Week 3 Written Assignment - Problems and Exercises /

Week 3 Written Assignment - Problems and Exercises

Please complete the following exercises using the templates below:

Chapter 5: Page 195 - Problem 9: Breakeven Analysis and Planning Future Sales

Excel Template

Chapter 6: Pages 232 and 233 - Problem 2: Preparing a Comprehensive Budget

Excel Template

P9. Bar Company has a maximum capacity of 500,000 units per year. Variable manufacturing costs are $25 per unit. Fixed overhead is $900,000 per year. Variable selling and administrative costs are $5 per unit, and fixed selling and administrative costs are $300,000 per year. The current sales price is $36 per unit.

Required

1. What is the breakeven point in 

(a) Sales units 

(b) Sales dollars?

2. How many units must Bar Company sell to earn a profit of $600,000 per year?
3. A strike at one of the company’s major suppliers has caused a shortage of materials, so the current year’s production and sales are limited to 400,000 units. To partially offset the effect of the reduced sales on profit, management is planning to reduce fixed costs to $1,000,000. Variable cost per unit is the same as last year. The company has already sold 30,000 units at the regular selling price of $36 per unit.

a. What amount of fixed costs was covered by the total contribution margin of the first 30,000 units sold?
b. What contribution margin per unit will be needed on the remaining 370,000 units to cover the remaining fixed costs and to earn a profit of $290,000 this year?

P6-2 Bathworks produces hair and bath products. Bathworks’ owner would like to have an estimate of the company’s net income in the coming year.

 

Required
Project Bathworks’s net income next year by completing the operating budgets and budgeted income statement that follows. Assume that the selling price will remain constant.

1. Sales budget:

Bathworks Sales Budget For the year Ended December 31
	Quarter
	1	2	3	4	Year
Sales in units	4,000	3,000	5,000	5,000	17,000
SELLING price per unit	X$5	X?	X?	X?	X?
Total sales	$24,000	?	?	?	?

 

2. Production budget:

Bathworks Production Budget For the year Ended December 31
	Quarter
	1	2	3	4	year
Sales in units	4,000	?	?	?	?
Plus desired units of ending finished goods inventory	300	?	?	600	600
Desired total units	4,300	?	?	?	?
Less desired units of beginning Finished goods inventory b	?	?	?	?	400
Total products units	3,900	?	?	?	?

a. Desired units of ending finished goods inventory 5 10% of next quarter’s budgeted sales.
b. Desired units of beginning finished goods inventory 5 10% of current quarter’s budgeted sales.

3. Direct materials purchases budget:

Bathworks Direct Materials Purchases Budget For the year Ended December 31
	quarter
	1	2	3	4	Year
Total production units	3,900	3,200	5,000	5,100	17,200
Ounces per unit	X4	X4	X4	X4	X4
Total production needs in ounces	15,600	?	?	?	?
Plus desired ounces of ending direct materials inventory 1	2,560	?	?	3,600	3,600
	18,160	?	?	?	?
Less desired ounces of beginning
Direct materials inventory	3,120	?	?	?	3,120
Total ounces of direct materials to be purchased	15,040	?	?	?	?
Cost per ounce	X$0.10	X?	X?	X?	X?
Total cost of direct materials purchases	$1,504	?	?	?	?

a. Desired ounces of ending direct materials inventor = 20% of next quarter’s budgeted production needs in ounces.

b. Desired ounces of beginning direct materials inventory = 20% of current quarte’s budgeted production needs in ounces.

4. Direct labor budget:

 

Bathworks Direct labor Budget For the year Ended December 31
	Quarter
	1	2	3	4	Year
Total production units	3,900	?	?	?	?
Direct labor hours per unit	X0.10	X?	X?	X?	X?
Total direct labor hours	390	?	?	?	?
Direct labor cost per hour	X$20	X?	X?	X?	X?
Total direct labor cost	$7,8,00	?	?	?	?

5. Overhead budget:

 

Bathworkds Overhead Budget For the Year Ended December 31
	Quarter
	1	2	3	4	year
Variable costs:
Factory supplies($0.05)	$195	$?	$?	$?	$?
Employee benefits ($0.25)	975	?	?	?	?
Inspection($0.10)	390	?	?	?	?
Maintenance and repairs($0.15)	585	?	?	?	?
Utilities($0.05)	195	?	?	?	?
Total variable overhead costs	$2,340	$?	$?	$?	$?
Total fixed overhead costs	4,300	?	?	?	?
Toal overhead costs	$6,640	$?	$?	$?	$?

6. Selling and administrative expenses budget:

Bathworks Selling and administrative Expenses Budget For the year Ended December 31
	Quarter
	1	2	3	4	Year
Variable selling and administrative expenses:
Delivery expenses(0.10)	$400	$?	$?	$?	$?
Sales commission($0.15)	600	?	?	?	?
Accounting ($0.05)	200	?	?	?	?
Other administrative espenses($0.20)	800	?	?	?	?
Total variable selling and administrative expenses	$2,000	$?	$?	$?	$?
Total fixed selling and administrative expenses	5,000	?	?	?	?
Total selling and administrative expenses	$7,000	$?	$?	$?	$?

 

7. Cost of goods manufactured budget: 31

Bathworks Cost of Goods Manufactured Budget For the Year Ended December
Direct materials used:
Direct materials inventory, beginning	$?
Purchases	?
Cost of direct materials availale for use	$?
Less direct materials inventory, ending	?
Cost of direct materials used		$?
Direct labor costs		?
Overhead costs		?
Total manufacturing costs		$?
Work in process inventory, beginning		?
Less work in process inventory, ening		?
Cost of goods manufactured		$?
Units produced		?
Manufactured cost per unit		$?

8. Budgeted income statement:

 

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