ACCT 311 Lecture Notes - Lecture 7: Direct Labor Cost, Budget, Income Statement

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violetfox768

9 Jul 2018

School

American River College

Department

Accounting

Course

ACCT 311

Professor

Pollard

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Document Summary

Student learning outcomes: explain the purposes of budgeting, prepare a master budget and its component schedules, and. Chapter 7: profit planning relate the budget to planning and control. Chapter outline: basic framework of budgeting, master budget interrelationships. A detailed plan for the acquisition and use of resources. Budget production, distribution, financing, and investing activities, resulting in a cash budget, budgeted income statement, and budgeted balance sheet. A summary of a firm"s plans that sets targets for sales, Master budget: responsibility accounting the idea that management should be held responsible for only those items that it can control, the budget period. Budgets normally cover 1 fiscal year divided into 3 months. Budgets may cover the 1 fiscal year by dividing the year into twelve months. , and are divided into 4 quarters , and 1st quarter is. Self - imposed budget a budget that is prepared with the cooperation and participation of managers at all levels budgeted amounts to be justified.

Related Questions

Be noted the required is to June 2016 Not December 2016.

You have just been hired as a new management Accountant by SaudiJewellery, a distributor of earring to various retail outletslocated in shopping malls across the country. In the past, thecompany has done very little in the way of budgeting and at certaintimes of the year has experienced a shortage of cash.

Since you are well trained in budgeting, you have decided toprepare a master budgets for the Fourth quarter of 2016 in order toshow management the benefits that can be gained from an integratedbudgeting program. To this end, you have worked with accounting andother areas to gather the information assembled below.
The company sells many styles of earrings, but all are sold for thesame price- $10 per pair. Actual sales of earrings for the lastthree months and budgeted sales for the next six months follow (inpairs of earrings):

Recent and forecast sales ( in units)

January (actual)... 20,800
February (actual)... 26,000
March (actual)... 40,000
April (budget)... 65,000
May (budget)... 100,000
June (budget)... 50,000

July (budget)... 30,000

August (budget ... 28,000

September (budget) 25,000

The concentration of sales before and during May is due to MothersDay.

The concentration of sales before and during May is due toMother's Day.

Balance sheet at September 30, 2016

Assets Cash 74,000

Accounts receivable 346,000

Inventory 104,000

Prepaid insurance 21,000

Property and equipment (net) 950,000

Total assets $1,495,000

Liabilities and Stockholders' Equity

Accounts payable $100,000

Dividends payable 15,000

Capital stock 800,000

Retained earnings 580.000

Total liabilities & stockholders' equity $1.495.000

All sales are on credit. The collection of sales is asfollows:

20% of a month's sales are collected in the month of sale.

70% is collected in the following month, and the remaining

10% is collected in the second month following sale.

Bad debts have been negligible.

Additional information: Cost to buy a pair of earrings fromsuppliers is S4 Desired ending inventory at the end of each monthis 40% of the cost of goods sold in the following month.

Payment for purchases is as follows:

One-half of a month's purchases is paid for in the month ofpurchase; the other half is paid for in the following month.

Monthly operating expenses for the company are given below:

Variable monthly expenses:

Sales commissions 4% of month's sales paid as incurred

Fixed monthly expenses paid as incurred:

Advertising 200,000

Rent 18,000

Salaries 106,000

Utilities 7,000

Depreciation 14,000

Insurance is paid on an annual basis, in November of each year$36000 was paid on 1st of nov last year (i.e., $3000 permonth).

The company plans to purchase $16,000 in new equipment duringMay and $40,000 in new equipment during June; both purchases willbe for cash

The company declares dividends of $15,000 each quarter, payablein the first month of the following quarter.

The company maintains a minimum cash balance of $50,000. Allborrowing is done at the beginning of a month and any repaymentsare made at the end of a month.

