Based on the information provided below, please prepare the following:
1. Sales Budget
2. Production Budget
3. Direct Materials Budget
4. Direct Labor Budget
5. Manufacturing Overhead Budget
6. Selling and Administrative Expense Budget
7. Schedule of Expected Collections from Customers
8. Schedule of Expected Payments for Direct Materials
9. Cash Budget
10. Budgeted Income Statement
The Alvis & Cordis Company, Inc. expects to sell 200,000 cases of a high energy drink during 2013, with sales peaking in the fourth quarter. Expected unit sales are: 30,000 in Quarter 1; 40,000 cases in Quarter 2; 50,000 cases in Quarter 3 and 80,000 cases in Quarter 4. The Alvis & Cordis Company plans to sell the energy drink for $35 per case.
25% of sales are expected to be collected in the quarter of the sale with the remaining 75% percent of sales to be collected in the quarter following the sale. Accounts receivables of $88,000 at the end of December 31, 2012 are expected to be collected in full in the first quarter of 2013.
The management desires an ending finished goods inventory equal to 30% of next quarter's sales. Sales for the first quarter of 2014 are estimated to be 42,000. The management desires an ending inventory of raw materials equal to 15% of the next quarter's production requirements. Production for the first quarter of 2014 is estimated to be 225,000. The manufacture of each case requires 12 pounds of raw materials. The cost per pound of raw materials is $0.30.
20% of DM are paid in the quarter purchased and 80% in the following quarter. Accounts payable of $31,400 at December 31, 2012 are expected to be paid in full in the first quarter of 2013.
Each case produced requires 0.45 direct labor hours per case and the anticipated hourly rate of pay is $18.00.
Manufacturing Overhead is budgeted as follows:
Variable costs:
Indirect materials ($0.80/hour)
Indirect labor ($2.10/hour)
Utilities ($0.50/hour)
Maintenance ($0.40/hour)
Fixed Costs:
Supervisory salaries $42,000
Depreciation $19,000
Property taxes & insurance $6,000
Maintenance $8,300
Selling and Administrative Expenses are budgeted as follows:
Variable expenses:
Sales commissions ($0.75 per case)
Freight-out ($0.60 per case)
Fixed expenses:
Advertising $21,000
Sales salaries $44,000
Property taxes and insurance $16,000
Depreciation $12,000
Income Statement Assumptions:
Interest expense is $22,100.
Income tax rate is 30%.
Cash Budget Assumptions:
Beginning cash balance is $22,900.
Management would like to have a cash balance of at least $30,000 at the beginning of each quarter for contingencies.
Management plans to spend $110,000 during the year on equipment purchases: $24,000 in the first quarter; $38,000 in the second quarter; $22,000 in the third quarter; and $26,000 in the fourth quarter.
Direct labor is paid 100% in the quarter incurred.
MOH and Selling & Administrative expenses: all items except depreciation are paid in the quarter incurred.
Company makes equal quarterly payments of its estimated annual income taxes.
Company has an agreement with a local bank that allows it to borrow in increments of $10,000 at the beginning of each quarter, up to $600,000 total loan balance.
Interest rate on loans is 1% per month (not compounded, for simplicity).
Company repays loans and interest at the end of the year.
Prior Year Balance Sheet Information:
Buildings and equipment $700,000.
Accumulated depreciation $292,000.
Common stock $952,042.
Retained earnings $2,000,000.
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acct_281_budget_project_spring_2015.docx
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