Create an operating budget Peyton approved a pet supplies manufacturer preparing a budget for the quarter July through September 2014
a) Prepare a sales budget.
b) Annotate your sales budget line items.
c) Prepare a production budget.
d) Annotate your production budget line items.
e) Prepare a manufacturing budget.
f) Annotate your manufacturing budget line items.
g) Prepare a selling expense budget.
h) Annotate your selling expense budget line items.
i) Prepare a general and administrative expense budget using appropriate costing methods.
You are provided the following information.
The budgeted balance sheet at June 30, 2014, is: Peyton Approved Budgeted Balance Sheet 30-Jun-15 ASSETS
Accounts receivable 259,900
Raw materials inventory 35,650
Finished goods inventory 241,080
Total current assets 578,630
Less accumulated depreciation 240,000 480,000
Total assets $1,058,630
LIABILITIES AND EQUITY Accounts payable $63,400
Short-term notes payable 24,000
Taxes payable 10,000
Total current liabilities
97,400 long-term note payable 300,000
Total Liabilities 397,400
Common stock $600,000
Retained earnings 61,230
Total stockholders equity 661,230
Total liabilities and equity $1,058,630
1.Sales were 20,000 units in June 2014. Forecasted sales in units are as follows: July, 19,000; August, 21,000; September, 20,000; October, 24,000. The productAc€?cs selling price is $17.50 per unit and its total product cost is $14.35 per unit.
2. The June 30 finished goods inventory is 14,700 units.
3. Going forward, company policy calls for a given monthAc€?cs ending finished goods inventory to equal 70% of the next monthAc€?cs expected unit sales.
4. The June 30 raw materials inventory is 4,375 units. The budgeted September 30 raw materials inventory is 1,980 units. Raw materials cost $8 per unit. Each finished unit requires 0.50 units of raw materials. Company policy calls for a given monthAc€?cs ending raw materials inventory to equal 20% of the next monthAc€?cs materials requirements.
5. Each finished unit requires 0.50 hours of direct labor at a rate of $16 per hour.
6. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $1.35 per direct labor hour. Depreciation of $20,000 per month is treated as fixed factory overhead.
7. Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable.
8. Sales representatives commissions are 10% of sales and are paid in the month of the sales. The sales managerAc€?cs monthly salary is $3,750 per month.
9. The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale).
10. All raw materials purchases are on credit, and no payables arise from any other transactions. One monthAc€?cs raw materials purchases are fully paid in the next month.
11. Dividends of $20,000 are to be declared and paid in August.
12. Income taxes payable at June 30 will be paid in July. Income tax expense will be assessed at 35% in the quarter and paid in October.
13. Equipment purchases of $100,000 are budgeted for the last day of September.
the minimum ending cash balance for all months is $40,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.
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