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(solution) Hi I can use some help with the following problem. Don't


Hi I can use some help with the following problem.  Don't understand what changes I must make for the Budget Analysis.  

1. List the changes in your final sensitivity analysis, and explain why you chose this set of changes.
2. Briefly explain what Jeffery would need to do to implement each of these changes.
3. List several business risks or other factors that could influence whether the company
would be able to achieve the desired results.



10.38 Assumptions and Master Budget for Unique Sinks INPUT SECTION--BUDGET ASSUMPTIONS Revenue Budget Average

 

Sink Per First Second Third Fourth Revenue Assumptions: Quarter Forecasted housing starts (local area)

 

Average number of sinks per house

 

Market share

 

Average selling price per unit 6,000

 

3.0

 

35%

 

$85.00 24,000

 

2.9

 

35%

 

$85.00 7,000

 

3.0

 

35%

 

$85.00 2,000

 

3.1

 

35%

 

$85.00 First

 

Second

 

Third

 

Fourth 40

 

$0.50

 

3

 

$12.00

 

10%

 

10% 40

 

$0.50

 

3

 

$12.00

 

10%

 

10% 40

 

$0.50

 

3

 

$12.00

 

10%

 

10% 40

 

$0.50

 

3

 

$12.00

 

10%

 

10% $0.3000

 

$0.2667

 

$0.1000 $0.3000

 

$0.2667

 

$0.1000 $0.3000

 

$0.2667

 

$0.1000 $9,000 $9,000 $9,000 Sales 6,000

 

24,000

 

7,000

 

2,000 3.0

 

2.9

 

3.0

 

3.1 Market Budgeted

 

Units Price Budgeted Share Sold Per Unit Revenue Production Budget (units) $0.3000

 

$0.2667

 

$0.1000 Houses Total

 

Sink House Quarter 18,000

 

69,600

 

21,000

 

6,200 35%

 

35%

 

35%

 

35% 6,300

 

24,360

 

7,350

 

2,170 $85 $

 

$85

 

$85

 

$85

 

$ 535,500

 

2,070,600

 

624,750

 

184,450

 

3,415,300 $9,000 Production Cost Assumptions: Variable Production Costs:

 

Direct material-Pounds per unit

 

Direct material-Cost per pound

 

Direct labor-Hours per unit

 

Direct labor-Cost per hour

 

Desired ending sink inventory as % of next quarter's sales

 

Desired ending DM inventory as % of next quarter's DM requirement

 

Variable Production Costs Per Direct Labor Hour:

 

Indirect labor

 

Supplies

 

Other

 

Fixed Production Cost:

 

Depreciation

 

Fixed overhead allocation base: Direct labor hours Targeted

 

Ending Finished

 

Units Less

 

Beginning Required Inventory Quarter Units

 

Sold Needed Inventory Production First

 

Second

 

Third

 

Fourth 2,436

 

735

 

217

 

630 6,300

 

24,360

 

7,350

 

2,170 8,736

 

25,095

 

7,567

 

2,800 (600)

 

(2,436)

 

(735) 8,136

 

22,659

 

6,832

 

2,583 (217) Assuming first quarter sales next year are the same as first quarter this year. Direct Material and Direct Labor Resource Requirements Required Selling and Administration Cost Assumptions:

 

Variable Costs:

 

Commission as % of revenue

 

Bad debts as % of revenue

 

Fixed Costs:

 

Salaries 10%

 

2% $40,000

 

$2,400

 

$7,400 $40,000

 

$2,400

 

$9,200 $40,000

 

$2,400

 

$7,300 66%

 

32% 66%

 

32% 66.6667%

 

33.3333%

 

$80,000 66.6667%

 

33.3333%

 

$40,000 66.6667%

 

33.3333%

 

$40,000 $0 $0 $0 Pounds

 

of Material Labor

 

Hours Labor

 

Hours Production Per Unit Used Per Unit Used 66%

 

