Tyva makes a very popular undyed cloth sandal in one, style, but in Regular and Deluxe. The Regular sandals have cloth soles and the Deluxe sandals have cloth-covered wooden soles. Tyva is preparing a budget for June 2018 and has estimated sales based on past experience.
Problem 1: Required 1. Prepare each of the following for June: a. Revenues budget b. Production budget in units c. Direct material usage budget and direct material purchases budget in both units and dollars; round to dollars d. Direct manufacturing labor cost budget e. Manufacturing overhead cost budgets for setup, processing, and inspection activities f. Budgeted unit cost of ending finished-goods inventory and ending inventories budget g. Cost of goods sold budget h. Marketing and general administration and shipping costs budget i. Prepare and budgeted income statement a. Revenues Budget For the Month of June, 2018 Units Selling Price Total Revenues Regular Deluxe Total b. Production Budget For the Month of June, 2018 Product Regular Deluxe Budgeted unit sales Add: target ending finished goods inventory Total required units Deduct: beginning finished goods inventory Units of finished goods to be produced c. Direct Material Usage Budget in Quantity and Dollars For the Month of June, 2018 Material Cloth Wood Total Physical Units Budget Direct materials required for Regular (2,150 units × 1.3 yd.; 0 b.f.) yds. b.f. Deluxe (2,950 units × 1.5 yds.; 2 b.f.) yds. b.f. Total quantity of direct materials to be used yds. b.f. Cost Budget Available from beginning direct materials inventory (under a FIFO cost-flow assumption) To be purchased this period Cloth: (7,220 yd. – 610 yd.) × $5.25 per yd. Wood: (5,900 – 800) × $7.50 per b. f. Direct materials to be used this period Direct Materials Purchases Budget For the Month of June, 2018 Material Cloth Wood Total Physical Units Budget To be used in production yds. ft. Add: Target ending direct material inventory yds. ft. Total requirements yds. ft. Deduct: beginning direct material inventory yds. ft. Purchases to be made yds. ft. Cost Budget Cloth: (6,996 yds. × $5.25 per yd.) Wood: (5,395 ft × $7.50 per b.f.) Total d. Direct Manufacturing Labor Costs Budget For the Month of June, 2018 Output Units Direct Manufacturing Total Hourly Wage Total Produced Labor-Hours per Unit Hours Rate Regular Deluxe Total e. Manufacturing Overhead Costs Budget For the Month of June 2018 Total Machine setup (Regular, 43 batchesa × 2 hrs./batch + Deluxe, 59 batchesb × 3 hrs./batch) x $18/hour Processing (31,400 DMLH x $1.80) Inspection [(2,150 + 2,950) pairs x $1.35 per pair] Total Regular: 2,150 pairs ÷ 50 pairs per batch = 43; bDeluxe: 2,950 pairs ÷ 50 pairs per batch = 59 f. Unit Costs of Ending Finished Goods Inventory For the Month of June, 2018 Regular Deluxe Cost per Input per Total Input per Total Unit of Input Unit of Output Unit of Output Cloth $5.25 1.3 yd 1.5 yd Wood 7.5 0 b.f. 2 b.f. Direct Labor 15 5 hr. 7 hrs. Machine setup 18 0.04 hra 0.06 hrb Processing 1.8 5 hrs 7 hrs Inspection 1.35 1 pair 1 pair Total 2 hours per setup ÷ 50 pairs per batch = 0.04 hr. per unit 3 hours per setup ÷ 50 pairs per batch = 0.06 hr. per unit Ending Inventories Budget June, 2018 Quantity Cost per unit Total Direct Materials Cloth yards Wood b.f Finished goods Regular Deluxe Total ending inventory g. Cost of Goods Sold Budget For the Month of June, 2018 Beginning finished goods inventory, June 1 ($23,250 + $92,625) Direct materials used (requirement c) Direct manufacturing labor (requirement d) Manufacturing overhead (requirement e) Cost of goods manufactured Cost of goods available for sale Deduct ending finished goods inventory, June 30 (requirement f) Cost of goods sold h. Nonmanufacturing Costs Budget For the Month of June, 2018 Total Marketing and general administration 8% × $825,000 Shipping (5,000 pairs ÷ 40 pairs per shipment) × $15 Total Cash Budget June 30, 2018 Cash balance, June 1 (from Balance Sheet) Add receipts Collections from May accounts receivable Collections from June accounts receivable ($825,000 x 60%) Total collection from customers Total cash available for needs (x) Deduct cash disbursements Direct material purchases in May Direct material purchases in June ($77,192 x 80%) Direct manufacturing labor Manufacturing overhead ($68,139 x 70% because 30% is depreciation) Nonmanufacturing costs ($67,875 x 90% because 10% is depreciation) Taxes Dividends Total disbursements (y) Financing Interest at 6% ($150,000 6% 1 ÷ 12) (z) Ending cash balance, June 30 (x) – (y) – (z) Budgeted Income Statement For the Month of June, 2018 Revenues Bad debt expense ($825,000 x 2%) Net revenues Cost of goods sold Gross margin Operating (nonmanufacturing) costs Interest expense (for June) Net income Budgeted Balance Sheet June 30, 2018 Assets Cash Accounts receivable ($825,000 × 40%) Less: allowance for doubtful accounts Inventories Direct materials Finished goods Fixed assets Less: accumulated depreciation ($136,335 + $68,13930% + $67,875 × 10%)) Total assets Liabilities and Equity Accounts payable ($77,192 × 20%) Interest payable Long-term debt