| October 3, 2018

SUBDOMAIN 308.1 – COST/MANAGERIAL ACCOUNTINGCompetency 308.1.7: Developing Budgets – The student can develop variousforms of operating budgets, including a flexible budget system.Objective 308.1.7-02: Develop a cash receipts budget for a firm selling on both acash and a credit basis.Objective 308.1.7-08: Develop a selling and administrative budget.Objective 308.1.7-09: Develop a schedule of borrowing and repayment of loans.Given:Note: This is the second of two budgeting tasks that must be completed in order. Ifyou have not finished the first task (308.1.7-01), please do so before beginning thistask.Company A is a high-end ceiling fan manufacturer established six years ago. It hasone luxury fan model that is unique and has wide market acceptance.Sales DataActual Sales Data – Year 10 (last 2 months)Projected Sales Data – Year 11 (first 5months)Month Units SoldNovember, X6 3,000December, X6 2,400January, X7 3,500February, X7 4,000March, X7 3,500April, X7 3,400May, X7 4,000Selling price is $100 per unit.All sales are on credit.Ending InventoryRaw materials: Outlined in direct materials belowWork in process: No work in process inventory; all work completed on last day ofquarterFinished goods: 20% of next month’s sales projectionAverage unit cost in Year 10: –$64Inventory method used: FIFODirect Cost DataDirect Materials:Motors are purchased ready to use from an outside supplier at a cost of $14each. Company A’s management desires to maintain a motor inventory based on20% of next month’s projected production.Blades are produced in the plant. Each fan requires 10 blades. The material ispurchased in 4 ft. x 8 ft. sheets at $24 per sheet. Fifteen blades can be cut out ofeach sheet. Experience has shown that, on average, the number of defectiveblades produced by the cutting process is equal to 6% of the number of goodblades. Defective blades must be discarded. In case of machine breakdowns,management desires an ending inventory of finished blades each month equal to10% of the next month’s projection of total blades for production.Direct Labor:Total payroll expense including benefits is $63 per hour for the productionworkers required to operate the blade-cutting machine and $63 per hour for theworkers required to staff the assembly/packing workstation. The standard laborallowance is 0.2 hours per fan on the blade-cutting machine and 0.2 hours perfan at the assembly/packing workstation.Overhead:Variable manufacturing overhead and fixed overhead items are presented below.Accounts ReceivableAll sales are made on credit. Historically, 26% of receivables have been collectedduring the month of sale, 50% collected in the month following the sale, and 20%collected two months after the sale. The company has experienced a 4% bad debt onits credit sales.Accounts PayableAll materials are purchased on credit. Normally one half of the purchases are paidduring the month in which they were purchased and one half paid the followingmonth. The accounts payable balance shown on the Year 10 balance sheetrepresents one half of the December purchases. The company does not receive”>purchase discounts from its suppliers.Indirect Labor CostsCompany Sales Representatives 3% commission on sales each monthSales Manager $5,000/mo. plus 50% override on salescommissionProduction Supervisor $4,000/mo.Administrative Expenses(salaries)$8,000/mo.Other ExpensesYearly Insurance Premiums $36,000 on October 1; 80% related to factoryoperationsFactory Utilities January – $15,000; February – $17,000; March –$15,200Usage estimated at 90% factory and 10%administrativeAdvertising Expenses 7% of monthly salesFactory Building Mortgage(20 years at 8%)Building purchased four years ago for $430,000 (totalcost)Down payment of $190,000Mortgage paid at the end of each quarterTravel Expenses 4% of monthly salesFactory Maintenance 10% of monthly blade material costsFactory Janitor Services $3,000/mo.Cash ControlThe cash on hand at the beginning of each month must be maintained at $60,000 forany contingencies that might arise. If the operations do not provide this balance, thecompany will use its preapproved line of credit at 8% and borrow sufficient funds tomeet the minimum required cash balance. When there is a credit line balance due, itwill be paid in the next month that generates a projected cash balance over the$60,000 minimum.Depreciable AssetsThe factory building was purchased on January 1, Year 3. It is being depreciatedusing straight line depreciation for 20 years. Salvage value of the building isestimated at $70,000.The blade-cutting machine was purchased on December 31, Year 10, for $240,000cash. It is being depreciated over eight years using the double declining balancemethod. Depreciation is recognized on long-term assets at the end of each quarter.Dividend PolicyThe company declares $58,000 annual dividend to its shareholders in the first monthof the quarter. Dividends are paid in the second month of the quarter.Task:A. Using the attached “Accounting Forms Template” and the information provided inthe attached given, complete the following accounting forms for the first threemonths of Year 11:1. Selling and administrative budget2. Accounts receivable receipt schedule3. Accounts payable payment schedule4. Cash budget including a schedule of borrowing and repayment of loansNote: For definitions of terms commonly used in the rubric, see the attached RubricTerms.Note: When using sources to support ideas and elements in a paper or project, thesubmission MUST include APA formatted in-text citations with a correspondingreference list for any direct quotes or paraphrasing. It is not necessary to list sourcesthat were consulted if they have not been quoted or paraphrased in the text of thepaper or project.Note: No more than a combined total of 30% of a submission can be directly quotedor closely paraphrased from sources, even if cited correctly. For tips on using APAstyle, please refer to the APA Handout web link included in the APA Guidelinessection.

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