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Scenario Roletter Company Budgets for the five months 2007 Particulars

Jan

Feb

Mar

Apr

May

Estimated sales in units Selling price Direct Manufacturing labour hrs per unit Wage per direct manufacturing labour hour

10,000 54.00 2 10.00

12,000 51.50 2 10.00

8,000 51.50 1.5 10.00

9,000 51.50 1.5 11.00

9,000 51.50 1.5 11.00

Besides wages, labour cost includes the following: Pension contribution Workers compensation insurance Employee medical insurance Social security tax

0.50 0.15 0.40 7.50%

per hour per hour per hour

From April wages has been increased to 11 per hour Roletter expected to have 16000 frames on hand on December 31, 2006 and it has a policy of carrying on ending inventory of 100% of the following month sales and 50% of second month following sales.

Required Prepare a production budget and direct manufacturing labour budget for Roletter Company by month and for the first quarter of 2007.

Roletter Company Production budget for the first quarter ended 31, March 2007 Particulars Targeted sales in units (given) Add: Targeted closing inventory 100% of next month sales 50% of second next month sales Units required Less: beginning from inventory Finished units to be produced

Jan 10,00 0

Feb 12,00 0

Mar 8,000

12,00 0

8,00 0

9,000

4,000 26,00 0 (16,00 0) 10,00 0

4,500 24,50 0 (16,00 0) 8,50 0

4,500 21,50 0 (12,50 0) 9,000

Roletter Company Direct Manufacturing labour cost budget for the first quarter ended 31, March 2007

Particulars Labour Hours budget Units to be produced from production budget Hrs per unit

Jan $ 10,000 2.00

Feb $ 8,500 2.00

Total hrs (a)

20,000

17,000

Mar $ 9,000 1.50 13,50 0

10.00 0.75 0.50 0.15 0.40 11.80

10.00 0.75 0.50 0.15 0.40 11.80

10.00 0.75 0.50 0.15 0.40 11.80

Labour cost budget Per hour Wage per direct manufacturing labour hour Social security tax Pension contribution Workers compensation insurance Employee medical insurance Total cost per hour (b)

236,000.0 0

Total labour cost (a*b)

200,600.0 0

159,300.0 0

Scenario

Tab Comp Inc

The company prepares annual sales forecasts of which the first six months for presented here.

2006 are

Cash sales account for 25% of tab comp's total sales, 30% of the total sales are paid by bank credit card , and the remaining 45% are on open account The cash sales and bank credit sales are received in the month of sale. Bank credit card are subject to 4% discount deducted at the time of daily deposit. The cash sales from open account are 70% in the month following the sale and 28% in the second month after the sale. Remaining are uncollectible.

Software Sales Support

Hardware sales Units

Dollars $

Jan

130

390,000.00

Feb Mar

120 110

360,000.00 330,000.00

Dollars $ 160,000 .00 140,000 .00 150,000

Total Revenues Dollars $ 550,000.00 500,000.00 480,000.00

Apr

90

270,000.00

May

100

300,000.00

Jun

125

375,000.00

675.00

2,025,000.00

Total

.00 130,000 .00 125,000 .00 225,000 .00 930,000 .00

400,000.00 425,000.00 600,000.00 2,955,000.00

Tabcorps month end Inventory requirements for computer hardware units are 30% of the next month's sales. A one - month lead time is required for delivery from the manufacturer. Thus, orders for computer hardware units are placed on the 25 th of each month to assure that they will be in the store by the first day of the month needed. The computer hardware units are purchased under terms of n/45 measured from the time the units are delivered to Tabcomp. Tabcomp's purchase price is 60% of selling price.

Required 1. Calculate the cash that TabComp, Inc can expect to collect during April 2006. Be sure to show all of your calculations. 2. TabComp Inc is determining how many MZB-33 computer hardware units to order on January 25, 2006. Determine the projected number of computer hardware units that were that will be ordered and dollar amount that the company will place for these hardware units.

Solution TabComp 1.

Cash collections from receivables during April 2006

Particulars

Amount $

Cash sales 25% of April sales

Amount $ 100,000.00

Credit card sales Less: 4% discount

120,000.00 4,800.00

115,200.00

Open account 70% of 45% of March sales 28% of 45% of Feb. sales

151,200.00 63,000.00

214,200.00

Total cash collections from receivables during April 2006

2.

Projected number of computer hardware to be ordered during Jan 2006

429,400.00

Particulars

Units

March Budgeted sales in units (given)* Add: Targeted closing inventory (30% of next month sales) Total units required Less: Beginning inventory (30% of current month sales) Total units to be ordered Dollar value of units @ 60% of sale value

110 27 137 -33 104

Dollars $ 330,000.00 81,000.00 411,000.00 (99,000.00) 312,000.00 187,200.00

* Since the lead time is one month therefore march month sales was considered if the units were to be ordered by Jan 25.

