Assignment - Creating Budgets and Evaluating Performance. Make sure to include references.
Budget Problem
Country Cookin' Inc. begins the budgeting process for the following year in the 1st quarter of the current year. With the information provided below, prepare the sales, production and direct materials budgets for the 1st quarter of next year. Also determine the budgeted manufacturing cost per unit and prepare the budgeted income statement for January of next year.
Country Cookin' Inc. sells the cooker/smokers they manufacture to various retailers for $130 each. Each cooker/smoker requires 11 ounces of raw material, which is purchased by Country Cookin' Inc. for $8.00 per ounce. To prepare for next month's production, Country Cookin' Inc. likes to maintain an ending stock of raw material equal to 10% of the production requirements for the current month. The company would also like to maintain an ending stock of finished cooker/smokers equal to 20% of next month's sales.
Sales are projected to be 6,000 for January, 8,000 for February and 14,000 for March.
Your Company expects to sell 12,000 cooker/smokers in April and needs 132,000 ounces of direct materials for production. Country Cookin' will start the year with an inventory of 7744 of raw material
15% of sales from Country Cookin' Inc. to retailers are cash sales, while the remaining 85% are sold on account.
Additional budgeted information includes:
| |
Month |
|
|
1st
Quarter |
| Projections For Next Year |
January |
February |
March |
| Direct labor |
$ 24,000 |
$ 34,500 |
$ 51,000 |
$ 109,500 |
| Manufacturing overhead: |
|
|
|
|
| Variable |
$ 28,800 |
$ 41,400 |
$ 61,200 |
$ 131,400 |
| Fixed 1 |
$ 41,000 |
$ 41,000 |
$ 41,000 |
$ 123,000 |
| Total operating expenses 2 |
$ 71,000 |
$ 74,000 |
$ 95,000 |
$ 240,000 |
Each cooker/smoker requires 0.25 of an hour of direct labor at the rate of $15.00.
Country Cookin' Inc. estimated at the beginning of the year that it would produce 307,500 cooker/smokers next year.
Interest expense is budgeted at zero since the company has no outstanding debt.
Income tax expense is budgeted at 35% of income before taxes.
1 Prepare next year's 1st quarter sales budget for Country Cookin' Inc.
2 Prepare next year's 1st quarter production budget for Country Cookin' Inc.
3 Prepare next year's 1st quarter direct materials budget for Country Cookin'.
4 Prepare next year's budgeted manufacturing cost per unit for Country Cookin' Inc.
5 Prepare next year's budgeted income statement for the month ended January 31 for Country Cookin' Inc.
It is now the end of April and Country Cookin' management is ready to evaluate its first quarter performance. Prepare a flexible budget for sales levels of 26,000, 28,000, and 30,000 smokers.
Next prepare a performance report based on the following actual results, flexible budget, and master budget prepared in week 4.
Evaluate the first quarter performance of Country Cookin'.
Attachment:- Creating Budgets and Evaluating Performance.xlsx