Scenario
Roletter Company Budgets for the five months 2007
Particulars Jan Feb Mar Apr May
Estimated sales in units 10,000 12,000 8,000 9,000 9,000
Selling price 54.00 51.50 51.50 51.50 51.50
Direct Manufacturing labour hrs per unit 2 2 1.5 1.5 1.5 Wage per direct manufacturing labour
hour 10.00 10.00 10.00 11.00 11.00
Besides wages, labour cost includes the following: Pension contribution 0.50 per hour Workers compensation insurance 0.15 per hour Employee medical insurance 0.40 per hour
Social security tax 7.50%
From April wages has been increased to 11 per hour
Roletter expected to have 16000 frames on hand on December 31, 2006 and it has a policy of carrying on ending inventory of 100% of the following month sales and 50% of second month following sales.
Required
Prepare a production budget and direct manufacturing labour budget for Roletter Company by month and for the first quarter of 2007.
Roletter Company
Production budget for the first quarter ended 31, March 2007
Particulars Jan Feb Mar
Targeted sales in units (given) 10,000 12,000 8,000 Add: Targeted closing inventory
100% of next month sales 12,000 8,000 9,000 50% of second next month sales
4,000
4,500 4,500 Units required 26,000 24,500 21,500 Less: beginning from inventory (16,000) (16,000) (12,500) Finished units to be produced 10,000 8,500 9,000
Roletter Company
Direct Manufacturing labour cost budget for the first quarter ended 31, March 2007
Particulars Jan Feb Mar
Labour Hours budget $ $ $
Units to be produced from production budget 10,000 8,500 9,000 Hrs per unit 2.00 2.00 1.50 Total hrs (a) 20,000 17,000 13,500 Labour cost budget
Per hour
Wage per direct manufacturing labour hour 10.00 10.00 10.00 Social security tax 0.75 0.75 0.75
Pension contribution 0.50 0.50 0.50
Workers compensation insurance 0.15 0.15 0.15
Employee medical insurance 0.40 0.40 0.40
Total labour cost (a*b) 236,000.0 0 200,600.0 0 159,300.0 0 Scenario
Tab Comp Inc
The company prepares annual sales forecasts of which the first six months for 2006 are presented here.
Cash sales account for 25% of tab comp's total sales, 30% of the total sales are paid by bank credit card , and the remaining 45% are on open account
The cash sales and bank credit sales are received in the month of sale. Bank credit card are subject to 4% discount deducted at the time of daily deposit.
The cash sales from open account are 70% in the month following the sale and 28% in the
second month after the sale. Remaining are uncollectible.
Hardware sales
Software Sales
Support Total Revenues
Units Dollars Dollars Dollars
$ $ $ Jan 130 390,000.00 160,000.00 550,000.00 Feb 120 360,000.00 140,000 .00 500,000.00 Mar 110 330,000.00 150,000 480,000.00
.00 Apr 90 270,000.00 130,000 .00 400,000.00 May 100 300,000.00 125,000.00 425,000.00 Jun 125 375,000.00 225,000.00 600,000.00 Total 675.00 2,025,000.00 930,000.00 2,955,000.00 Tabcorps month end Inventory requirements for computer hardware units are 30% of the next month's sales. A one - month lead time is required for delivery from the manufacturer. Thus, orders for computer hardware units are placed on the 25 th of each month to assure that they will be in the store by the first day of the month needed. The computer hardware units are purchased under terms of n/45 measured from the time the units are delivered to Tabcomp. Tabcomp's purchase price is 60% of selling price.
Required
1. Calculate the cash that TabComp, Inc can expect to collect during April 2006. Be sure to show all of your calculations.
2. TabComp Inc is determining how many MZB-33 computer hardware units to order on January 25, 2006. Determine the projected number of computer hardware units that were that will be ordered and dollar amount that the company will place for these hardware units.
Solution
TabComp 1. Cash collections from receivables during April 2006
Particulars Amount Amount
$ $
Cash sales
25% of April sales 100,000.00
Credit card sales 120,000.00
Less: 4% discount 4,800.00 115,200.00
Open account
70% of 45% of March sales 151,200.00
28% of 45% of Feb. sales 63,000.00 214,200.00
Total cash collections from receivables during April 2006 429,400.00
Particulars Units Dollars $
March Budgeted sales in units (given)* 110 330,000.00
Add: Targeted closing inventory (30% of next month sales) 27 81,000.00
Total units required 137 411,000.00
Less: Beginning inventory (30% of current month sales) -33 (99,000.00)
Total units to be ordered 104 312,000.00
Dollar value of units @ 60% of sale value 187,200.00
* Since the lead time is one month therefore march month sales was considered if the units were to be ordered by Jan 25.
