Storm Tools has formed a new business unit to produce battery-powered drills. Th
ID: 2554577 • Letter: S
Question
Storm Tools has formed a new business unit to produce battery-powered drills. The business unit was formed by the transfer of selected assets and obligations from the parent company. The unit's initial balance sheet on January 1 contained cash ($500,000), plant and equipment ($2,500,000), notes payable to the parent ($1,000,000), and Common Stock ($2,000,000). The business unit is expected to repay the note at $50,000 per month, plus all accrued interest at 1/2% per month. Payments are made on the last day of each month. The unit is scheduled to produce 25,000 drills during January, with an increase of 2,500 units per month for the next three months. Each drill requires $40 of raw materials. Raw materials are purchased on account, and paid in the month following the month of purchase. The plant manager has established a goal to end each month with raw materials on hand, sufficient to meet 25% of the following month's planned production. The unit expects to sell 20,000 drills in January; 25,000 in February, 25,000 in March, and 30,000 per month thereafter. The selling price is $100 per drill. Half of the drills will be sold for cash through a website. The others will be sold to retailers on account, who pay 40% in the month of purchase, and 60% in the following month. Uncollectible accounts are not material. Each drill requires 20 minutes of direct labor to assemble. Labor rates are $24 per hour. Variable factory overhead is applied at $9 per direct labor hour. The fixed factory overhead is $25,000 per month; 60% of this amount is related to depreciation of plant and equipment. With the exception of depreciation, all overhead is funded as incurred. Selling, general, and administrative costs are funded in cash as incurred, and consist of fixed components (salaries, $100,000; office, $40,000; and advertising, $75,000) and variable components (15% of sales).
Prepare the master budget for the quarter ended March 31, 2018.
Can an expert help prepare the master budget with the template below
$ 7,000,000
STORM TOOLS SALES BUDGET QUARTER ENDED MARCH 31, 2018 JANUARY FEBRUARY MARCH QUARTER Unit sales 20,000 25,000 25,000 70,000 Unit sales price 100 100 100 100 Budgeted sales revenue $ 2,000,000 $ 2,500,000 $ 2,500,000$ 7,000,000
Explanation / Answer
Sales Budget January February March Total Sales units 20000 25000 25000 70000 Unit selling price 100 100 100 100 Budgeted Sales 2000000 2500000 2500000 7000000 Cash sales - 50% 1000000 1250000 1250000 3500000 Credit Saes - 50% 1000000 1250000 1250000 3500000 Schedule of collections January February March Total Cash sales 1000000 1250000 1250000 3500000 Credit Sales: January Sales 400000 600000 0 1000000 February Sales 500000 750000 1250000 March Sales 500000 500000 Total collections 1400000 2350000 2500000 6250000 Receivables 600000 750000 750000 750000 Raw material budget January February March Total Budgeted Production 25000 27500 30000 82500 Cost of raw material per unit 40 40 40 40 Raw material required for production 1000000 1100000 1200000 3300000 Add: Desired ending inventory 220000 240000 260000 260000 (20% of next month's requirement) Total material needed 1220000 1340000 1460000 3560000 Less: Begining Inventory 0 220000 240000 0 Budgeted Raw material purchases 1220000 1120000 1220000 3560000 Schedule of cash payments for purchases January February March Total January purchases 0 1220000 1220000 February purchases 0 1120000 1120000 March purchases 0 0 Total payments 0 1220000 1120000 2340000 Payables 1220000 1120000 1220000 1220000 Direct labor budget January February March Total Budgeted Production 25000 27500 30000 82500 Direct labour hours per unit (20/60) 0.33 0.33 0.33 0.33 Direct labor hours for production 8333 9167 10000 27500 Direct labor cost per hour $24.00 $24.00 $24.00 $24.00 Direct labor cost 200000 220000 240000 660000 Manufacturing overhead budget January February March Total Direct labor hours needed (DLH) 8333 9167 10000 27500 Variable manufacturing overhead per DLH $9 $9 $9 $9 TotL Variable manufacturing overhead 75000 82500 90000 247500 Fixed manufacturing overhead 25000 25000 25000 75000 Total manufacturing overhead 100000 107500 115000 322500 Depreciation Expense 15000 15000 15000 45000 Cash payment for manufacturing overheads 85000 92500 100000 277500 Selling and administrative expenses budget January February March Total Variable selling and admin. Expenses (15% of sales) 300000 375000 375000 1050000 Fixed selling and admin. Expenses Salaries Expense 100000 100000 100000 300000 Office Expense 40000 40000 40000 120000 Advertising expense 75000 75000 75000 225000 Total fixed selling andadmin. Expenses 215000 215000 215000 645000 Selling and administrative expenses budget 515000 590000 590000 1695000 Cash payment for selling and admin. Expenses 515000 590000 590000 1695000 CASH BUDGET January February March Total Beginning cash balance 500000 1045000 1217750 500000 Add: Collections from sales 1400000 2350000 2500000 6250000 total cash available for disbursements 1900000 3395000 3717750 6750000 Cash disbursements: For raw material 0 1220000 1120000 2340000 For direct labor 200000 220000 240000 660000 For manufacturing overhead 85000 92500 100000 277500 For selling and administrative expenses 515000 590000 590000 1695000 For repayent of note 50000 50000 50000 150000 For interest 5000 4750 4500 14250 Total cash disbursements 855000 2177250 2104500 5136750 Cash Surplus 1045000 1217750 1613250 1613250 Ending cash balance 1045000 1217750 1613250 1613250 STORM TOOLS Budgeted Profit and Loss Account For the quaeter ending March 31, 2018 Sales 7000000 Cost of goods sold 3633636 Gross profit 3366364 Selling and admin. Expenses: Variable expenses 1050000 Salaries expense 300000 Office Expense 120000 Advertising Expense 225000 Total selling and admn. Expenses 1695000 Net operating income 1671364 Interest Expense 14250 Net income 1657114 Working: Cost of production Direct material 3300000 Direct labor 660000 Manufacturing overheads 322500 Total cost 4282500 Production 82500 Cost per unit 51.91 Ending Finished goods - units (82,500 - 70,000) 12500 Value of finished goods 648864 Cost of goods sold (4,282,500 - 648,864) 3633636 STORM TOOLS Budgeted Balance Sheet as at March 31, 2018 Assets Cash 1613250 Accounts Receivables 750000 Raw material inventory 260000 Finished Goods Inventory 648864 Total Current Assets 3272114 Plant and equipment 2500000 Less: Accumulated Depreciation 45000 2455000 Total Assets 5727114 Liabilities and Stockholders' equity Accounts Payable 1220000 Notes Payable 850000 Total Liabilities 2070000 Stockholders' equity Common stock 2000000 Retained earnings 1657114 Total Stockholders' equity 3657114 Total Liabilities and Stockholders' Equity 5727114
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