32% 66.6667%

 

33.3333%

 

$0 Cash Flow Assumptions:

 

Revenue Collections:

 

During quarter sold

 

During next quarter

 

Direct Material Payments:

 

During quarter purchased

 

During next quarter

 

Current Year Income Tax--Estimated Payments 10%

 

2% 66%

 

32% Other 10%

 

2% $40,000

 

$2,400

 

$8,300 Depreciation 10%

 

2% Pounds

 

of Material $50,000 Quarter First

 

Second

 

Third

 

Fourth

 

Total 8,136

 

22,659

 

6,832

 

2,583 40

 

40

 

40

 

40 325,440

 

906,360

 

273,280

 

103,320 3

 

3

 

3

 

3 24,408

 

67,977

 

20,496

 

7,749 1,608,400 120,630 Direct Materials Purchases Budget (Pounds) Desired

 

Ending

 

Inventory Quarter All other costs paid as incurred

 

Dividends Declared & Paid

 

Short-Term Financing Assumptions: First

 

Second

 

Third

 

Fourth Production Total Direct

 

Materials Less

 

Beginning Required Requirements Required Inventory Purchases 90,636

 

27,328

 

10,332

 

32,544 325,440

 

906,360

 

273,280

 

103,320 416,076

 

933,688

 

283,612

 

135,864 (20,000)

 

(90,636)

 

(27,328)

 

(10,332) 396,076

 

843,052

 

256,284

 

125,532 Direct Materials and Direct Labor Budget Minimum Cash Balance

 

Annual Interest Rate for Borrowing

 

Assume no interest earned on cash balances $30,000

 

8% $30,000

 

8% $30,000

 

8% $300,000

 

8% Direct

 

Material Income Statement Assumption: Income Tax Rate 30% 30% Prior Year Balances Carried Over to Current Year: 30% 30% Total

 

Material Labor

 

Hours Cost

 

Per Total

 

Labor Total Direct

 

Material and Purchases Quarter Cost

 

Per

 

Pound Cost Used Hour Cost Labor Costs First

 

Second

 

Third

 

Fourth

 

Total 396,076

 

843,052

 

256,284 198,038

 

421,526

 

128,142 24,408

 

67,977

 

20,496 125,532 $0.50 $

 

$0.50

 

$0.50

 

$0.50 292,896 $

 

815,724

 

245,952

 

92,988 490,934

 

1,237,250

 

374,094 7,749 $12.00 $

 

$12.00

 

$12.00

 

$12.00 62,766 1,620,944 $ 810,472 120,630 $ 1,447,560 $ 2,258,032 Assets: Cash

 

Raw materials inventory (cost)

 

Finished goods inventory (Cost)

 

Accounts receivable

 

Allowance for bad debts

 

Land, building and equipment

 

Accumulated depreciation

 

Liabilities and Equity:

 

Accounts payable (purchases)

 

Income taxes payable

 

Credit Line Loan Payable

 

Common stock

 

Retained Earnings Beginning Balance Sheet Math Check:

 

Total Assets

 

Total Liab & Equity $

 

$

 

$

 

$

 

$

 

$

 

$ $

 

$

 

$

 

$

 

$ 45,820

 

10,000

 

30,250

 

118,000

 

(7,378)

 

912,000

 

(114,000) 72,370

 

7,000

 

750,000

 

165,322 20,000 Pounds

 

600 Sinks Manufacturing Overhead Budget Quarter

 

First

 

Variable Overhead Costs

 

Indirect labor

 

Supplies

 

Other

 

Total variable costs

 

Fixed Overhead Costs

 

Depreciation

 

Total fixed costs

 

Total manufacturing overhead $ Second 7,322 $

 

6,510

 

2,441 Third 20,393 $

 

18,129

 

6,798 Total 2,325 $

 

2,067

 

775 36,189

 

32,172

 

