ACC 113 Chapter Notes - Chapter 16: Cash Flow, Cash Flow Statement, Income Tax

35 views3 pages

amaranthjellyfish619

5 Jan 2021

School

Tunxis Community College

Department

Accounting

Course

ACC 113

Professor

Lardie

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

Used to forecast how many units of product to produce in order to meet sales projections; next step in budgeting process for manufacturing companies. Traditional manufacturing companies often choose to hold an established minimum level of finished-goods inventory in case of unexpected demands for product or unexpected problems in production. So, sales forecast must be adjusted to account for any expected increase/decrease in finished goods inventory. Material, labour, overhead and selling & administrative expense budgets. Used to project dollar amount of raw materials purchased for production. Adjustment is needed due to keeping extra materials. Bob"s bewdiful juices needs two purchases budgets: one for orange concentrate and another for bottles. One litre of concentrate (. 80) produces 32 bottles of finished product. Bob requires 20% of next month"s direct materials on hand. Used to project dollar amount of direct labour cost needed for production. Bob"s juices has 5 machines with one person assigned to each.

Related Questions

The Sabat Corporation manufactures and sells two products:Thingone and Thingtwo. In July 2013, SabatÃ¢â¬â¢s budget departmentgathered the following data to prepare budgets for 2014:
2014 Projected Sales

Product	Units	Price
Thingone	62,000	$172
Thingtwo	46,000	$264

2014 Inventories in Units

Expected Target

Product	January 1, 2014	December 31, 2014
Thingone	21,000	26,000
Thingtwo	13,000	14,000

The following direct materials are used in the two products:

Amount used per unit

Direct Material	Unit	Thingone	Thingtwo
A	Pound	5	6
B	Pound	3	4
C	Each	0	2

Projected data for 2014 for direct materials are:

Direct material	Anticipated purchase price	Expected inventories January 1, 2014	Target inventories December 31, 2014
A	$11	37,000lb	40,000lb
B	6	32,000lb	35,000lb
C	5	10,000 units	12,000 units

Projected direct manufacturing labor requirements and rates for2014 are:

Product	Hours per unit	Rate per hour
Thingone	3	$11
Thingtwo	4	14

Manufacturing overhead is allocated at the rate of $ 19 per directmanufacturing labor-hour.
Based on the preceding projections and budget requirements forThingone and Thingtwo, prepare the ÃÂfollowing budgets for2014:

Required
1. Revenues budget (in dollars)
2. What questions might the CEO ask the marketing manager whenreviewing the revenues budget? Explain briefly.
3. Production budget (in units)
4. Direct material purchases budget (in quantities)
5. Direct material purchases budget (in dollars)
6. Direct manufacturing labor budget (in dollars)
7. Budgeted finished goods inventory at December 31, 2014 ( indollars)
8. What questions might the CEO ask the production manager whenreviewing the production, direct materials, and directmanufacturing labor budgets?
9. How does preparing a budget help Sabat CorporationÃ¢â¬â¢s topmanagement better manage thecompany?

coffeeporcupine731

Tina's Fine Juices is a bottler of orange juice located in theNortheast. The company produces bottled orange juice from fruitconcentrate purchased from suppliers in Florida, Arizona, andCalifornia. The only ingredients in the juice are water andconcentrate. The juice is blended, pasteurized, and bottled forsale in 12-ounce plastic bottles. The process is heavily automatedand is centered on five machines that control the mixing andbottling of the juice. The amount of labor required is very smallper bottle of juice. The average worker can process 10 bottles ofjuice per minute, or 600 bottles per hour. The juice is sold by anumber of grocery stores under their store brand name and insmaller restaurants, delis, and bagel shops under the name ofTina's Fine Juices. Tina's has been in business for several yearsand uses a sophisticated sales forecasting model based on previoussales, expected changes in demand, and economic factors affectingthe industry. Sales of juice are highly seasonal, peaking in thefirst quarter of the calendar year.

