Jacobs Incorporated manufactures a product with a selling price of $55 per unit.
ID: 2525165 • Letter: J
Question
Jacobs Incorporated manufactures a product with a selling price of $55 per unit. Units and monthly cost data follow:
Variable:
• Selling and administrative: $4.60 per unit
• Direct materials: $15.25 per unit manufactured
• Direct labor: $12.50 per unit manufactured
• Variable manufacturing overhead: $7.00 per unit manufactured
Fixed:
• Selling and administrative: $60,000 per month
• Manufacturing (including depreciation of $10,000): 45,000 per month
Jacobs Incorporated pays all bills in the month incurred. All sales are on account with 60 percent collected the month of sale and the balance collected the following month. There are no sales discounts or bad debts.
Jacobs Incorporated desires to maintain an ending finished goods inventory equal to 25 percent of the following month’s sales and a raw materials inventory equal to 16 percent of the following month’s production. January 1, 2018 inventories are in line with these policies.
Actual unit sales for December 2017 and budgeted unit sales for January, February and March of 2018 are as follows:
month
december
january
february
march
Sales-units
9600
8100
9925
12125
Sales dollars
$ 528,000.00
$ 445,500.00
$ 545,875.00
$ 666,875.00
Additional Information:
• The January 1 beginning cash is projected as $5,125.
• The company requires a minimum cash balance of $5,000 and may borrow any amount needed from a local bank at a monthly interest rate of 4%. The company borrows money at the beginning of the month and repayments are made at the end of the month. Interest payments are due monthly.
• For the purpose of operational budgeting, units in the January 1 inventory of finished goods are valued at variable manufacturing cost.
• Each unit of finished product requires one unit of raw materials.
• Jacobs Inc intends to pay a cash dividend of $30,000 in January.
Complete the following budgets (each should be on a separate tab in excel):
Please double check my work for questions a, b, c and need help to fill in the blanks on questions d & e. Thanks!
a. A production budget for January and February.
b. A purchases budget in units for January.
c. A manufacturing cost budget for January.
d. A cash budget for January.
e. A budgeted contribution income statement for January.
month
december
january
february
march
Sales-units
9600
8100
9925
12125
Sales dollars
$ 528,000.00
$ 445,500.00
$ 545,875.00
$ 666,875.00
Explanation / Answer
a. A production budget for January and February. Production Budget For the Months of January and February of 2018 Particulars January February March Requirements for current sales (Unit) 8100 9925 12125 Desired ending inventory 2481 3031 Total Requirements 10581 12956 12125 Less: Beginning Inventory 2025 2481 3031 Production Requirements (units) 8556 10475 9094 b. A purchases budget in units for January. Raw materials Purchases Budget For the month of January 2018 Particulars January February Production Requirements (units) 8556 10475 9094 Raw material Requirements ( 1 unit/I unit of prodn.) 8556 10475 9094 Desired Ending Inventory(16% * next mth.need) 1676 1455 Total Requirements 10232 11930 Less: Beginning Inventory 1369 1676 Purchases Required (units) 8863 10254 Purchases ( $ 15.25 each) 135161 156374 c. A manufacturing cost budget for January. Manufacturing Cost Budget For the month of January 2018 Particulars January Direct Materials (8556*15.25) 130479 Direct Labor (8556* 12.50) 106950 Variable Manufacturing Overhead (8556*7) 59892 Total Variable Cost 297321 Fixed Manufacturing Overhead 45000 Total Manufacturing cost 342321 d. A cash budget for January. Cash Budget For the month of January 2018 Particulars January Beginning Balance 5125 Receipts: December Sales (528000*60%) 211200 January Sales (445500*60%) 267300 Total Cash Available 483625 Disbursements: Purchases 135161 Direct Labor 106950 Variable Manufacturing Overhead 59892 Fixed Manufacturing Overhead (exclude depreciation) 35000 Variable Selling and Administrative (8100*4.60) 37260 Fixed Selling and Administrative 60000 Dividend 30000 Total disbursements 464263 Ending Balance 19362 e. A budgeted contribution income statement for January. Budgeted Contribution Income Statement For the month of January 2018 Particulars Per unit Total Amount Sales (8100*55) 55 445500 Less: Variable Cost (15.25+12.5+7)*8100 34.75 281475 Cost of Goods Sold 20.25 164025 Selling and Administrative (8100*4.6) 4.6 37260 Contribution 15.65 126765 Less Fixed Costs Manufacturing Overhead 45000 Selling and Administrative 60000 Net Income 21765
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