Need 10-13

Hawkins Engineering’s management wants to prepare budgets forone of its products, GalaxyRS, for July 2019. The firm sells theproduct for $800 per unit and has the following expected sales (inunits) for these months in 2019:

April                      May                      June                     July                       August                 September

6,000                    4,000                    5,600                    6,500                    6,800                    7,800

Typically, cash sales for Hawkins represent 20% of sales whilecredit sales represent 80%. Hawkins bills customers on the firstday of the month following the month of sale. Experience has shownthat 85% of the company’s billings will be collected during themonth of sale, 10% by the end of the month after the sale and 5%will ultimately be uncollectible.

The production process requires the following:

Standard Costs:

Galaxy-80                                                           4 lbs                     $1.25/lb

RS-360                                                                 2lbs                      $5.00/lb

Directlabor                                                        

Skill level1                                                       0.01hours          $50/hour

Skill level2                                                       0.10hours          $20/hour

Variable manufacturing overhead is budgeted at $1,200 per batch(of 100 units) plus $80 per direct labor hour. In addition tovariable overhead, the firm has a monthly fixed factory overhead of$60,000, of which $25,000 is depreciation expense. The firm paysall manufacturing labor and factory overhead when incurred.

The firm’s policy is to maintain an ending finished goodsinventory each month equal to 10% of the following month’s budgetedsales, but in no case less than 500 units. All materialsinventories are to be maintained at 5% of the production needs forthe next month, but not to exceed 1,000 pounds. The firm expectsall inventories at the end of June to be within the guidelines.

The purchase terms for materials are 3/10, n/30. Hawkings makesall payments within the discount period. Experience has shown that80% of the purchases are paid in the month of the purchase and theremainder are paid in the month immediately following. In June2019, the firm budgeted purchases of $30,000 for Galaxy-80 and$20,000 for RS-360.

Total budgeted marketing, distribution, customer service andadministrative costs for 2019 are 1,850,000. Ofthis amount, $1,200,000 is considered fixed and includesdepreciation expense of $150,000. The remainder varies with sales.The budgeted total sales for 2019 are $4 million. All marketing andadministrative costs are paid in the month incurred.

Additional information follows:

               Cashbalance                                                                    $40,000

Management desires to maintain an end-of-month minimum cashbalance of $40,000. The firm has an agreement with a local bank toborrow its short-term needs in multiples of $1,000 up to $100,000at an annual interest rate of 12%. Borrowings are assumed to occurat the end of the month. Bank borrowing at July 1 is $0.

Required:

On the basis of the preceding data and projections, prepare thefollowing budgets:

1.Sales budget for July

2.Production budget for July

3.Production budget for August

4.Direct materials used budget for July (in units anddollars)

5.Direct materials purchased budget for July (in units anddollars)

6.Direct manufacturing labor budget for July

7.Manufacturing overhead budget for July

8.Operating costs budget for July

9.Cost of goods sold budget for July

10.Budgeted income statement for July

11.Cash collections schedule for July

12.Cash disbursements schedule for July

13.Cash budget for July

1.) Sales Budget for July
		July
Budgeted Selling price/unit		$                                 800.00
Budgeted Sales		$                             6,500.00
The Total Budgeted Sales		$                     5,200,000.00
2.) Production Budget for July
		July (Units)
Add: Closing Inventory ofFinished the goods (6800x0.1)=(680)		680
Budgeted Sales Units		6,500
Units Needed		7,180
Less: Opening inventory offinished the goods (6500x0.1)=(650)		-650
Production units for month		6,530
3.) Production Budget for August
		August (units)
Budgeted Sales Units		6,800
Add: Closing inventory offinsihed the goods (7800x0.1)=(780)		780
Units Needed		7,580
Less; Opening inventory offinished goods		-680
the Production units for month		6,900
4.) The Direct Material Used Budget forJuly
		Galaxy - 80	RS - 360
The Direct materials/unit		4 pound	2 pound
The Total Direct Materials Used		(6530unitsx4lbs)	6530x2lbs
Cost of Material/pound		1.25/lbs	5/lbs
The Total Cost of Material Used		$                           32,650.00	$                   65,300.00
5.) Direct Material Purchase Budget forJuly
		Galaxy - 80	RS - 360
Requirements for Production		26,120 lbs	13,060 lbs
Add: Desired closing inventory		1,380	690
Total Requirements		27,500	13,750
Less: Opening inventory(27500-26194)(13750-13097)		-1,306	-653
Quantity to be purchased		26,194	13,097
Purchase Price		$1.25 per lbs	$5 per lbs
Total Purchase Cost		$                           32,742.50	$                   65,485.00
6.) Direct Manufacturing Labor Budget
Particulars		Per Unit	Total
Production			6,530 units
Skilled Labor - Level 1		0.01hrs/unit	$3,265       (6,530 units *0.01hr/unit*$50/hr)
Skilled Labor - Level 2		0.10hrs/unit	$13,060     (6,530units*0.10hr/unit*$20.0/hr)
Total Manufacturing Labor Cost			$                   16,325.00
7.) Manufacturing Overhead Budget
Particulars		Rate	Total
Production			6,530 untis
Variable Manufacturing Overheads		$1,200/100 Units	$78,360 (6,530units*$1200/100units)
		$80/ direct labor Hr	$57,464 (718.3hrs*$80/hr)
Fixed Manuractuing Overheads -Depreciation			$                   25,000.00
Fixed Manufacturing Overhads - Others			$                   35,000.00
Total			$                 195,824.00
8.) Operating Costs Budget for July
Particulars		Costs ($)
Direct Material		$                           97,950.00
Direct Labor		$                           16,325.00
Variable Manufacturing Overhead		$                        135,824.00
Fixed Manufacturing Overheads(excludingdep)		$                           35,000.00
Fixed Man. Overheads - Depreciation		$                           25,000.00
Total Operating Costs		$                        310,099.00
9.) Costs of Goods Sold Budget forJuly
Particulars		Costs ($)
Direct Material		$                           97,950.00
Direct Labor		$                           16,325.00
Manufactuing Overheads		$                        195,824.00
Total		$                        310,099.00
Add: Opening Stock(650 Units		$                           30,868.00
Total		$                        340,967.00
Less; Closing Stock (680 units		$                        (32,293.00)
Cost of Goods Sold (inc selling &admin)		$                     1,253,674.00