F 13 Problem Set #3: Aggregate Planning and Master Budget

July
Aug Sept
Oct
Nov
Dec
Inv100
BoM
Deman 1,700 1,600 1,700 1,500 1,600 1,500
d
Holding Cost
Labor Cost
Labor Cost OT

10 per unit per month

24.00 per hour
36.00 per hour

Labor Hours

1.5 per unit

Hours
Available
Workdays
Available
Current
Workforce

7.5 per
day
20 per month
16

Use the information about demand and labor costs above. Assume that the company maintains a labor force of 16
employees and uses overtime as necessary to meet demand.

All labor costs are paid in the month incurred.

Each unit uses $42.00 of materials. Materials required are ordered in the month prior to production and
paid for in the month of production.

Each unit sells for $129. All customers purchase on credit. 10% of customers pay in the month of
purchase; 75% pay in the following month; 15% in the month after that.

Manufacturing Overhead costs are variable and are incurred at the rate of $21.00/unit. All overhead
costs are paid in the month following the month incurred.

Fixed SG&A Expense is $18,000; this includes $3,000 in depreciation expense. All SG&A costs
requiring cash are paid in the month incurred.

There is one variable selling cost: a 6% commission paid to the companys sales force. Commissions
are paid on the 15th of month following receipt of all of the sales revenue. As a result, commissions for
sales made in July are not paid until the month after all of Julys sales revenue has been received.

Inventory holding costs are based on inventory on hand at the end of the month. So the 10 units on
hand at the beginning of July resulted in holding costs incurred and paid in June, the previous month.
This amount is included on the Income Statement as part of the Cost of Goods Sold. The holding costs
for any inventory on hand at the end of July will be included in Julys Cost of Goods Sold and so on.

The following are required. Please note that you may need to analyze information from the third quarter (July
through September) in order to do this.
1.
2.
3.

Prepare a GAAP Income Statement for October, November and December and for the quarter ending
December 31.
Prepare a Cash Budget for October. November, and December and for the quarter ending December 31.
Cash at the beginning of October is on the Balance Sheet provided.
Provide support for the Accounts Receivable, Accounts Payable, and Commissions Payable balances given in
the Balance Sheet as of September 30.

4.

Bonus points: prepare a Balance Sheet as of December 31.

BALANCE
SHEET
As of September
30
Assets
Cash
Accounts
Receivable
Inventory
Total Current
Assets
Equipment
Accum
Depreciation
Net
Equipment
Total
Assets
Liabilities
Overhead
Payable
Commission
Payable
Total Current
Liabilities
Equity
Contributed
Capital
Retained
Earnings
Total Equity
Total Liabilities and
Equity

16,000
228,33
0
0
244,33
0
60,000
(30,000
)
30,000
274,33
0
35,700
38,700
74,400
40,000
159,93
0
199,93
0
274,33
0