Scenario

Scarborough Corporation

2007 Projected sales Product Thing one Thing two Inventories in units Product Thing one Thing two

Units 60,000 40,000

Price 165 250

Jan, 2007 20,000 8,000

Dec 31,2007 25,000 9,000

The following direct materials are used in the two products Amount used per unit Direct material A B C

Units pound pound each

Thing one 4 2 0

Projected data for 2007 with respect to direct materials are as follows

Thing two 5 3 1

Direct material A B C

Anticipated Purchase price 12.00 5.00 3.00

Expected inventory, Jan 07 32,000 29,000 6,000

Expected inventory, Dec 07 36,000 32,000 7,000

Projected date for 2007 with respect to manf labour Product Thing one Thing two

Hours per unit 2 3

Rate per Hour 12 16

Manufacturing overhead is allocated at the rate of $20 per direct manufacturing labour Based on the preceding projections and budget requirements for Thing one and Thing two. Prepare the following budgets for 2007 Required 1. Revenue Budget (in dollars) 2. Production Budget (in units) 3. Direct material purchases budget (in quantities) 4. Direct material purchase budget (in dollars) 5. Direct manufacturing labor budget (in dollars) 6. Budgeted finished goods inventory at December 31, 2007

Solution 1.

Revenue Budget for the year ending December 31,2007

Product

Units sold

Thing one Thing two Total 2.

60,000 40,000

Selling price $ 165 250

Total Revenues $ 9,900,000.00 10,000,000.00 19,900,000.00

Budget in units for the year ending December 31,2007 Production

Particulars

Sales (in units) from Revenue budget Add: Targeted closing finished goods inventory Total required units Less: Beginning finished goods inventory Total finished goods to be produced

Thing one Units 60,00 0 25,00 0 85,00 0 (20,000.0 0) 65,00 0

Thing two Units 40 ,000 9 ,000 49 ,000 (8 ,000) 41 ,000

Total Units 100 ,000 34 ,000 134 ,000 (28 ,000) 106 ,000

3. Direct Material purchases budget (in quantities) for the year ended December 31,2007 Particulars Finished units to be produced from production budget

A

B

C

4 5 260, 000 205, 000 465, 000 36, 000 501,000 (32, 000) 469, 000

2 3 130 ,000 123 ,000 253 ,000 32, 000 285,000 (29 ,000) 256 ,000

0 1

65 ,000 41 ,000

Thing one Thing two Units used for each finished unit Thing one Thing two Total units used in Thing one Total units used in Thing two Total units used in production Add: Target closing inventory of materials Total units required Less: Available from beginning inventory of materials Total materials to be purchased in units

41, 000 41, 000 7, 000 48,000 (6 ,000) 42, 000

4. Direct Material purchase budget (in dollars) for the year ended December 31,2007 Particulars Units to be purchased from purchase budget schedule Per unit price Dollar value of purchases

A 469,000 12.00 5,628,000.0 0

B 256,00 0 5.00 1,280,000.0 0

C 42,000 3.00 126,000.0 0

Total 767,00 0 7,034,000. 00

5. Direct Manufacturing Labor budget ( in dollars) for the year ended December 31,2007 Particulars Labour Hours budget Hours per unit Finished units from Production Budget Total Hours used in production

Thing one 2

Thing two

Total

3

65,000 41,000 ___________________________________ 130,000 123,000 253,000

________________________________

Labour cost Budget Total hours used in production Rate per hour Total labour cost

130,000

123,000

253,000

12 16 ____________________________________ 1,560,000 1,968,000 3,528,000

_________________________________

6. Budgeted Finished goods inventory as at December 31,2007 Particulars Cost per unit Direct materials A B C Direct materials (a)

Thing one $

Thing two $

48.00 10.00 58.00

60.00 15.00 3.00 78.00

Direct labour Hours per unit Rate per hour Direct labour (b)

2 12.00 24.00

3 16.00 48.00

Manufacturing overheads Hours per unit Rate per hour Manufacturing overheads (c )

2 20.00 40.00

3 20.00 60.00

Total $

Total cost per unit (a+b+c)

122.00

186.00

Units in closing finished goods inventory

25,000

9,000

3,050,000.00

1,674,000.00

Budgeted finished goods inventory

4,724,000.00

Scenario Easecom Company Income statement for the year ended, December 31, 2007 (in thousands) Revenues

Amount $

Equipment Maintenance contracts

6,000.00 1,800.00

Total revenues Cost of goods sold Gross margin Operating costs Marketing Distribution Customer Maintenance Administration Total operating costs Operating income Following changes were made

Amount $

7,800.00 (4,600.00) 3,200.00 600.00 150.00 1,000.00 900.00 2,650.00 550.00

Selling price of equipment increase by 10% and equipment sales in units increase by 6% with corresponding growth in maintenance contracts Cost of each unit sold is expected to increase by 3% Marketing costs increase by 250,000 but administration costs remain constant Distribution costs vary in proportion in units sold Two maintenance staffs were hired for total cost of $130000 There is no beginning or ending inventory Required Prepare a budgeted income statement for the year December 31,2008

Solution: Easecom Company Income statement for the year ended, December 31, 2008 (in thousands) Revenues Equipment Maintenance contracts Total revenues Cost of goods sold Gross margin Operating costs Marketing Distribution Customer Maintenance Administration Total operating costs Operating income

Note 1 1

Amount $ 6,996.00 1,908.00

8,904.00 (5,022.28) 3,881.72

1

1 1 1

Amount $

850.00 159.00 1,130.00 900.00 3,039.00 842.72

Note 1 Sales Increase in sales price Growth rate Increase sales

6,000.00 10% 6% 6,996.00

Maintenance contracts Growth rate Increase contracts

1,800.00 6% 1,908.00

Cost of goods sold Increase in price Growth rate Increase in cost of goods sold

(4,600.00) 3% 6% (5,022.28)

Increase in Marketing costs

250

Distribution Proportion to unit sales Increase in distribution

150.00 6% 159.00

Increase in Customer maintenance

130.00