need help QuinnCompany manufactures and sells executive writing desks. The follo
ID: 2566803 • Letter: N
Question
need help
QuinnCompany manufactures and sells executive writing desks. The following information gathered by the company’s accountant is for the 2017 budget:
The company expects to sell 1,000 executive writing desks during 2017 at an estimated price of $450 per desk.
Materials and labor per desk:
Direct materials (wood) 5 board feet (b.f) per desk
Direct manufacturing labor 6 hours per desk
Costs: 2016 Unit price 2017 Unit Price
Wood $28 per b.f. $30.00 per b.f.
Direct manufacturing labor $24.00 per hour $25.00 per hour
Beginning Ending
Inventory Inventory
Inventories: 1/1/2017 12/31/2017
Finished goods (executive writing desks) 100 units 200 units
Direct materials (wood) 2,000 b.f. 1,500 b.f.
Other costs:
Budgeted variable manufacturing overhead:
Indirect manufacturing labor $28,000
Indirect materials 13,200
Utilities 5,000
Budgeted fixed manufacturing overhead:
Depreciation – factory equipment 5,060
Factory rent 12,000
Factory manager’s salary 30,000
Factory security 13,000
Apex uses direct manufacturing labor-hours as the cost allocation base (denominator level) to allocate variable and fixed manufacturing costs to production.
Budgeted variable marketing expense is 30 sales visits at $250 per visit.
Budgeted fixed non-manufacturing costs are:
Selling expense, $17,000
Administrative expense, 13,000
The company plans to declare a common stock cash dividend of $5,000 in December 2017.
The inventoriable unit cost for ending finished goods inventory on December 31, 2016, is $375. The company uses FIFO inventory method for both direct materials and finished goods.
Budgeted balances at December 31, 2017, in the selected accounts are:
Cash…………………………………………………………… $10,000
Accounts receivable…………………………………………… 36,000
Factory equipment (net) ………………………………………. 750,000
Office furniture and fixtures (net)……………………………... 300,000
Accounts payable……………………………………………… 10,000
Note payable (due 02/01/2018)…………………………………… 7,000
Accumulated depreciation – factory equipment……………… 150,000
Accumulated depreciation – office furniture and fixtures……. 50,000
Allowance for doubtful accounts……………………………… 1,740
Note payable (due 09/30/2020) ……………………………….. 78,000
Bonds payable (maturing 12/31/2030) ……………………….. 100,000
Common stock ($1 par value) ………………………………… 100,000
Additional paid in capital……………………………………… 600,000
Retained earnings (balance at 1/1/17) ………………………… 101,520
The company’s income tax rate is 20%.
Required:
1. Prepare a cost of goods manufactured budget
2. Prepare a budgeted classified balance sheet as of December 31, 2017
Explanation / Answer
1) Cost of Goods Manufactured Budget Opening inventory of Direct Material $ 56,000 Add: Direct material Purchased (WN 1) $ 150,000 Less: Closing Inventory of Direct Materials $ 45,000 Direct Material Used $ 161,000 Direct Labour 1100*6*25 $ 165,000 Variable maufacturing overhead $ 46,200 Fixed Manufacturing overhead $ 60,060 Total Cost of units manufactured $ 432,260 2) Budgeted Classified Balanceshet as of 31st December 2017 Current Assets Cash $ 10,000 Accounts receivable $ 36,000 Less: Allowance for Doubtful debts $ 1,740 $ 34,260 Inventory of finished goods (WN 3) $ 79,320 Inventory of Direct Material $ 45,000 Total Current Assets $ 168,580 Fixed Assets Factory equipment (net) $ 750,000 Less: Accumulted Depreciation $ 150,000 $ 600,000 Office furniture and fixtures (net) $ 300,000 Less: Accumulted Depreciation $ 50,000 $ 250,000 Total Fixed Assets $ 850,000 Total assets $ 1,018,580 Current Liabilities Accounts payable $ 10,000 Note payable (due 02/01/2018) $ 7,000 Dividend Payable $ 5,000 Income Tax Payable $ 4,412 Total Current Liabilities $ 26,412 Long-term Liabilities Note payable (due 09/30/2020) $ 78,000 Bonds payable (maturing 12/31/2030) $ 100,000 Total Long-term Liabilities $ 178,000 Owner's Equity Common stock ($1 par value) $ 100,000 Additional paid in capital $ 600,000 Retained earnings (balance at 31/12/17) ( WN 5) $ 114,168 Total Owner's Equity $ 814,168 Total Owner's Equity & liabilities $ 1,018,580 WN 1 Direct Material Purchased (In units) material used +Closing stock - Opening stock (1100*5)+1500-2000 5000 WN 2 Units manufactured Units Sold +closing stock-opening stock 1000+200-100 1100 WN 3 Calculation of closing stock Direct Material $ 30,000 Direct Labour $ 30,000 Variable maufacturing overhead $ 8,400 Fixed Manufacturing overhead $ 10,920 Closing stock $ 79,320 WN 4 Cost of Goods Sold Total Cost of units manufactured $ 432,260 Add: opening stock $ 37,500 Less: Closing stock $ 79,320 Cost of Goods Sold $ 390,440 WN 5 Retained earnings (balance at 1/1/17) $ 101,520 Add: sales $ 450,000 Less: cost of good sold (WN 4) $ 390,440 Less: Variable marketing expense $ 7,500 Less: Fixed Non-manufacturing cost $ 30,000 Less: Income Tax @ 20% $ 4,412 Less: Dividend declared $ 5,000 Retained earnings (balance at 31/12/17) $ 114,168
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.