Please take your time! Ive seen this problem worked incorrectly several times an
ID: 2541705 • Letter: P
Question
Please take your time! Ive seen this problem worked incorrectly several times and it is very difficult for me. I have worked it 4 times and still no correct answer.
Case Question 5-38 Klandon Company manufactures decorative rocks for aquariums. Kim Klandon is preparing the budget for the quarter ended June 30. She has gathered the following information. 1. Klandon's sales manager reported that the company sold 12,000 bags of rocks in March. He has developed the following sales forecast. The expected sales price is $10 per bag. Apri 20,000 bags May 50,000 bags June 30,000 bags July 25,000 bags August 15,000 bags sales personnel receive a 5% commission on every bag o increase resulting from the budgeted equipment purchase in June (see part 7). 2 ocks sold. The following monthly ed selling and administrative expenses are planned or the quarter. However, these amounts do not include the depreciation Monthly Fixed Selling and Administrative Costs Variablc Cost/Unit Depreciation Salaries of sales personnel Advertising Management salaries Miscellaneous Bad debts Total costs $10,000 $.50 25,000 1,000 10,000 500 50 $46,500 $1.00 3. After experiencing difficulty in supplying customers in a timely fashion due to inventory shortages, the company established a policy requiring the ending Finished Goods Inventory to equal 20% of the following month's budgeted sales, in units. On March 31, 4,000 bags were on hand Five pounds of raw materials are required to fil each bag of finished rocks. The company wants to have raw materials on hand at the end of each month equal to 10% of the following month's production needs. on March 31, 13,000 pounds of materials were on hand. 4. S. The raw materials used in production cost $0.40 per pound. Half of the month's purchases is paid for in the month of purchase; the other half, in the following month. No discount is available. 6. The standard labor allowed for one bag of rocks is 15 minutes. The current direct labor rate is $10 per hour. 7. On June 1, the company plans to spend $48,000 to upgrade its office equipment that is fully depreciated. The new equipment is expected to have a five-year life, with no residual value. 8. The budgeted monthly variable and fixed overhead amounts are as follows. Variable overhead is based on the number of units produced. The fixed overhead budget is based on an annual production of 400,000 bags.Explanation / Answer
Sales Budget April May June Total Unit Sales (bags) 20000 50000 30000 100000 Sales price per bag ($) 10 10 10 10 Budgeted Sales ($) 200000 500000 300000 1000000 Production Budget April May June Total Budgeted unit sales 20000 50000 30000 100000 Add: Desired ending inventory 10000 6000 5000 5000 (20% of next month's sales) Total inventory needed 30000 56000 35000 105000 Less: Beginning Inventory 4000 10000 6000 4000 Budgeted Production 26000 46000 29000 101000 Materials Purchase Budget April May June Total Budgeted Production units 26000 46000 29000 101000 Raw material per unit of production (pounds) 5 5 5 5 Raw material needed for production (pounds) 130000 230000 145000 505000 Add: Desired ending inventory of raw material 23000 14500 12250 12250 (10% of next month's requirement) Total Raw Material Needed (pounds) 153000 244500 157250 517250 Less: Beginning Inventory of raw material 13000 23000 14500 13000 Budgeted Purchases (pounds) 140000 221500 142750 504250 Cost per pounds of raw material ($) 0.40 0.40 0.40 0.40 Budgeted Raw Material Purchases ($) 56000 88600 57100 201700 Direct labor budget: April May June Total Budgeted Production (bags) 26000 46000 29000 101000 Direct labor hour per bag of production 0.25 0.25 0.25 0.25 Direct labor hours required for production 6500 11500 7250 25250 Direct labor rate per hour ($) 10 10 10 10 Budgeted direct labor cost 65000 115000 72500 252500 Manufacturing overhead budget April May June Total Variable overheads: Indirect material ($0.05 per bag) 1300 2300 1450 5050 Indirect labor ($0.20 per bag) 5200 9200 5800 20200 Utilities ($0.10 per bag) 2600 4600 2900 10100 Maintenance ($0.15 per bag) 3900 6900 4350 15150 Total variable overheads 13000 23000 14500 50500 Fixed overheads: Indirect material 1000 1000 1000 3000 Indirect labor 10000 10000 10000 30000 Utilities 20000 20000 20000 60000 Maintenance 6000 6000 6000 18000 Property Taxes 5000 5000 5000 15000 Depreciation 8000 8000 8000 24000 Total Fixed overheads 50000 50000 50000 150000 Total manufacturing overheads 63000 73000 64500 200500 Cash payment for overheads 55000 65000 56500 176500 Selling and administrative expenses: April May June Total Variable overheads: Salaries of sales personnel ($0.50 per bag of sales) 10000 25000 15000 50000 Bad debts ($0.50 per bag of sales) 10000 25000 15000 50000 Total Variable overheads 20000 50000 30000 100000 Fixed overheads: Depreciation 10800 10800 10800 32400 Salaries of sales personnel 25000 25000 25000 75000 Advertising 1000 1000 1000 3000 Management Salaries 10000 10000 10000 30000 Miscellaneous 500 500 500 1500 Total Fixed overheads 47300 47300 47300 141900 Total Selling and administrative expenses 67300 97300 77300 241900 Cash payment for selling and administrative expenses 56500 86500 66500 209500 Ending Inventory and cost of goods sold budget Beginning raw material (13,000 pounds @$0.40) 5200 Add: Purchases 201700 Raw material available for use 206900 Less: Ending raw material (12,250 pounds @$0.40) 4900 Raw material used for production 202000 Direct labor cost 252500 Manufacturing overhead 200500 Total cost of manufacture 655000 Add: Beginning work in process 0 655000 Less: Ending work in process 0 Cost of goods manufactured 655000 Total number of bags produced 101000 Cost per bag 6.5 Ending inventory (bags) 5000 Value of ending inventory 32426 Schedule of cash collections: April May June Total Budgeted Sales 200000 500000 300000 1000000 Collections from : March Sales 30000 30000 April Sales 140000 50000 190000 May Sales 350000 125000 475000 June Sales 75000 75000 Total Collections 170000 400000 200000 770000 Uncollectible 10000 25000 15000 50000 Receivables 50000 125000 210000 210000 Schedule of paymets for raw material April May June Total Budgeted Raw Material Purchases ($) 56000 88600 57100 201700 Payments for: March purchases 12000 12000 April purchases 28000 28000 56000 May purchases 44300 44300 88600 June purchases 28550 28550 Total payments for purchases 40000 72300 72850 185150 Payables 28000 44300 28550 28550