The company has an agreement with a bank that allows the companyto borrow in increments of $1,000 at the beginning of each month.The interest rate on these loans is 1% per month and for simplicitywe will assume that interest is not compounded. At the end of thequarter, the company would pay the bank all of the accumulatedinterest on the loan and as much of the loan as possible (inincrements of $1,000), while still retaining at least $50,000 incash.

Required: Prepare a master budget for the three-month periodending December 31, 016.

Include the following detailed budgets: a. A sales budget, bymonth and in total N b. A schedule of expected cash collectionsfrom sales, by month and in total. c. A merchandise purchasesbudget in units and in dollars. Show the budget by month and intotal. A schedule of expected cash disbursements for merchandisepurchases, by month and in total.

2. A cash budget. Show the budget by month and in total.Determine any borrowing that would be needed to maintain theminimum cash balance of $50,000. 3. A budgeted income statement forthe three-month period ending June 30 2014. Use the contributionapproach.

4. A budgeted balance sheet as of June 30, 2014.

5. Based on the master budget that you prepared for the fourthquarter of 2016, what would you expect the results to be for thefourth quarter of the year.

6: Define strategic plan, long range plan, capital budgets and amaster budget.

7. Briefly explain the major benefits of budgets 8. Explain thepotential problems in implementing budgets g. Differentiate betweenan operating budget and a financial budget.

magentamammoth556

Due Week 9 and worth 200 points

Before approaching this assignment, be sure that you have watched the following video.

https://www.youtube.com/watch?v=frh3I2rVDzs. YouTube. PLEASE USE DATA FROM VIDEO OR MAKE UP YOUR OWN DATA

Babycakes, a specialty bakery, is the company that will be considered for all parts of your budget planning and control report. For this assignment, you will develop a three to four (3 â 4) page paper in which you address the following.

Briefly discuss the ways a realistic budget will benefit the owner of Babycakes versus having no budget at all. Be sure to use Babycakes as the company and any specific product details in your explanation.

Prepare a sales budget for the LA Babycakes store for the 4th quarter of 2016. Present the number of units, sales price, and total sales for each month; include October, November, and December, and a total for the quarter. Use one-half of the Valentineâs Day sales as the basis for a usual day in the new quarter. Use 30 days for each month. Calculate the total sales for each month for October, November, and December.

Create three (3) new products, one (1) for each of the three (3) holiday seasons in the 4th quarter. Estimate the sales units, sales price, and total sales for each month. Describe the assumptions used to make these estimates. Include an overview of the budget in the report, presenting the actual budget as an appendix with all data and calculations. Add these amounts to your sales budget.

The owner of Babycakes is interested in preparing a flexible budget rather than the static budget she currently uses. She does not understand why, when sales increase, her static budget often shows an unfavorable variance. Explain how a flexible budget will overcome this problem. Use the details of your newly prepared budget for the 4th quarter of 2016 to address her concern.

Imagine that Babycakes is facing a financial challenge that is causing the actual amount of money that it spends to become significantly more than its budgeted amount. Include a discussion of your own unique cause of the overspending. Explain the corrective actions needed to address these challenges.

Integrate relevant information from at least three (3) quality academic resources in this assignment. Note: Please do not use your textbook as an academic resource. Also, Wikipedia and other Websites that are unreliable do not qualify as academic resources.

Your assignment must follow these formatting requirements.

Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; references must follow APA or school-specific format. Check with your professor for any additional instructions.

Include a cover page containing the title of the assignment, the studentâs name, the professorâs name, the course title, and the date. The cover page and the reference page are not included in the required page length.

An abstract is not required.

The specific course learning outcomes associated with this assignment are:

Evaluate management control systems and examine their relationship with accounting and planning, including feedback and non-?nancialperformance measurements.

Evaluate decision-making tools for capital investments, budgeting, and budgeting controls.

Analyze financial accounting tools and techniques that convert financial accounting data into information for decision making.

