Running head: ASSIGNMENT FOUR

Assignment Four

Ashford University Managerial Accounting BUS 630 Professor Susan Didriksen April 02, 2012

ASSIGNMENT FOUR Assignment Four This paper will focus on three forecasts from three separate corporations. These corporations include Jessi Corporation, Hareston Company, and Raredon Corporation. Master budgets will be created showing calculations. Jessi Corporation The Jessi Corporations marketing department submitted a forecast for sales. This forecast focuses on the upcoming fiscal year. All sales involved are on account. The forecast shows as follows: First Quarter 11,000 Second Quarter 12,000 Third Quarter 14,000
Fourth Quarter

Units to be produced

13,000

The selling price of the company's product is $18.00 per unit. Management expects to collect 65% of sales in the quarter in which the sales are made, 30% in the following quarter, and 5% of sales are expected to be "'uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is $70,200. The company expects to start the first quarter with 1,650 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 15% of the next quarter's budgeted sales. The desired ending finished goods inventory for the fourth quarter is 1,850 units. Based on this information, the following will be prepared: the companys sales budget and schedule of expected cash collection and the companys production budget for the upcoming year. This information is shown beginning on page three:

ASSIGNMENT FOUR
Quarter Two 18 per unit 14,000 Quarter Three 18 per unit 13,000 Quarter Four 18 per unit 11,000

Problem 8-12 sales price sales forecast, units collections: current month prior month total collections production budget: units sold ending target less: beg on hand produce, in units

Quarter One $18.00 per unit 12,000

$140,400 70,200 210,600

$163,800 64,800 228,600

$152,100 75,600 227,700

$128,700 70,200 198,900

12,000 2,100 1,650 12,450

14,000 1,950 2,100 13,850

13,000 1,650 1,950 12,700

11,000 1,850 1,650 11,200

Hareston Company The next problem will encompass the information submitted by Hareston Companys production department. The information is a forecast of units to be produced for the upcoming fiscal year. The provided information is shown as follows:
Units to be produced 1 Quarter 7,000
st

nd

Quarter 8,000

3 Quarter 6,000

rd

4 Quarter 5,000

th

In addition, the beginning raw materials inventory for the first quarter is budgeted to be 1,400 pounds and the beginning accounts payable for the first quarter is budgeted to be $2,940. Each unit requires 2 pounds of raw material that costs $1.40 per pound. Management desires to end each quarter with an inventory of raw materials equal to 10% of the following quarter's production needs. The desired ending inventory for the fourth quarter is 1,500 pounds. Management plans to pay for 80% of raw material purchases in the quarter acquired and 20% in the following quarter. Each unit requires 0.60 direct labor-hours and direct labor-hour workers are paid $14.00 per hour.

ASSIGNMENT FOUR Using this information, the following budgets will be prepared: the companys direct materials budget and schedule of expected cash disbursements for purchase of materials for the upcoming fiscal year and the direct labor budget for the upcoming fiscal year. The last budget will assume the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced. This is shown in the table below:
Quarter One 14,000 1,400 1,400 14,000 19,600 Quarter Two 14,000 1,400 1,400 14,000 19,600 Quarter Three 14,000 1,400 1,400 14,000 19,600 Quarter Four 14,000 1,500 1,400 14,100 19,740

P8-13 produce, in units ending target RM less: beg on hand RM purchase, units purchase, dollars pay, this month purchases pay last month purchases payment for raw materials

15,680 2,940 18,620

15,680 3,920 19,600

15,680 3,920 19,600

15,792 3,920 19,712

direct labor hours direct labor dollars

8,400 $ 117,600

8,400 $ 117,600

8,400 $ 117,600

8,400 $117, 600

Raredon Corporation The final problem will calculate budgets based on Raredon Corporations forecast of units. The production department submitted this forecast based on units to be produced by quarter for the upcoming fiscal year. The information provided is as follows:

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

ASSIGNMENT FOUR Units to be produced 12,000 14,000 13,000 11,000

Each unit requires 0.70 direct labor-hours, and direct labor-hour workers are paid $10.50 per hour. In addition, the variable manufacturing overhead rate is $1.50 per direct labor-hour. The fixed manufacturing overhead is $80,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $22,000 per quarter. From this information, the following will be calculated: the companys direct materials budget and schedule of expected cash disbursements for purchases of materials for the upcoming fiscal year and the companys direct labor budget for the upcoming fiscal year. The last budget will be configured assuming the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced. The calculations are show in the spreadsheet below:
Quarter Quarter Quarter Quarter One Two Three Four 12,000 14,000 13,000 11,000 8,400 9,800 9,100 7,700 88200 102900 95550 80850

P8-14 produce, in units direct labor hours direct labor dollars manufacturing overhead budget: variable overhead fixed overhead manufacturing costs non-cash manufacturing overhead payments

12600 80000 92600 22000 70600

14700 80000 94700 22000 72700

13650 80000 93650 22000 71650

11550 80000 91550 22000 69550

The calculated budgets shown in this paper was based on information from three corporations. This information allowed for specific budget calculations in assigned areas. The

ASSIGNMENT FOUR three corporations budget submissions were from various departments, although information contained was of similar classification.