Scenario
Scarborough Corporation
2007
Projected sales
Product Units Price
Thing one 60,000 165 Thing two 40,000 250 Inventories in units
Product Jan, 2007 Dec 31,2007
Thing one 20,000 25,000 Thing two 8,000 9,000 The following direct materials are used in the two products
Amount used per unit
Direct material Units Thing one Thing two
A pound 4 5
B pound 2 3
C each 0 1
Direct material Purchase priceAnticipated Expected inventory, Jan 07 Expected inventory, Dec 07 A 12.00 32,000 36,000 B 5.00 29,000 32,000 C 3.00 6,000 7,000 Projected date for 2007 with respect to manf labour
Product Hours per unit Rate per Hour
Thing one 2 12
Thing two 3 16
Manufacturing overhead is allocated at the rate of $20 per direct manufacturing labour Based on the preceding projections and budget requirements for Thing one and Thing two. Prepare the following budgets for 2007
Required
1. Revenue Budget (in dollars) 2. Production Budget (in units)
3. Direct material purchases budget (in quantities) 4. Direct material purchase budget (in dollars) 5. Direct manufacturing labor budget (in dollars)
6. Budgeted finished goods inventory at December 31, 2007
Solution
1. Revenue Budget for the year ending December 31,2007
Product Units sold Selling price Total Revenues
$ $
Thing one 60,000 165 9,900,000.00 Thing two 40,000 250 10,000,000.00
Total 19,900,000.00
2. Budget in units for the year ending December 31,2007 Production
Particulars Thing one Thing two Total
Units Units Units
Sales (in units) from Revenue budget 60,000 40,000 100,000 Add: Targeted closing finished goods
inventory 25,000 9,000 34,000 Total required units 85,000 49,000 134,000 Less: Beginning finished goods inventory
(20,000.0 0) (8 ,000) (28 ,000) Total finished goods to be produced 65,000 41,000 106,000
3. Direct Material purchases budget (in quantities) for the year ended December 31,2007
Particulars A B C
Finished units to be produced from production budget
Thing one 65,000
Thing two 41,000
Units used for each finished unit
Thing one 4 2 0
Thing two 5 3 1
Total units used in Thing one
260, 000 130 ,000 - Total units used in Thing two 205,000 123,000 41,000 Total units used in production 465,000 253,000 41,000 Add: Target closing inventory of materials 36,000 32,000 7,000
Total units required 501,000 285,000 48,000
Less: Available from beginning inventory
of materials (32,000) (29,000) (6,000) Total materials to be purchased in
units 469,000 256,000 42,000
4. Direct Material purchase budget (in dollars) for the year ended December 31,2007
Particulars A B C Total
Units to be purchased from
purchase budget schedule 469,000 256,000 42,000 767,000 Per unit price 12.00 5.00 3.00
Dollar value of purchases 5,628,000.00 1,280,000.00 126,000.00 7,034,000.00
5. Direct Manufacturing Labor budget ( in dollars) for the year ended December 31,2007
Particulars Thing one Thing two Total
Labour Hours budget
Hours per unit 2 3 Finished units from Production Budget 65,000 41,000
___________________________________ Total Hours used in production 130,000 123,000 253,000
________________________________
Labour cost Budget
Total hours used in production 130,000 123,000 253,000 Rate per hour 12 16
____________________________________ Total labour cost 1,560,000 1,968,000 3,528,000
_________________________________
6. Budgeted Finished goods inventory as at December 31,2007
Particulars Thing one Thing two Total
Cost per unit $ $ $
Direct materials
A 48.00 60.00
B 10.00 15.00
C - 3.00
Direct materials (a) 58.00 78.00 Direct labour
Hours per unit 2 3
Rate per hour 12.00 16.00 Direct labour (b) 24.00 48.00 Manufacturing overheads
Hours per unit 2 3
Rate per hour 20.00 20.00 Manufacturing overheads (c ) 40.00 60.00
Total cost per unit (a+b+c) 122.00 186.00 Units in closing finished goods inventory 25,000 9,000
Budgeted finished goods inventory 3,050,000.00 1,674,000.00 4,724,000.00
Scenario
Easecom Company
Income statement for the year ended, December 31, 2007 (in thousands)
Revenues Amount Amount
$ $ Equipment 6,000.00
Maintenance contracts 1,800.00
Total revenues 7,800.00
Cost of goods sold (4,600.00)
Gross margin 3,200.00 Operating costs Marketing 600.00 Distribution 150.00 Customer Maintenance 1,000.00 Administration 900.00
Total operating costs 2,650.00
Operating income 550.00
Selling price of equipment increase by 10% and equipment sales in units increase by 6% with corresponding
growth in maintenance contracts
Cost of each unit sold is expected to increase by 3%
Marketing costs increase by 250,000 but administration costs remain constant Distribution costs vary in proportion in units sold
Two maintenance staffs were hired for total cost of $130000 There is no beginning or ending inventory
Required
Prepare a budgeted income statement for the year December 31,2008
Solution:
Easecom Company
Income statement for the year ended, December 31, 2008 (in thousands)
Revenues Note Amount Amount
$ $
Equipment 1 6,996.00
Maintenance contracts 1 1,908.00
Total revenues 8,904.00
Cost of goods sold 1 (5,022.28)
Gross margin 3,881.72 Operating costs Marketing 1 850.00 Distribution 1 159.00 Customer Maintenance 1 1,130.00 Administration 900.00
Total operating costs 3,039.00
Note 1
Sales 6,000.00
Increase in sales price 10%
Growth rate 6%
Increase sales 6,996.00
Maintenance contracts 1,800.00
Growth rate 6%
Increase contracts 1,908.00 Cost of goods sold (4,600.00) Increase in price 3%
Growth rate 6%
Increase in cost of goods sold (5,022.28) Increase in Marketing costs 250
Distribution 150.00
Proportion to unit sales 6% Increase in distribution 159.00 Increase in Customer maintenance 130.00