Forecasted sales for the last two months of 2012 and all of 2013are as follows:

2012 Bottles

November 375,000

December 370,000

2013 Bottles

January 350,000

February 425,000

March 400,000

April 395,000

May 375,000

June 350,000

July 375,000

August 385,000

September 395,000

October 405,000

November 400,000

December 365,000

Following is some other information that relates to Tina's FineJuices:

Juice is sold for $1.05 per 12-ounce bottle, in cartons thathold 50 bottles each.

Tina's Fine Juices tries to maintain at least 10 percent of thenext month's estimated sales in inventory at the end of eachmonth.

The company needs to prepare two purchases budgets: one for theconcentrate used in its orange juice and one for the bottles thatare purchased from an outside supplier. Tina's has determined thatit takes 1 gallon of orange concentrate for every 32 bottles offinished product. Each gallon of concentrate costs $4.80. Tina'salso requires 20 percent of next month's direct material needs tobe on hand at the end of the budget period. Bottles can bepurchased from an outside supplier for $0.10 each.

Factory workers are paid an average of $15 per hour, includingfringe benefits and payroll taxes. If the production scheduledoesn't allow for full utilization of the workers and machines, oneor more workers are temporarily moved to another department.

Most of the production process is automated, the juice is mixedby machine, and machines do the bottling and packaging. Overheadcosts are incurred almost entirely in the mixing and bottlingprocess. Consequently, Tina's has chosen to use a plantwide costdriver (machine hours) to apply manufacturing overhead toproducts.

Variable overhead costs will be in direct proportion to thenumber of bottles of juice produced, but fixed overhead costs willremain constant, regardless of production. For budgeting purposes,Tina's separates variable overhead from fixed overhead andcalculates a predetermined overhead rate for variable manufacturingoverhead costs.

Variable overhead is estimated to be $438,000 for the year, andthe production machines will run approximately 8,000 hours at theprojected production volume for the year (4,775,000 bottles).Therefore, Tina's predetermined rate for variable overhead is$54.75 per machine hour ($438,000

burgundyhare489

Show your work

Preparing a Comprehensive Budget

Ginnie Springs Company has been bottling and selling water since1940. The companyâs current owner would like to know how a newproduct would affect the companyâs rent income in the comingyear.

Required

Calculate Ginnie Springs net income for the new product in thecoming year by completing the operating budgets and budgeted incomestatement that follow. Assume that the selling price will remainconstant.

Sales budget

Ginnie Springs Company

Sales Budget

Forthe year Ended December 31

Quarter

	1	2	3	4	Year
Sales in Units	40,000	30,000	50,000	55,000	175,000
Selling price per unit	X $1	X ?	X ?	X ?	X ?
Totals Sales	40,000	$ ?	X ?	X ?	X ?

2. Production Budget:

Ginnie SpringsCompany

ProductionBudget

For the year Ended December31_____________

Quarter

	1	2	3	4	Year
Sales in Units	40,000	?	?	?	?
Plus desired units of ending finished goods inventory*	30,000	?	?	6000	6000
Desired total Units	43000	?	?	?	?
Less desired units of ending finished goods inventory*	4000	?	?	?	4000
Total Production units	39,000	?	?	?	?

*Desired units of ending finished goods inventory = 10% of nextquarterâs budgeted production needs in ounces. Desired ounces ofbeginning direct materials inventory = 20% of current quartersbudgeted production needs in ounces.

3.DirectMaterials Purchases budget

Ginnie SpringsCompany

Direct Materials PurchaseBudget

For the year Ended December31_____________

Quarter

	1	2	3	4	Year
Total production units	39,000	32,000	50,500	55,500	?
Ounces per unit	X 20	X 20	X 20	X 20	X 20
Total production needs in ounces	780,000	?	?	?	?
Plus desired ounces of ending direct materials inventory*	128,000 908,000	? ?	? ?	240,000 ?	240,000 ?
Less desired ounces of ending direct materials inventory*	156,000	?	?	?	156,000
Total ounces of direct material to be purchased	752,000	?	?	?	?
Cost per ounce	X $0.01	X ?	X ?	X ?	X ?
Total cost of direct materials purchases	$7520	?	?	?	?

