HARTSELL MANUFACTURING HARTSELL MANUFACTURING Corporation is preparing its budge
ID: 2468647 • Letter: H
Question
HARTSELL MANUFACTURING
HARTSELL MANUFACTURING Corporation is preparing its budget for the coming year, 2014. The first step is to plan for the first quarter of that coming year. HARTSELL MANUFACTURING gathered the following information from the managers.
Sales
Unit sales for November 2013
112,500
Unit sales for December 2013
102,100
Expected unit sales for January 2014
113,000
Expected unit sales for February 2014
112,500
Expected unit sales for March 2014
116,000
Expected unit sales for April 2014
125,000
Expected unit sales for May 2014
137,500
Unit selling price
$12
HARTSELL MANUFACTURING likes to keep 10% of the next month’s unit sales in ending inventory. All sales are on account. 85% of the Accounts Receivable are collected in the month of sale, and 15% of the Accounts Receivable are collected in the month after sale. Accounts receivable on December 31, 2013, totaled $183,780.
Direct Materials
Item
Amount Used per Unit
Inventory, Dec. 31
Metal
1 lb @ 58¢ per lb.
5,177.5 lbs
Plastic
12 oz @ 6¢ per oz
3,883.125 lbs
Rubber
4 oz @ 5¢ per oz
1,294.375 lbs
2 lbs per unit
10,355.0 lbs
Metal, plastic, and rubber together are 75¢ per pound per unit.
HARTSELL MANUFACTURING likes to keep 5% of the materials needed for the next month in its ending inventory. Payment for materials is made within 15 days. 50% is paid in the month of purchase, and 50% is paid in the month after purchase. Accounts Payable on December 31, 2013, totaled $120,595. Raw Materials on December 31, 2013, totaled 11,295 pounds.
Direct Labor
Labor requires 12 minutes per unit for completion and is paid at a rate of $8 per hour.
Manufacturing Overhead
Indirect materials
30¢ per labor hour
Indirect labor
50¢ per labor hour
Utilities
45¢ per labor hour
Maintenance
25¢ per labor hour
Salaries
$42,000 per month
Depreciation
$16,800 per month
Property taxes
$ 2,675 per month
Insurance
$ 1,200 per month
Janitorial
$ 1,300 per month
Selling and Administrative
Variable selling and administrative cost per unit is $1.60.
Advertising
$15,000 a month
Insurance
$ 1,400 a month
Salaries
$72,000 a month
Depreciation
$ 2,500 a month
Other fixed costs
$ 3,000 a month
HARTSELL MANUFACTURING
Other Information
The Cash balance on December 31, 2013, totaled $100,500, but management has decided it would like to maintain a cash balance of at least $800,000 beginning on January 31, 2014. Dividends are paid each month at the rate of $2.50 per share for 5,000 shares outstanding. The company has an open line of credit with Romney’s Bank. The terms of the agreement requires borrowing to be in $1,000 increments at 8% interest. HARTSELL MANUFACTURING borrows on the first day of the month and repays on the last day of the month. A $500,000 equipment purchase is planned for February.
Instructions
For the first quarter of 2014, do the following.
(e) Prepare a manufacturing overhead budget. (Round amounts to the nearest dollar.)
(f) Prepare a selling and administrative budget.
(g) Prepare a schedule for expected cash collections from customers.
(h) Prepare a schedule for expected payments for materials purchases. (Round totals to nearest dollar)
(i) Prepare a cash budget.
Sales
Unit sales for November 2013
112,500
Unit sales for December 2013
102,100
Expected unit sales for January 2014
113,000
Expected unit sales for February 2014
112,500
Expected unit sales for March 2014
116,000
Expected unit sales for April 2014
125,000
Expected unit sales for May 2014
137,500
Unit selling price
$12
Explanation / Answer
Answer:
Production budget January February March Quarter Expected unit sales 113000 112500 116000 341500 Ending inventory 11250 11600 12500 35350 Beginning inventory 11300 11250 11600 34150 Required production 112950 112850 116900 342700 Selling and administrative budget January February March Quarter Variable selling and administrative cost $ 1,80,720.00 $ 1,80,560.00 $ 1,87,040.00 $ 5,48,320.00 Advertising $ 15,000.00 $ 15,000.00 $ 15,000.00 $ 45,000.00 Insurance $ 1,400.00 $ 1,400.00 $ 1,400.00 $ 4,200.00 Salaries $ 72,000.00 $ 72,000.00 $ 72,000.00 $ 2,16,000.00 Depreciation $ 2,500.00 $ 2,500.00 $ 2,500.00 $ 7,500.00 Other fixed costs $ 3,000.00 $ 3,000.00 $ 3,000.00 $ 9,000.00 Manufacturing overhead budget January February March Quarter Indirect material $ 6,77,700.00 $ 6,77,100.00 $ 7,01,400.00 $ 20,56,200.00 Indirect labor $ 11,29,500.00 $ 11,28,500.00 $ 11,69,000.00 $ 34,27,000.00 Utilities $ 10,16,550.00 $ 10,15,650.00 $ 10,52,100.00 $ 30,84,300.00 Maintenance $ 5,64,750.00 $ 5,64,250.00 $ 5,84,500.00 $ 17,13,500.00 Salaries $ 42,000.00 $ 42,000.00 $ 42,000.00 $ 1,26,000.00 Depreciation $ 16,800.00 $ 16,800.00 $ 16,800.00 $ 50,400.00 Property taxes $ 2,675.00 $ 2,675.00 $ 2,675.00 $ 8,025.00 Insurance $ 1,200.00 $ 1,200.00 $ 1,200.00 $ 3,600.00 Janitorial $ 1,300.00 $ 1,300.00 $ 1,300.00 $ 3,900.00 Schedule of expected cash collection January February March Quarter December collections $ 1,83,780.00 $ 1,83,780.00 January collections $ 11,52,600.00 $ 2,03,400.00 $ 13,56,000.00 February collections $ 11,47,500.00 $ 2,02,500.00 $ 13,50,000.00 March collections $ 11,83,200.00 $ 11,83,200.00 Total $ 13,36,380.00 $ 13,50,900.00 $ 13,85,700.00 $ 40,72,980.00 Schedule of expected merchandise purchases January February March Quarter Required production 112950 112850 116900 342700 Ending inventory 11285 11690 12625 35600 Beginning inventory 11295 11285 11690 34270 Required purchases 112940 113255 117835 344030 Cost of purchases $ 84,70,500.00 $ 84,94,125.00 $ 88,37,625.00 $ 2,58,02,250.00 Payment for december purchases $ 39,06,225.00 $ 39,06,225.00 Payment for january purchases $ 42,35,250.00 $ 42,35,250.00 $ 84,70,500.00 Payment for february purchases $ 42,47,062.50 $ 42,47,062.50 $ 84,94,125.00 Payment for march purchases $ 44,18,812.50 $ 44,18,812.50 Total $ 81,41,475.00 $ 84,82,312.50 $ 86,65,875.00 $ 2,52,89,662.50Related Questions
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