budget preparation
Budget: $10 – $30 AUD
Alibaba Pty Ltd manufactures and sells plastic toy guns. The toy’s unit selling price is $12.
Below are requirements of direct material and direct labour to manufacture one toy gun:
Direct material
1.2 kg of plastic
Alibaba usually adopts a single application rate of $0.85 per unit produced for variable manufacturing overhead. According to the company’s production manager, the annual fixed manufacturing overhead will be approximately $15,000. Expected monthly expenses of selling and administrative are estimated $2,080 per month plus $1.20 per unit sold.
Required:
Part 1. Prepare the following for Alibaba for the thirdquarter (July, August, and September). Include each month as well as the third quarter total for each budget.
a. Sales budget. [4 marks]
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b. Production budget. [4 marks]
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c. Direct materials purchases budget in units and dollar amount. [4 marks]
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d. Direct labor budget in hours and dollar amount. [4marks]
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e. Manufacturing overhead budget. [4 marks]
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Part 2. Suppose that the company had $28,000 cash at bank at the beginning of the third quarter. Cash sales average 60 per cent of total sales (refer to your answer to part a). Credit sales are collected 50 per cent in the month of sale and 50 per cent in the month following sale. Prepare budgeted cash receipts. Include each month (Julyto September) as well as quarter 2 totals.
FitnessWat Pty Ltd manufactures and distributes fitness smart watches. The company has used an absorption product costing system, which means that both variable and fixed overhead are included in the product cost. Cost estimates for a smart watch and predicted production volume for the coming year are as follows:
Per Unit
Total
Direct materials
$90
Direct labour
$45
Variable manufacturing overhead
$32
Variable selling and administrative expenses
$33.8
Fixed selling and administrative expenses
$855,000
Fixed manufacturing overhead
$1,035,000
Expected volume of production (units):
18,500
Senior management expects to earn a rate of return (ROI) of 28% on their invested assets of $5,625,000.
Required:
a. The company currently uses the cost-plus pricing method. Compute the mark-up percentage and target selling price that will allow the company to earn its desired ROI of 28% for the coming year. [5 marks]
Click or tap here to enter text.
b. Based on a recent marketing research, the senior management has an optimistic sales expectation of 20,000 units and predicts to earn a higher ROI of 31%. Compute new mark-up percentage and new target selling price that will allow the company to earn its new desired ROI.
Click or tap here to enter text.
c. Another cost-based approach to pricing is called time and material pricing. Under this approach, two pricing rates are set. Explain where this approach is used and identify the steps involved in time-and-material pricing. Also explain why this approach is used in some industries.
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Below are requirements of direct material and direct labour to manufacture one toy gun:
Direct material
1.2 kg of plastic
Alibaba usually adopts a single application rate of $0.85 per unit produced for variable manufacturing overhead. According to the company’s production manager, the annual fixed manufacturing overhead will be approximately $15,000. Expected monthly expenses of selling and administrative are estimated $2,080 per month plus $1.20 per unit sold.
Required:
Part 1. Prepare the following for Alibaba for the thirdquarter (July, August, and September). Include each month as well as the third quarter total for each budget.
a. Sales budget. [4 marks]
Click or tap here to enter text.
b. Production budget. [4 marks]
Click or tap here to enter text.
c. Direct materials purchases budget in units and dollar amount. [4 marks]
Click or tap here to enter text.
d. Direct labor budget in hours and dollar amount. [4marks]
Click or tap here to enter text.
e. Manufacturing overhead budget. [4 marks]
Click or tap here to enter text.
Part 2. Suppose that the company had $28,000 cash at bank at the beginning of the third quarter. Cash sales average 60 per cent of total sales (refer to your answer to part a). Credit sales are collected 50 per cent in the month of sale and 50 per cent in the month following sale. Prepare budgeted cash receipts. Include each month (Julyto September) as well as quarter 2 totals.
FitnessWat Pty Ltd manufactures and distributes fitness smart watches. The company has used an absorption product costing system, which means that both variable and fixed overhead are included in the product cost. Cost estimates for a smart watch and predicted production volume for the coming year are as follows:
Per Unit
Total
Direct materials
$90
Direct labour
$45
Variable manufacturing overhead
$32
Variable selling and administrative expenses
$33.8
Fixed selling and administrative expenses
$855,000
Fixed manufacturing overhead
$1,035,000
Expected volume of production (units):
18,500
Senior management expects to earn a rate of return (ROI) of 28% on their invested assets of $5,625,000.
Required:
a. The company currently uses the cost-plus pricing method. Compute the mark-up percentage and target selling price that will allow the company to earn its desired ROI of 28% for the coming year. [5 marks]
Click or tap here to enter text.
b. Based on a recent marketing research, the senior management has an optimistic sales expectation of 20,000 units and predicts to earn a higher ROI of 31%. Compute new mark-up percentage and new target selling price that will allow the company to earn its new desired ROI.
Click or tap here to enter text.
c. Another cost-based approach to pricing is called time and material pricing. Under this approach, two pricing rates are set. Explain where this approach is used and identify the steps involved in time-and-material pricing. Also explain why this approach is used in some industries.
Sent from my iPhone
Related categories:
Accounting