Final Project - Operating Budget_Electronic Technology

Final Project  -  Operating Budget  -  Accounting Principles II

Electronic Technology, Incorporated manufactures two different types of housing used for electric motors.  In the fall of the current year, James Lingor, the controller, compiled the following data to aid in preparing the 2015 annual budget. 

       Sales Forecast for 2015:

Product                                                                Units                     Price

Small Housing                                    90,000                   $170

Large Housing                                    70,000                   $275

       Raw Materials Prices and Inventory Levels:

Raw Material                     Expected Inventory, 1/1               Desired Inventory, 12/31             Estimated Price

Sheet Metal                                       32,000 lbs                                            36,000 lbs                                            $8

Bar Stock                                             29,000 lbs                                            32,000 lbs                                            $5

Base                                                        6,000 units                                          7,000 units                                        $12

       Used of Raw Material:

Raw Material                                          Amount   Used   Per   Unit

                                                                Small Housing      Large Housing

Sheet Metal                                          4 lbs                          5 lbs                                

Bar Stock                                                2 lbs                          3 lbs

Base                                                          --                               1 unit

       Direct Labor requirements and rates:

Product                                                                Hours per Unit                       Rate per Hour

Small Housing                                           2                                                       $15

Large Housing                                           3                                                       $20

       Finished Goods Inventory Prices and Units:

Product                                                Expected Inventory, 1/1               Desired Inventory, 12/31             Estimated Cost

Small Housing                                    20,000                                                   25,000                                        $  81

Large Housing                                      8,000                                                     9,000                                        $146 

      Manufacturing Overhead:

Variable Overhead                                         Activity Based Budget Rate

Purchasing and materials handling           $   .25 per pound of sheet metal and bar stock purchased

Machine depreciation                                    $ 2.50 per housing produced (either type)

Utilities and inspection                                  $1.50 per housing produced (either type)

General manufacturing overhead            $3.00 per direct labor hour

Fixed  Overhead                                              Annual Cost

Property taxes on plant                                $ 10,000

Building S/L depreciation - plant                                $ 12,000

       Administrative and Marketing Expenses:

Variable Admin and Mktg                                            Activity Based Budget Rate

Sales commissions                                                           7.5% of sales dollars

Shipping                                                                               $1.00 per housing shipped (either type)

Advertising                                                                         2% of sales dollars

Fixed  Admin and Mktg                                                 Annual Cost

Property taxes on office                                               $ 5,000

Building S/L depreciation – office                              $ 2,000

Administrative and marketing salaries                    $102,000

Income tax rate  30%

Required:

Prepare the following budgets for 2015. 

All budgets must link to others so that a ‘what-if’ scenario change will result in an completely update operating budget. 

a.       Sales budget

b.      Production budget

c.       Direct materials budget

d.      Direct labor budget

e.      Manufacturing overhead budget

f.        Cost of goods sold budget  (assume no WIP inventories)

g.       Budgeted income statement  (Net income =  $ 9,458,050)

(CPA Adapted)