managerial accounting cash budget cost of goods sold and finished goods inventory 429132

Aug 29, 2021 | Uncategorized

1. Sales
2012 Actual Sales 2013 Estimated Sales
Nov Dec Jan Feb Mar Apr May
Units 7,835 7,970 7,450 7,090 8,320 9,070 10,120
The selling price per unit has remained constant for the past year and is expected to
remain unchanged throughout the first quarter of 2013 at an amount of $68.99
2. Cash Collection Policy
Total sales consist of the following:
Cash sales: 5%
Credit sales: 95%
Credit collections are as follows:
In the month following the month of sale: 75%
In the second month following the month of sale: 25%
The Company does not have any bad debts.
3. Production Policy
The Company’s policy is to produce during each month, enough units to meet the current
month’s sales as well as a desired inventory at the end of the month which should be
equal to 23% of next month’s estimated sales. At the end of December 2012, the finished
goods inventory consisted of 1,714 units at a cost each of $40.50.
4. Raw Materials Purchasing Policy
Each month the Company purchases enough raw materials to meet that month’s
production requirements and an amount equal to 25% of the next month’s estimated
production requirements. Each unit of finished product requires 2.83 pounds of raw
materials. Raw materials are purchased at a cost of $1.38 per pound. On December 31,
2012, there were enough materials in inventory to meet 20% of January 2013’s
production requirements.
Payments are made as follows:
In the month of purchase: 80%
In the following month the balance: 20%
The accounts payable balance of $5,754.60 as of December 31, 2012, represents 20% of
purchases made in December 2012 to be paid in January 2013.
5. Direct Labor Costs
Direct labor hours required per unit of finished product: 1.75
Average rate per direct labor hour: $ 10.25
6. Manufacturing Overhead
The Company applies variable manufacturing overhead cost at the rate of 120% of direct
labor cost and fixed factory overhead on the basis of the number of direct labor hours.
The company has the following fixed overhead expenses per month:
Factory supervisor’s salary $ 54,000.00
Factory rent 6,000.00
Factory insurance 6,500.00
Depreciation of factory equipment 600.00
All manufacturing overhead costs, except depreciation, are paid for in cash during the
month in which they are incurred.
7. Selling and Administrative Expenses
Variable selling expenses are:
Freight out $ 0.80 per unit
Sales commissions 1% of sales
Fixed selling and administrative expenses per month are:
Salaries $ 8,700.00
Rent 1,800.00
Advertising 150.00
Insurance 250.00
Depreciation (excluding depreciation of
computer to be purchased at the end
of January 2013 10,050.00
8. Income Taxes
Combined tax rate 30% of Income before taxes
9. Capital Expenditures
The Company expects to buy a new computer on January 31, 2013, for use in the sales and
administrative offices at a cost of $180,000.00, which will be paid in cash. Monthly
depreciation expense will be an additional $3,000.00 .
10. Financing Policy
On March 31, 2013, the Company is scheduled to pay $300,000.00 , of the long-term notes
payable plus interest expense for the first quarter at a rate of 12%
With respect to short-term borrowing, the Company’s policy is to borrow at the beginning
of a month with an anticipated cash deficiency. A minimum cash balance of $25,000.00 is
required of the end of each month. The Company repays the principal of such short-term
borrowing at the end of the first following month to the extent of anticipated excess cash.
Interest must be paid at the beginning of the following month at a rate of 12%. Borrowing
and principal repayments are made in multiples of $1,000.00 .
11. Investing Policy
The Company invests any cash balance in excess of minimum requirements in marketable
securities at the beginning of any month where such surplus is anticipated. Investments
earn interest of the rate of 6% per annum which is credited to our account by the bank at
the beginning of the following month. You may assume that the balance of Marketable
Securities at December 31, 2012, was outstanding throughout the entire month.
12. General Information
Use proper rounding and show two (2) decimal places of accuracy on dollar amounts.
Round up and show whole amounts on all other figures.

WHAT NEEDS TO GET DONE:

1 Cost of Goods Sold & Ending Finished Goods Inventory calculations assuming FIFO.
2 Budgeted Income Statement for the entire quarter (not month by month)

The Sales budget, materials budget, manufacturing overhead and selling and administrative expenses have all been completed but I’m having trouble with my numbers on these two.