Desired ounces of ending direct material inventory =20% of nextquarters budgeted production needs in ounces.

Desired ounces of beginning direct materials inventory = 20% ofcurrent quarters budgeted production needs in ounces.

4.Directlabor budget:

Ginnie SpringsCompany

Direct LaborBudget

For the year EndedDecember 31_____________

Quarter

	1	2	3	4	Year
Total production units	39,000	?	?	?	?
Direct labor hours per units	X 0.001	X ?	X ?	X ?	X ?
Total direct labor hours	39.0	?	?	?	?
Direct labor cost per hour	X $8	X ?	X ?	X ?	X ?
Total direct labor cost	$312	$ ?	$ ?	$ ?	$ ?

5.Overheadbudget

Ginnie SpringsCompany

Overhead Budget

For the year EndedDecember 31_____________

Quarter

	1	2	3	4	Year
Variable overhead costs:
Factory supplies ($0.01)	$ 390	$ ?	$ ?	$ ?	$ ?
Employee benefits ($0.05)	1,950	?	?	?	?
Inspection ($0.01)	390	?	?	?	?
Maintenance and repairs($0.02)	780	?	?	?	?
Utilities ($0.01)	390	?	?	?	?
Total Variable overheadcosts	$3900	$ ?	$ ?	$ ?	$ ?
Total fixed overhead costs	1416	?	?	?	?
Total overhead costs	$5,316	$ ?	$ ?	$ ?	$ ?

Note: The figures in parentheses are variable costs perunit.

6.Sellingand administrative expenses budget:

Ginnie SpringsCompany

Selling and Administrative Expenses Budget

For the year EndedDecember 31_____________

Quarter

	1	2	3	4	Year
Variable Selling and Administrative expenses
Delivery expenses ($0.01)	$ 400	$ ?	$ ?	$ ?	$ ?
Sales Commission ($0.02)	800	?	?	?	?
Accounting ($0.01)	400	?	?	?	?
Other administrative expenses($0.01)	400	?	?	?	?
Total Variable selling and administrative exp.	$2,000	$ ?	$ ?	$?	$?
Total fixed selling and administrative exp.	5000	?	?	$?	?
Total selling and administrative expenses	$ 7,000	$ ?	$ ?	$ ?	$ ?

Note: The figures in parentheses arevariable costs per unit

7. Cost of goods manufactured budget:

Ginnie SpringsCompany

Cost of Goods Manufactured Budget

For the year EndedDecember 31_____________

Direct Material Used:

Direct Material Inventory,Beginning

Purchases

Cost of Direct materials available foruse

Less: Direct materials Inventory,ending

Cost of Direct Materialsused

Direct laborcosts:

Overhead costs:

Total manufacturing costs

Work in Process Inventory,beginning*

Less: work in process inventory,ending*

Cost of Goods Manufactured

Units produced

Manufactured cost perunit

It is the companyâs policy to have no units in process at theend of theyear.

8. Budgeted income statement

Ginnie Springs Company

Selling and Administrative Expenses Budget

For the year EndedDecember 31_____________

Sales

Cost of goods sold

Finished goods inventory beginning

Cost of goods manufactured

Cost of Goods available for sale

Less finished goods inventory, ending

Cost of good sold

Gross margin

Selling and administrative expenses

Income from operations

Income taxes expenses (30% tax rate)

Net Income

lemonhamster976

ACC 113 Chapter Notes - Chapter 16: Cash Flow, Cash Flow Statement, Income Tax

Document Summary

Get access

Related Documents

ACC 113 Chapter Notes - Chapter 12: Cost Leadership, Business Matters

ACC 113 Chapter Notes - Chapter 1: Operating Leverage

ACC 113 Lecture Notes - Lecture 30: Financial Statement, Financial Accounting, Cash Flow

Related Questions