12,063 16,273 13,665 5,166 80,424 9,000 9,000 9,000 9,000 36,000 9,000

 

$ 45,320 9,000 9,000 9,000 36,000 25,273 $ 54,320 $ 22,665 $ 14,166 $ 116,424 $ Total Fixed Overhead Costs

 

Total Labor Hours Used in Production

 

Fixed Manufacturing Overhead Allocation Rate Per Direct Labor Hour

 

$

 

$ 6,149 $

 

5,466

 

2,050 Fourth 36,000

 

120,630

 

0.2984 $ 994,692

 

994,692

 

Total Production Cost Per Unit Quarter 155,754 Direct material

 

Direct labor

 

Variable overhead

 

Total Variable Cost Per Unit

 

Fixed overhead

 

Total Cost Per Unit $ $ First

 

20.0000 $

 

36.0000

 

2.0001

 

58.0001

 

0.8953

 

58.8954 $ Second

 

20.0000 $

 

36.0000

 

2.0001

 

58.0001

 

0.8953

 

58.8954 $ Third

 

20.0000 $

 

36.0000

 

2.0001

 

58.0001

 

0.8953

 

58.8954 $ Fourth

 

20.0000

 

36.0000

 

2.0001

 

58.0001

 

0.8953

 

58.8954 Budgeted Statement of Cost of Goods Manufactured and Sold Beginning direct materials

 

Plus purchases

 

Less ending direct materials

 

Cost of direct materials used

 

Cost of direct labor used

 

Allocated manufacturing overhead

 

Cost of goods manufactured

 

Beginning finished goods

 

Goods available for sale

 

Less ending finished goods

 

Cost of goods sold $ First

 

10,000 $

 

198,038 Quarter

 

Second

 

Third

 

45,318 $

 

13,664 $

 

421,526

 

128,142 Fourth

 

5,166 $

 

62,766 Total

 

10,000

 

810,472 (45,318) (5,166) (16,272) (16,272) 453,180

 

815,724 136,640

 

245,952 51,660

 

92,988 804,200

 

1,447,560 23,557 65,607 19,781 7,479 116,424 479,173 1,334,511 402,373 152,127 2,368,184 30,250 143,469 43,288 12,780 30,250 509,423 1,477,980 445,661 164,907 2,398,434 (143,469)

 

$ (13,664) 162,720

 

292,896 (43,288) (12,780) (37,104) (37,104) 432,881 $ 127,803 365,954 $ 1,434,692 First $ Second $ 2,361,330 Selling and Administration Budget Quarter

 

Variable costs

 

Commissions

 

Bad debts

 

Total variable costs

 

Fixed costs

 

Salaries

 

Depreciation

 

Other

 

Total fixed costs

 

Total Selling and Administration Costs $ 53,550 $ Third 207,060 $ Fourth 62,475 $ Total 18,445 $ 341,530 10,710 12,495 3,689 68,306 64,260 248,472 74,970 22,134 409,836 40,000

 

2,400

 

8,300 40,000

 

2,400

 

7,400 40,000

 

2,400

 

9,200 40,000

 

2,400

 

7,300 160,000

 

9,600 50,700

 

$ 41,412 49,800 51,600 49,700 201,800 114,960 $ 298,272 $ 126,570 $ 71,834 32,200

 

$ 611,636 Cash Receipts and Disbursements Budget Quarter

 

First

 

Receipts

 

From current quarter's sales

 

From prior quarter (net of bad debts)

 

Total receipts $ 353,430 $ Third 1,366,596 $ Fourth 412,335 $ Total 121,737 $ 2,254,098 110,622 171,360 662,592 199,920 1,144,494 464,052 1,537,956 1,074,927 321,657 3,398,592 132,025

 

72,370

 

292,896

 

7,322

 

6,510

 

2,441

 

40,000

 

53,550

 

8,300

 

7,000 281,017

 

66,013

 

815,724

 

20,393

 

18,129

 

6,798

 