Use technology and information resources to research issues in financial accounting for managers.

Write clearly and concisely about financial accounting using proper writing mechanics.

Grading for this assignment will be based on the quality of your responses, logic and organization of the paper, and language and writing skills. Please review the Rubric for the Assignment: Budget Planning and Control.

instructions |help

Question 1 (of 1) Save & ExitSubmit

value:
50.00 points

Case 8-31 Master Budget with Supporting Schedules [LO8-2, LO8-4,LO8-8, LO8-9, LO8-10]

You have just been hired as a new management trainee by EarringsUnlimited, a distributor of earrings to various retail outletslocated in shopping malls across the country. In the past, thecompany has done very little in the way of budgeting and at certaintimes of the year has experienced a shortage of cash.

Since you are well trained inbudgeting, you have decided to prepare comprehensive budgets forthe upcoming second quarter in order to show management thebenefits that can be gained from an integrated budgeting program.To this end, you have worked with accounting and other areas togather the information assembled below.

The company sells many styles ofearrings, but all are sold for the same priceâ$11 per pair. Actualsales of earrings for the last three months and budgeted sales forthe next six months follow (in pairs of earrings):


January(actual)	20,200	June (budget)	50,200
February(actual)	26,200	July (budget)	30,200
March (actual)	40,200	August (budget)	28,200
April (budget)	65,200	September(budget)	25,200
May (budget)	100,200

The concentration of sales before and during May is due toMotherâs Day. Sufficient inventory should be on hand at the end ofeach month to supply 40% of the earrings sold in the followingmonth.

Suppliers are paid $4.1 for a pairof earrings. One-half of a monthâs purchases is paid for in themonth of purchase; the other half is paid for in the followingmonth. All sales are on credit, with no discount, and payablewithin 15 days. The company has found, however, that only 20% of amonthâs sales are collected in the month of sale. An additional 70%is collected in the following month, and the remaining 10% iscollected in the second month following sale. Bad debts have beennegligible.

Monthlyoperating expenses for the company are given below:


Variable:
Sales commissions		4%	of sales
Fixed:
Advertising	$	210,000
Rent	$	19,000
Salaries	$	108,000
Utilities	$	7,500
Insurance	$	3,100
Depreciation	$	15,000

Insurance is paid on an annualbasis, in November of each year.

The company plans to purchase$16,500 in new equipment during May and $41,000 in new equipmentduring June; both purchases will be for cash. The company declaresdividends of $15,750 each quarter, payable in the first month ofthe following quarter.

Alisting of the companyâs ledger accounts as of March 31 is givenbelow:


Assets
Cash	$	75,000
Accounts receivable($28,820 February sales; $353,760 Marchsales)		382,580
Inventory		106,928
Prepaidinsurance		21,500
Property andequipment (net)		960,000

Total assets	$	1,546,008

Liabilities and Stockholdersâ Equity
Accountspayable	$	101,000
Dividendspayable		15,750
Common stock		820,000
Retainedearnings		609,258

Total liabilitiesand stockholdersâ equity	$	1,546,008

The company maintains a minimumcash balance of $51,000. All borrowing is done at the beginning ofa month; any repayments are made at the end of a month.

The company has an agreement witha bank that allows the company to borrow in increments of $1,000 atthe beginning of each month. The interest rate on these loans is 1%per month and for simplicity we will assume that interest is notcompounded. At the end of the quarter, the company would pay thebank all of the accumulated interest on the loan and as much of theloan as possible (in increments of $1,000), while still retainingat least $51,000 in cash.

Required:

1.	A cash budget. Show the budget by month and in total.(Cash deficiency, repayments and interest should beindicated by a minus sign.)

2.	A budgeted income statement for the three-month period endingJune 30. Use the contribution approach.

3.	A budgeted balance sheet as ofJune 30.

ACCT 311 Lecture Notes - Lecture 7: Direct Labor Cost, Budget, Income Statement

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