1. Business
  2. Accounting
  3. you have been hired as the new budget controller for...

Question: you have been hired as the new budget controller for...

Question details

You have been hired as the new budget controller for Goldhouse Inc. The firm has been in business for two years and currently makes one product, the Supreme house. Using the information below, make a master budget to present to company executives for quarter 1. It will consist of the operating budget and the financial budget with the following components:

  1. Sales budget
  2. Production budget
  3. Direct materials purchase budget
  4. Direct labor budget
  5. Overhead budget
  6. Selling and administrative expenses budget
  7. Ending finished goods inventory budget
  8. Cost of goods sold budget
  9. Budgeted income statement
  10. Cash budget

All budgets should be in table format. An explanatory narrative should be included to describe computations made in each budget. Each narrative should be placed next to its corresponding budget table.

---------------------------------------

Pertinent Information

Unit selling price $235

Projected sales in units for the first quarter

Month

Sales

January

50,000

February

60,000

March

70,000

April

70,000

May

70,000

Direct labor usage data:

Direct labor per unit

direct labor per hour

3 hours

$12.50

Direct material usage data:

Direct Material Usage

Per Unit

Unit Cost

Plastic pellets

10 lbs

$7

Insulation

5 lbs

$3

Inventory policy requires that there are sufficient materials on hand at the beginning of the month to produce 50% of that months estimated sales. This was the case on January 1.

Monthly overhead data:

Fixed Cost

Variable Cost

Power

$1.00

Supplies

.40

Maintenance

25,000

.50

Supervision

16,000

Depreciation

100,000

Taxes

15,000

Other

10,000

1.40

Monthly overhead is estimated using a flexible budget formula and is measured in direct labor hours.

Monthly selling and administrative data:

Fixed Cost

Variable Cost

Salaries

$20,000

Depreciation

10,000

Shipping

1.00

Other

10,000

.50

Monthly selling and administrative expenses are estimated using a flexible budget formula and are measured in units sold.

Finished goods inventory:

Month

Units

Unit Cost

January 1

40,000

$166

Desired ending inventory for each month is 80 percent of next month's sales.

All sales and purchases are for cash. The cash balance on January 1 was $500,000. Goldhouse Inc. requires a minimum month cash balance of $1000. If there is a cash shortage, money is borrowed at a rate of 10 percent and is repaid at the end of the quarter along with the interest due. Cash borrowed at the end of the quarter is repaid at the end of the following quarter. On January 1, there were no loans.

Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution