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Budget Preparation Case

Instruction: This is a take$-$home assignment that you can work individually or with your

peers. You must show steps $($reference to ebook or lecture$)$ in your answers by creating a

spreadsheet and individually submit it at the end of day for credit.

$*$each question worth $1$ point for a total of $10$ points $($questions a$-$j$).$ You can answer

questions k$-$o for extra credit points

Mumbower Corporation makes one product and has provided the following information

to help prepare the master budget for the next four months of operations:

Raw materials requirement per unit of output

Raw materials cost

Direct labor requirement per unit of output

Direct labor wage rate

Variable selling and administrative expense

Fixed selling and administrative expense

$4$ pounds

$$5\mathrm{.}00$ per pound

$2\mathrm{.}8$ direct labor$-$hours

$$19\mathrm{.}00$ per direct labor$-$hour

$$1\mathrm{.}60$ per unit sold

$$80,000$ per month

Credit sales are collected:

$40\%$ in the month of the sale

$60\%$ in the following month

Raw materials purchases are paid:

$40\%$ in the month of purchase

$60\%$ in the following month

The ending finished goods inventory should equal $20\%$ of the following month's sales.

The ending raw materials inventory should equal $40\%$ of the following month's raw

materials production needs.Required:

a$.$ What are the budgeted sales for November?

b$.$ What are the expected cash collections for November?

c$.$ What is the budgeted accounts receivable balance at the end of November?

d$.$ According to the production budget, how many units should be produced in

November?

e$.$ If $40,000$ pounds of raw materials are needed for production in December, how many

pounds of raw materials should be purchased in November?

f$.$ What is the estimated cost of raw materials purchases for November?

g$.$ If the cost of raw material purchases in October is $$201,040,$ then in November what

are the total estimated cash disbursements for raw materials purchases?

h$.$ What is the estimated accounts payable balance at the end of November?

i$.$ What is the estimated raw materials inventory balance at the end of November?

j$.$ What is the total estimated direct labor cost for November assuming the direct labor

workforce is adjusted to match the hours required to produce the forecasted number of

units produced?

$k.$ For simplicity, we will assume that there is no fixed manufacturing overhead and that

the variable manufacturing overhead is $$7\mathrm{.}00$ per direct labor$-$hour. What is the estimated

unit product cost?

What is the estimated finished goods inventory balance at the end of November?

$m.$ What is the estimated cost of goods sold and gross margin for November?

$n.$ What is the estimated total selling and administrative expense for November?

o$.$ What is the estimated net operating income for November?

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