Solutions Manual

WASATCH MANUFACTURING
Master Budget
Sales Budget
December
Unit Sales

February

March

April

May

8900

9900

9200

9500

$9

$9

$9

$9

$9

$9

$76,000

$80,100

$89,100

$82,800

$85,500

$77,400

Price per Unit

Sales Revenue

January

8444

8600

$9 price per unit

Cash Collections Budget

January

February

March

Quarter

Cash Sales

$20,025

$22,275

$20,700

$63,000

Credit Sales

$57,000

$60,075

$66,825

$183,900

Total Cash Collections:

$77,025

$82,350

$87,525

$246,900

25% Cash Sales

75% Credit Sales collected next month

Production Budget
January

February

March

Quarter

April

May

Unit Sales

8900

9900

9200

28000

9500

8600

Add: Desired Ending Inventory

1485

1380

1425

1425

1290

Total Units Needed

10385

11280

10625

29425

10790

Less: Beginning Inventory

1335

1485

1380

1335

1425

Untis to Produce

9050

9795

9245

28090

9365

15% Production Ending Inventory Policy (of following sales in units)

Direct Materials Budget

January
Units to Produce

February

9050

* DM needed per unit (lbs)

DM Needed for production (lbs)
Add: Ending Inventory of DM (lbs)
Total DM Needs (lbs)
Less: Beginning Inventory of DM (lbs)
DM Quantity to Purchase (lbs)
* Cost per pound
Total Cost of DM Purchase

March

9795

Quarter

9245

April

28090

9365

18100

19590

18490

56180

18730

1959

1849

1873

1873

20059

21439

20363

58053

1810

1959

1849

1810

18249

19480

18514

56243

$1.5

$1.5

$1.5

$1.5

$27,374

$29,220

$27,771

$84,365

2 DM (lbs) needed per Unit

10% DM Ending Inventory Policy (of next month's production need)
$1.5 DM Cost per lb

Cash Payments for Direct Material Purchases Budget

January
December Purchases (from A/P)
Janurary Purchases:
Feburary Purchases:

February

March

$22,000
$8,212

Quarter
$22,000

$19,161
$8,766

$27,374
$20,454

$29,220

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March Purchases:
Total Cash Payment for DM:

$30,212

$27,927

$8,331

$8,331

$28,785

$86,925

$22,000 A/P
30% Cash Purchase
70% Credit Purchase to be paid next month

Cash Payments for Direct Labor Budget

January
Units to Produce
* DL Hours per unit
Labor Hours required
* DL Cost per hour
Total DL Cost

February

March

Quarter

9050

9795

9245

0.3

0.3

0.3

28090
0.3

2715

2939

2774

8427

$13

$13

$13

$13

$35,295

$38,201

$36,056

$109,551

0.3 DL Hours per unit

$13 DL Cost per hour

Cash Payments for Manufacturing Overhead Budget

January
February
March

Quarter

Production in Units

9050

9795

9245

Variable MOH Rate

$1.4

$1.4

$1.4

$1.4

$12,670

$13,713

$12,943

$39,326

Fixed Rent

$6,500

$6,500

$6,500

$19,500

Other Fixed MOH

$2,100

$2,100

$2,100

$6,300

Total MOH Costs

$21,270

$22,313

$21,543

$65,126

Less: Depreciation

$0

$0

$0

$0

$21,270

$22,313

$21,543

$65,126

Variable MOH Costs

Cash Payments for MOH

28090

$1.4 Variable MOH Rate

$6,500 Monthly Factory Rent
$2,100 Other monthly fixed mfg costs
$0 Depreciation

Cash Payments for Operating Expenses Budget

January
Sales in Units
Variable Operating Expense Rate
Variable Operating Expense

February

March

Quarter

8900

9900

9200

$1.2

$1.2

$1.2

28000
$1.2

$10,680

$11,880

$11,040

$33,600

Fixed Operating Expense

$1,400

$1,400

$1,400

$4,200

Total Operating Expense

$12,080

$13,280

$12,440

$37,800

Less: Non-Cash Expense

Cash Payment for Operating

$0

$0

$0

$0

$12,080

$13,280

$12,440

$37,800

$1.2 Variable Operating Expense Rate

$1,400 Fixed monthly operating expense

Combined Cash Budget

January
Cash Balance, Beginning

February

March

Quarter

$6,000

$5,168

$4,997

$6,000

Add: Cash Collections from Sales

$77,025

$82,350

$87,525

$246,900

Total Cash Available

$83,025

$87,518

$92,522

$252,900

Less: Cash Payments:

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Material Purchases

$30,212

$27,927

$28,785

$86,925

Direct Labor

$35,295

$38,201

$36,056

$109,551

MOH

$21,270

$22,313

$21,543

$65,126

Operating Expense

$12,080

$13,280

$12,440

$37,800

Equipement Purchase

$15,000

$6,000

$4,000

$25,000

Tax Payment

$10,800

$10,800

Total Cash Payments

$113,857

$118,521

$102,824

$335,202

Excess / Deficiency of Cash

($30,832)

($31,003)

($10,302)

($82,302)

$36,000

$36,000

$18,000

$90,000

Financing
Borrowings
Repayments

$0

Interest Payments
Total Financing

($2,970)

($2,970)

$36,000

$36,000

$15,030

$87,030

$5,168

$4,997

$4,728

$4,728

Cash Balance, Ending

1.5% Simple Interest Rate per month
$6,000 Beginning Cash Balance
$10,800 Estimated Tax
$4,400 Minimum Ending Cash Balance
$1,000 Increment

Budgeted Manufacturing Cost per Unit

Direct Materials Cost per unit (2lbs/unit * $1.5/lbs)

$3

Direct Labor Cost per unit (0.3Hr/Unit * $13/Hr)

$3.9

Variable Manufactoring Cost per unit ($1.4/unit)

$1.4

Fixed Manufactoring Cost per unit

$0.6

Cost of Manufactoring Each Unit

$9

$0.6 Estimated Fixed MOH Cost per unit

Budgeted Income Statement

Sales Revenue

$252,000

Less: COGS

$249,200

Gross Profit

$2,800

Less: Operating Expenses

Less: Depreciation Expense
Operating Income
Less: Interest Expense
Less: Income Tax Expense
Net Income

$37,800
$5,200
($40,200)
$2,970
$0
($43,170)

$5,200 Depreciation for entire Quarter

28% Income Tax Rate

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