40,000

 

207,060

 

7,400

 

80,000 85,428

 

140,509

 

245,952

 

6,149

 

5,466

 

2,050

 

40,000

 

62,475

 

9,200

 

40,000 41,844

 

42,714

 

92,988

 

2,325

 

2,067

 

775

 

40,000

 

18,445

 

7,300

 

40,000 540,315

 

321,605

 

1,447,560

 

36,189

 

32,172

 

12,063

 

160,000

 

341,530

 

32,200

 

167,000 0 0 0 50,000 50,000 622,414 Disbursements

 

For current quarter's purchases

 

For prior quarter's purchases

 

Direct labor costs

 

Indirect labor

 

Supplies

 

Other production costs

 

Salaries

 

Commissions

 

Other selling & administration costs

 

Income taxes

 

Dividends

 

Total Disbursements

 

Excess Receipts (Disbursements) Second 1,542,534 637,228 338,457 3,140,634 $ (158,362) $ (4,578) $ 437,699 $ (16,800) $ 257,958 Beginning cash balance

 

Excess receipts (disbursements)

 

Line of credit:

 

Borrowings

 

Repayments

 

Interest on borrowing

 

Ending Cash Balance $ First

 

45,820 $

 

(158,362) Quarter

 

Second

 

Third

 

30,000 $

 

30,000 $

 

(4,578)

 

437,699 Fourth

 

314,728 $

 

(16,800) Total

 

45,820

 

257,958 $ 30,000 $ 30,000 $ 314,728 $ 300,000 $ 300,000 Beginning Line of Credit Balance

 

Ending Line of Credit Balance $

 

$ 0 $

 

142,542 $ 142,542

 

149,971 $

 

$ 149,971 $

 

0 $ 0 $

 

2,072 $ 0

 

2,072 Short-Term Financing Budget 142,542

 

0 7,429

 

0 0

 

(149,971) 2,072

 

0 152,044

 

(149,971) 0 (2,851) (2,999) 0 (5,850) Budgeted Statement of Income and Retained Earnings Sales

 

Cost of Goods Sold

 

Gross Margin

 

Selling and Administration

 

Operating income

 

Interest expense

 

Pretax income

 

Income taxes

 

Net Income First

 

535,500 $ Quarter

 

Second

 

Third

 

2,070,600 $

 

624,750 $ 365,954 1,434,692 169,546 432,881 127,803 2,361,330 635,908 191,869 56,647 1,053,970 298,272 126,570 71,834 611,636 54,586 337,636 65,299 (15,187) 442,334 0

 

54,586 2,851

 

334,785 2,999

 

62,299 0

 

(15,187) 5,850

 

436,484 16,376

 

$ Total

 

3,415,300 114,960 $ Fourth

 

184,450 $ 100,436 18,690 (4,556) 130,945 38,210 $ 234,350 (10,631) 305,539 $ 43,610 $ Beginning Retained Earnings

 

Less Dividends

 

Ending Retained Earnings 165,322

 

(50,000)

 

$ Budgeted Balance Sheet Beginning of Year

 

Assets

 

Cash

 

Raw materials inventory

 

Finished goods inventory

 

Accounts receivable, net

 

Total Current Assets

 

Land, building and equipment

 

Accumulated depreciation

 

Total Assets

 

Liabilities and Equity

 

Accounts payable (purchases)

 

Income taxes payable

 

Common stock

 

Retained Earnings

 

Total Liabilities and Equity $ End of Year

 

45,820

 

10,000

 

30,250 $ 300,000

 

16,272

 

37,104 110,622 $ 59,024 196,692 412,400 912,000 $ (114,000) 798,000 912,000

 

(159,600) 752,400 $ 994,692 $ $ 72,370

 

7,000

 

750,000 $ 165,322

 

$ 994,692 1,164,800 20,922

 

(29,055)

 

750,000

 

420,861 $ 1,162,728 420,861

 







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