are an managerial accountant for Blackmore Industries, and you are preparing the

Question

are an managerial accountant for Blackmore Industries, and you are preparing the 2018 8 budget. Consider the following information, and prepare the required budgets according to 9 the instructions that follow: 10 1 Sales Information 12 November 2017 unit sales (actual) 13 December 2017 unit sales (actual) 14 January 2018 unit sales (planned) 15 Sales price per unit 16 17 For all months in 2018, unit sales are expected to increase 1.2% over the previous month with the 18 exception of March, when a planned unit price increase to $13.75 is expected to decrease March 19 unit sales (compared to February) by 1.8%. The price increase will remain in effect for the rest of 20 the year 21 121,730 120,896 122,000 $13.00 2 Finished Goods Inventory Planning 23 Blackmore plans to keep 20% of the following month's unit sales on hand in finished goods inventory at the end of any given month. Blackmore has that percentage of January's planned 25 sales (above) on hand at December 31,2017. 26 27 Accounts Receivable and Collections 28 All sales are on account. Generally, 44% of each month's sales are collected in the month after 29 the sale, while 1.3% are never collected, and eventually written off. All other sales are collected 30 in the month of the sale 31 32 Net (collectible) accounts receivable balance at December 31, 2017: $691,525.00

Explanation / Answer

a. Sales Budget Jan Feb Mar Total Sales in Units 122000 123464 121241.6 366705.6 122696.5 124168.9 Price /unit 13 13 13.75 13.75 Sale value 1586000 1605032 1667073 4858105 1687078 Sales collections 54.7% collections 867542 877952.5 911888.7 2657383 44% collections 53194.24 697840 706214.1 1457248 Total sales collections 920736.2 1575793 1618103 4114632 b..Production Budget Jan Feb Mar Total Apr. Sales in Units 122000 123464 121242 366706 122697 124169 Add: Ending Inventory(20%*Next mth.) 24693 24248 24539 24539 24834 Total Needed 146693 147712 145781 391245 147530 Less: Available in beg. Inv. 24400 24693 24248 24400 24539 Production units reqd. 122293 123020 121533 366845 122991 c. Direct Materials Budget Production units reqd. 122293 123020 121533 366845 122991 Metallic raw material reqd /unit (in pounds) 2 2 2 2 2 Total raw materials reqd. 244586 246039 243065 733690 245982 Less: Ending Inventory reqd.(5%*next mth. Need) 12302 12153 12299 12299 Total Needed 256888 258192 255364 745989 Less: Available in beg. Inv. 9600 12302 12153 9600 Purchases reqd. 247288 245890 243211 736389 Cost/pound 3.69 3.69 3.69 3.69 Total cost of purchases 912491 907335 897449 2717275 Payment for purchases 68% payment(Current mth.purch.) 620494 616988 610265 1847747 32% payment(Last mth.) 359000 291997 290347 941344 Total payment for purchases 979494 908985 900613 2789092 d. Direct labor budget Production units reqd. 122293 123020 121533 366845 D/Lab.hrs. reqd. at 12 min./uint(No.of unit*12/60 24459 24604 24307 73369 D/L cost /hr. 12.65 12.65 12.65 12.65 Total Labor cost 309401 311239 307478 928118 e. Manufacturing OH Budget D/Lab.hrs. reqd. at 12 min./uint(No.of unit*12/60 24459 24604 24307 73369 Indirect materials(D/L hrs.*0.25) 6115 6151 6077 18342 Ind.Labor(D/L hrs.*0.42) 10273 10334 10209 30815 Maintenance(D/L hrs.*0.28) 6848 6889 6806 20543 Utilities (D/L hrs.*0.46) 11251 11318 11181 33750 Insurance 4800 4800 4800 14400 Property Taxes 2100 2100 2100 6300 Total cash mfg. Ohs 41387 41592 41172 124150 Depreciation 9700 9700 9700 29100 Total mfg. Ohs 51087 51292 50872 153250 f. Selling & Administartive expenses Advertising 8900 8900 8900 26700 Insurance 4800 4800 4800 14400 Salaries 74200 74200 74200 222600 Other fixed costs 3200 3200 3200 9600 Total cash S& A Ohs 91100 91100 91100 273300 Depreciation 5400 5400 5400 16200 Total S& A Ohs 96500 96500 96500 289500 g. Budgeted Income Statement Sales 4858105 Less: Cost of Raw materials used in prodn. 733690 Cost of Direct labor 928118 Mfg.OH 153250 1815058 Gross margin 3043047 Less: Operating expenses: S& A 289500 Operating Income 2753547 Less:Interest accrued on borrowings 9318 Income before interest 2744229 Less Income tax at 25% 686057 Net Income after tax 2058172 h.Cash Budget Jan. Feb. Mar. Total Beginning Balance 297500 250000 250000 297500 Add:Total sales collections 920736.2 1575793 1618103 4114632 Total cash available 1218236 1825792 1868103 4412132 Less: Disbursements: Payment for purchases 979494 908985 900613 2789092 Labor cost 309400.8 311239.4 307477.5 928117.7 Cash mfg. Ohs 41386.57 41591.51 41172.2 124150.3 Cash S& A Ohs 91100 91100 91100 273300 Purchase of fixed assets 475000 475000 Total disbursements 1421381 1827916 1340362 4589660 Surplus/(Deficit) -203145 -2124 527741 -177528 Add: Borrowings 453145 252124 705269 Less: Int. on borrowings 0 0 Less: Repayments 0 277741 277741 Ending Balance 250000 250000 250000 250000 Note: Amt.repaid 277741 So,int accrued : Int.on 277741 *0.5%*3 mths 4166 Bal.(453145-277741)*0.5%*3 mths 2631 On 252124*0.5%*2 mths 2521 Total int.accrued 9318

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