KAYAKS, INC._Manufacturing Budget

Question # 00003877 Posted By: ACCOUNTS_GURU Updated on: 11/22/2013 02:04 AM Due on: 12/31/2013
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KAYAKS, INC.

Balance Sheet

December 31, 2011



ASSETS

Cash-------$ 52,000

Accounts receivable----1,200,000

Raw materials inventory* ---120,000

Finished goods inventory** -----287,500

Plant assets, net of accumulated

Depreciation -----------2,135,000

Total Assets -----$ 3,794,500





LIABILITIES

Accounts payable ----$ 131,000

STOCKHOLDERS’EQUITY Common Stock---1,600,000

Retained Earnings ------2,063,500

Total Liabilities & SE -----$ 3,794,500

use in preparing the budget for 2012:



*40,000 pounds **1,000 kayaks



The following additional data is available for use in preparing the budget for 2012:



Cash collections (all sales are on account):

Collected in the quarter of sale------------40%

Collected in the quarter after sale---------60%

(Bad debts are negligible and can be ignored)

Cash disbursements for raw materials (all purchases are on account):

Cash paid in the quarter of purchase----70%

Cash paid in the quarter after purchase -----30%

Desired quarterly ending Raw materials inventory----40% of next quarter’s production needs.

Desired quarterly ending Finished goods inventory------ 10% of next quarter’s sales

Budgeted sales:

1st quarter 2012 ------------------------------------10,000 kayaks

2nd quarter 2012 ------------------------------------15,000 kayaks

3rd quarter 2012 ------------------------------------16,000 kayaks

4th quarter 2012 ------------------------------------14,000 kayaks

1st quarter 2013------------------------------------10,000 kayaks

2nd quarter 2013 ------------------------------------12,000 kayaks

Anticipated equipment purchases:

1st quarter 2012 ------------------------------------$30,000

2nd quarter 2012 ------------------------------------$0

3rd quarter 2012 ------------------------------------$0

4th quarter 2012 ------------------------------------$150,000

Quarterly dividends to be paid each quarter in 2012 ----$4,000

Expected sales price per unit ---------$400



Standard cost data:

Direct materials ----------10 pounds per kayak @ $3 per pound

Direct labor----------10 hours per kayak @ $20 per hour

Variable manufacturing overhead-----$5 per direct labor hour

Fixed manufacturing overhead (includes $9,000 depreciation)--- $103,125 per quarter

Variable selling expenses------------$25 per kayak

Fixed selling and administrative expenses:

Insurance -----------------------------------$45,000 per quarter

Sales salaries -------------------------------$30,000 per quarter

Depreciation --------------------------------$6,000 per quarter

Income tax rate -----------------------------30%

Estimated income tax payments planned in 2012:

1st quarter ------------------------------------$0

2nd quarter------------------------------------$50,000

3rd quarter------------------------------------$400,000

4th quarter ------------------------------------$500,000



Kayak’s desires to have a minimum cash balance at the end of each quarter of $50,000. In order to maintain this minimum balance, They may borrow from its bank in $10,000 increments with an interest rate of 6%. Money is borrowed at the beginning of the quarter in which a shortage is expected. Repayments of all or a portion of the principle (plus accrued interest on the amount being repaid) are made at the end of any quarter in which the cash balance exceeds the required minimum.



Requirements:

1.Use the above information to prepare the following components of the master budget:

a. Sales budget with a schedule of expected cash collections for each quarter and the year as a whole

b. Production budget for each quarter and the year as a whole

c. Direct materials purchases budget with a schedule of expected cash disbursements for materials for

i. each quarter and the year as a whole

d. Direct labor budget for each quarter and the year as a whole

e. Manufacturing overhead budget with expected cash disbursements for each quarter and the year as

i. a whole

f. Ending finished goods inventory budget for the year

g. Selling and administrative expense budget with expected cash disbursements for each quarter and

i. the year as a whole

h. Cash budget for each quarter and the year as a whole

i. Budgeted income statement for the year

j. Budgeted balance sheet for the end of the year
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