Case study

ACC212 Case Study – Lex Corporation

Lex, Corp., manufactures bamboo coat racks that sell for $35 each. Each rack requires 4 linear feet of bamboo, which costs $3.00 per foot. Each rack takes approximately 30 minutes to build, and the labor rate averages $17 per hour. Lex has the following inventory policies:

Ending finished goods inventory should be 40 percent of next month’s sales. Ending direct materials inventory should be 30 percent of next month’s production.

Expected unit sales (racks) for the upcoming months follow:

March 330

April 380

May 420

June 540

July 485

August 585

Variable manufacturing overhead is incurred at a rate of $0.45 per unit produced. Annual fixed manufacturing overhead is estimated to be $8,400 ($700 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $1,750 per month plus $0.50 per unit sold.

Lex, Corp., had $13,500 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the credit

sales, 50 percent is collected during the month of the sale, and 50 percent is collected during the

month following the sale. Assume the company can borrow in increments of $1,000 to maintain a

$13,000 minimum cash balance and that the amount will be repaid in the subsequent month,

provided there is adequate cash flow. Borrowings are made at the beginning of the month and

repayments occur at the end of the month. Interest on borrowings is 12% annually and is paid

monthly on amounts outstanding.

Of direct materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Direct material purchases for March 1 totaled $2,800. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $260 in depreciation. During May, Lex plans to pay $5,600 for a piece of equipment.

ACC212 Case Study – Lex Corporation Instructions:

Students are to complete and submit the following budgets in Excel. The Excel workbook should

contain a separate worksheet for each budget. Students should show their work by using formulas

in the Excel worksheets. Formulas should be used to link the worksheets when appropriate. Please

format everything according to the formatting guidelines listed below and use the templates below

in the preparation of the budget. See the grading rubric for point allocations.

Formatting Guidelines:

• The dollar sign should appear only in the first entry in each column and not again until the total or subtotal line. Unless the initial number is not in collars, in which case, when

switching from units to dollars the dollar sign should be used.

• Use commas for numbers exceeding 1,000.

• Use horizontal lines to separate headings from column entries and to highlight totals and subtotals (see formatting of the budgets below).

• Ensure that cells are formatted to the proper size for text to display fully in the cell.

• Be consistent about your use of decimal points. Meaning that all numbers in a worksheet should line up by using decimal points for all dollar amounts or none.

• If you use decimal points, format to two decimal points.

• DO NOT USE the “table” tool in Excel or your formatting will be wrong.

Templets:

Sales Budget

Production Budget

ACC212 Case Study – Lex Corporation

Direct Materials Budget

Direct Labor Budget

Overhead Budget

ACC212 Case Study – Lex Corporation

Cost of Goods Sold Budget

Selling and Administrative Budget

Budgeted Income Statement

ACC212 Case Study – Lex Corporation

Cash Collection Budget

Cash Disbursement Budget

Cash Budget