Using Excel for to prepare an operating budeget (manufacturing company)

Download an Excel template for this problem online in MyAccountingLab or athttp://www.pearsonhighered.com/Horngren.

Thunder Creek Company is preparing budgets for the first quarter of 2018. All relevant information is presented on the Excel template.

Requirements

1. Prepare a Sales Budget.

2. Prepare a Production Budget.

3. Prepare a Direct Materials Budget.

4. Prepare a Direct Labor Budget.

5. Prepare a Manufacturing Overhead Budget.

6. Prepare a Cost of Goods Sold Budget

7. Prepare a Selling and Administrative Expense Budget.

Short Answer

Expert verified

The total projected manufacturing cost per unit is $32.69.

Step by step solution

01

Preparation of sales budget

02

Preparation of production budget

03

Preparation of direct materials budget

04

Preparation of direct labor budget

05

Preparation of manufacturing overhead budget

06

Preparation of cost of goods sold budget

07

Preparation of Selling and Administrative Expense Budget 

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Most popular questions from this chapter

Question: Preparing an operating budget—sales, production, direct materials, direct labor, overhead, COGS, and S&A expense budgets

The Langley Batting Company manufactures wood baseball bats. Langley’s two primary products are a youth bat, designed for children and young teens, and an adult bat, designed for high school and college-aged players. Langley sells the bats to sporting goods stores, and all sales are on account. The youth bat sells for \(40; the adult bat sells for \)65. Langley’s highest sales volume is in the first three months of the year as retailers prepare for the spring baseball season. Langley’s balance sheet for December 31, 2018, follows:

Other data for Langley Batting Company for the first quarter of 2019:

a. Budgeted sales are 1,200 youth bats and 2,600 adult bats.

b. Finished Goods Inventory on December 31, 2018, consists of 300 youth bats at \(14 each and 950 adult bats at \)18 each.

c. Desired ending Finished Goods Inventory is 350 youth bats and 300 adult bats; FIFO inventory costing method is used.

d. Direct materials requirements are 48 ounces of wood per youth bat and 56 ounces of wood per adult bat. The cost of wood is \(0.25 per ounce.

e. Raw Materials Inventory of December 31, 2018, consists of 24,000 ounces of wood at \)0.25 per ounce.

f. Desired ending Raw Materials Inventory is 24,000 ounces (indirect materials are insignificant and not considered for budgeting purposes).

g. Each bat requires 0.7 hours of direct labor; direct labor costs average \(18 per hour. h. Variable manufacturing overhead is \)0.30 per bat.

i. Fixed manufacturing overhead includes \(1,300 per quarter in depreciation and \)20,140 per quarter for other costs, such as insurance and property taxes.

j. Fixed selling and administrative expenses include \(9,000 per quarter for salaries; \)2,500 per quarter for rent; \(1,000 per quarter for insurance; and \)200 per quarter for depreciation.

k. Variable selling and administrative expenses include supplies at 2% of sales.

Requirements

1. Prepare Langley’s sales budget for the first quarter of 2019.

2. Prepare Langley’s production budget for the first quarter of 2019.

3. Prepare Langley’s direct materials budget, direct labor budget, and manufacturing overhead budget for the first quarter of 2019. Round the predetermined overhead allocation rate to two decimal places. The overhead allocation base is direct labor hours.

4. Prepare Langley’s cost of goods sold budget for the first quarter of 2019.

5. Prepare Langley’s selling and administrative expense budget for the first quarter of 2019.

What is sensitivity analysis? Why is it important for managers?

Camp Company is a sporting goods store. The company sells a tent that sleeps six people. The store expects to sell 250 tents in 2018 and 280 tents in 2019. At the beginning of 2018, Camp Company has 25 tents in Merchandise Inventory and desires to have 5% of the next year’s sales available at the end of the year. How many tents will Camp Company need to purchase in 2018?

Preparing a financial budget—schedule of cash receipts, schedule of cash payments, cash budget

Haney Company has provided the following budget information for the first quarter of 2018:

Total sales \(214,000 Budgeted purchases of direct materials 40,300 Budgeted direct labor cost 37,200 Budgeted manufacturing overhead costs:

Variable manufacturing overhead 1,150 Depreciation 1,200 Insurance and property taxes 6,600 Budgeted selling and administrative expenses: Salaries expense 13,000 Rent expense 2,500 Insurance expense 1,100 Depreciation expense 350 Supplies expense 4,280 Additional data related to the first quarter of 2018 for Haney Company:

a. Capital expenditures include \)38,000 for new manufacturing equipment, to be purchased and paid in the first quarter.

b. Cash receipts are 65% of sales in the quarter of the sale and 35% in the quarter following the sale.

c. Direct materials purchases are paid 50% in the quarter purchased and 50% in the next quarter.

d. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.

e. Income tax expense for the first quarter is projected at \(44,000 and is paid in the quarter incurred.

f. Haney Company expects to have adequate cash funds and does not anticipate borrowing in the first quarter.

g. The December 31, 2017, balance in Cash is \)45,000, in Accounts Receivable is \(23,200, and in Accounts Payable is \)9,000.

Requirements

1. Prepare Haney Company’s schedule of cash receipts from customers and schedule of cash payments for the first quarter of 2018.

2. Prepare Haney Company’s cash budget for the first quarter of 2018.

What is budgetary slack? Why might managers try to build slack into their budgets?

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