINT 2080000 gr 800000 grs

Indirect manufacturing expenses are as follows (applied on the basis of hours of direct labor):

MANUFACTURING OVERHEAD Maintenance Costs insurance energy supervision accessories depreciation The pomp and sales management will include SELLING AND ADMINISTRATIVE EXPENSES Salaries Commissions Stationery and office tilies depreciation Miscellaneous Expenses

$ $ $ $ $

10,000 7,000 80,000 50% 10,000 12,000

$ $ $ $ $

35,000 3,500 50,000 20,000 40,000

Commissions

EXERCISE SOLUTION 7.5 PRODUCTION BUDGET


Plsticos del Sur S.A
FEATHERS FINE POINT 500000 plu 175000 -125000 550000 plu

ACCOUNTS projected Sales (+) Finished Produc Final Inv (-) Inv. Initial Finished Products REQUIRED PRODUCTION

MIDPOINT 800000 plu 420000 -300000 920000 plu

UDGET OF RAW MATERIAL REQUIREMENT


Plsticos del Sur S.A

PRODUCT FINE POINT MIDPOINT BIG POINT GRAMS TOTAL REQUIRED PRODUCTION Total required production kilograms Cost per kilogram TOTAL

COMPONENT A 550000 grs 920000 grs 430000 grs 1900000 grs 1900 Kg $ 100.00 ##########

COMPONENTB 1100000 grs 2760000 grs 2150000 grs 6010000 grs 6010 Kg $ 2,000.00 ##########

SHOPPING BUDGET MATERIAL


Plsticos del Sur S.A
RAW MATERIAL A 1900 Kg 900 -1050 1750 Kg $ 100.00 RAW MATERIAL B 6010 Kg 800 -2080 4730 Kg $ 2,000.00

Required Raw Material in Kg (+) Desired Ending Inventory (-) Initial Inventory (=) Purchase of Raw Material (*) Unit Cost

(=) TOTAL PURCHASES

$ 175,000

$ 9,460,000

BUDGET DIRECT LABOR


Plsticos del Sur S.A
FINE POINT 550000 plu 0.05 27500 hrs $ 20.00 $ 550,000.00 MIDPOINT 920000 plu 0.03 27600 hrs $ 20.00 ##########

Planned Production Hrs per Unit Total hrs Cost per hr COST OF DIRECT LABOR

BUDGET GIF
Plsticos del Sur S.A
maintenance insurance energy supervision depreciation accessories TOTAL $ $ $ $ $ $ $ 10,000 7,000 80,000 809,000 12,000 10,000 928,000

BUDGET AND ADMINISTRATIVE EXPENSES


Plsticos del Sur S.A
Salaries Commissions Stationery and office tilies depreciation Miscellaneous Expenses TOTAL $ $ $ $ $ $ 35,000 3,500 50,000 20,000 40,000 148,500

INVENTORY FINAL BUDGET


Plsticos del Sur S.A

TOTAL

$ 90,000 $ 1,600,000 $ 70,000 $ 1,760,000

NISHED GOODS INVENTORY FINAL BUDGET


Plsticos del Sur S.A
COST PER UNIT FINE POINT 0.10 4.00 0.50 1.00 0.57 6.17 MIDPOINT $ 0.10 $ 6.00 $ 0.50 $ 0.60 $ 0.34 $ 7.54

Raw Material A Raw Material B Raw Material C Labor MANUFACTURING OVERHEAD PRODUCT UNIT COST

$ $ $ $ $ $

RATEGIF =

Total GIF Hrs Totales $ 928,000 80900 hrs 11.471 hrs

RATE GIF =

RATE GIF =

UNWANTED INVENTORY FINAL BUDGET


Plsticos del Sur S.A
FINE POINT MIDPOINT BIG POINT TOTAL 1,079,750 3,166,800 1,311,450 5,558,000

INITIAL INVENTORY WANTED BUDGET


Plsticos del Sur S.A
FINE POINT MIDPOINT BIG POINT TOTAL ########## ########## ########## ##########

BUDGET COST OF SALES


Plsticos del Sur S.A
INITIAL INVENTORY FINISHED GOODS (+) PRODUTION RM LABOR MANUFACTURING OVERHEAD (=) COST PRODUCTS AVAILABLE (-) INV. FINAL FINISHED PRODUCT (=) COST OF SALES

########## $ 1,618,000 $ 928,000

BIG POINT 1 gr 5 grs

5 grs 0.06 $ 20.00 400000

gr gr gr

GREAT POINT 105000

GREAT POINT 75000

2.00 for large point last year.

GREAT POINT $ 12.00

GREAT POINT 998000 gr 700000 grs

Mano de Obra

10%

SUELDOS

GREAT POINT 400000 plu 105000 -75000 430000 plu

COMPONENTB

COMPONENT C 2750000 grs 4600000 grs 2150000 grs 9500000 grs 9500 Kg $ 100.00 ##########

RAW MATERIAL B

RAW MATERIAL C 9500 Kg 700 -998 9202 Kg $ 100.00

$ 920,200

BIG POINT 430000 plu 0.06 25800 hrs $ 20.00 ##########

TOTAL

80900 hrs $ 1,618,000

BIG POINT $ 0.10 $ 10.00 $ 0.50 $ 1.20 $ 0.69 $ 12.488

TOTAL

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