MANAGERIAL ACCOUNTING

Master Budget

Sales Budget
December January February March April May

Cash Collections Budget

January February March Quarter
Cash sales (30%) $24,030 $26,730 $24,840 $75,600
Credit sales 70% $53,200 56,070 62,370 $171,640
Total collections $77,230 $82,800 $87,210 $247,240

Production Budget
January February March Quarter
Unit sales 8,900 9,900 9,200 28,000
Plus:Desired ending inventory 990 920 950 950
Total needed 9,890 10,820 10,150 28,950
Less: Beginning inventory -8900 -990 -920 -890
Units to produce 9,000 9,830 9,230 28,060

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Direct Materials Budget

January February March Quarter
Units to be produced 9,000 9,830 9,230 28,060

Multiply by: Quantity of DM needed per unit x2 x2 x2 x2

Quantity of DM needed per unit 18,000 19,660 18,460 56,120
Plus: Desired ending inventory of DM 3,932 3,692 3,764 3,764
Total quantity of DM needed 21,932 23,352 22,224 59,884
Less: Beginning inventory of DM -3600 -3,932 -3,692 -3,600
Quantity of DM to purchase 18,332 19,420 18,532 56,284
Multiply by: Cost per pound x $1.50 x $1.50 x $1.50 x $1.50
Total cost of DM purchases $27,498 $29,130 $27,798 $84,426

Cash Payments for Direct Material Purchases Budget

January February March Quarter
December purchases
(From AP) $43,000 $43,000
January purchases $5,500 $21,998 $27,498
February purchases $5,826 23,304 $29,130
March purchases $5,560 $5,560
Total payments $48,500 $27,824 $28,864 $105,188

Cash Payments for Direct Labor Budget

January February March Quarter
Direct labor $3,510 $3,834 $3,600 $10,944

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Cash Payments for Manufacturing Overhead Budget

January February March Quarter
Rent (fixed) $6,500 $6,500 $6,500 $19,500
Other MOH (fixed) $2,900 $2,900 $2,900 $8,700

Variable manufacturing overhead cost $12,600 $13,762 $12,922 $39,284

Total disbursements $22,000 $23,162 $22,322 $67,484

Cash Payments for Operating Expenses Budget

January February March Quarter
Variable operating expenses $10,860 $11,880 $11,040 $33,600
Fixed operating expenses $1,400 $1,400 $1,400 $4,200
Total disbursements $12,080 $13,280 $12,440 $37,800

Combined Cash Budget

January February March Quarter
Cash balance, beginning $4,460 $4,800 $5,100 $4,460
Plus: Cash collections 77,230 82,800 87,210 247,240
Total cash available 81,690 87,600 92,310 251,700
Less cash disbursements:
DM purchases 48,500 27,824 28,864 105,188
Direct labor costs 3,510 3,834 3,600 10,944
MOH costs 22,000 23,162 22,322 67,484
Operating expenses 12,080 13,280 12,440 37,800
Tax payment 10,800 10,800
Equipment purchases 5,800 11,600 15,800 33,200
Total cash payments 91,890 90,500 83,026 265,416
Ending cash before financing -10,200 -2,900 9,284 -13,716
Financing:
Borrowings 15,000 8,000 23,000
Repayments -4,000 -4,000
Interest -610 -610
Total financing 15,000 8,000 -4,610 18,390

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Cash balance, ending $4,800 $5,100 $4,674 $4,674

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Budgeted Manufacturing Cost per Unit

Direct materials cost per unit $3.00
Direct labor cost per unit 0.39
Variable manufacturing overhead costs 1.4
Fixed MOH 0.7
Cost of manufacturing each unit $5,49

Budgeted Income Statement

Sales $252,000
Less: Cost of goods sold 153,720
Gross profit 98,280
Less: Operating expenses 37,800
Less: Depreciation expense 4,900
Operating income 55,580
Less: interest expense 610
Less: Income tax expense @ 30% 16,491
Net income $38,479

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