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ACC 202 Final Project Part I

ACC 202 Final Project Part I

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You are a manager for Peyton Approved, a pet supplies manufacturer. This responsibility requires you to create budgets, make pricing decisions, and analyze the results of operations to determine if changes need to be made to make the company more efficient.
You will be preparing a budget for the quarter July through September 2014. You are provided the following information. The budgeted balance sheet at June 30, 2014, is:
 
Peyton Approved

Budgeted Balance Sheet

30-Jun-15

ASSETS

 
Cash

 
$42,000

 
Accounts receivable

 
259,900

 
Raw materials inventory

 
35,650

 
Finished goods inventory

241,080

 
Total current assets

 
578,630

 
Equipment

$720,000

 
 
Less accumulated depreciation

240,000

480,000

 
Total assets

 
$1,058,630

 
 
 
 
 
LIABILITIES AND EQUITY

 
Accounts payable

 
$63,400

 
Short-term notes payable

 
24,000

 
Taxes payable

 
10,000

 
Total current liabilities

 
97,400

 
Long-term note payable

 
300,000

 
     Total Liabilities

 
397,400

 
Common stock

$600,000

 
 
Retained earnings

    61,230

 
 
Total stockholders’ equity

 
661,230

 
Total liabilities and equity

$1,058,630

 
 
 
All assumptions are new and apply to the July through September budget period.
 
1.     Sales were 20,000 units in June 2015. Forecasted sales in units are as follows: July, 18,000; August, 22,000; September, 20,000; October, 24,000. The sales price per unit is $18.00 and the total product cost is $14.35 per unit.
2.     The June 30 finished goods inventory is 16,800 units.
3.     Company policy calls for a given month's ending finished goods inventory to equal 70% of the next month's expected unit sales.
4.     The June 30 raw materials inventory is 4,600 units. The budgeted September 30 raw materials inventory is 1,980 units. Raw materials cost $7.75 per unit. Each finished unit requires 0.50 units of raw materials. Company policy calls for a given month’s ending raw materials inventory to equal 20% of the next month’s materials requirements.
5.     Each finished unit requires 0.50 hours of direct labor at a rate of $16 per hour.
6.     Overhead is allocated based on units of production. The predetermined variable overhead rate is $1.35 per unit produced. Depreciation of $20,000 per month is treated as fixed factory overhead.
7.     Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable.
8.     Sales commissions are 12% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $3,750 per month. The following critical elements must be addressed by completing the budget templates found on the “Budgets” tab.
 
Specifically, the following critical elements must be addressed when creating an Operating Budget by completing the budget templates found on the “Budgets” tab of your student workbook.
 
Step 1: Prepare a Sales Budget
Complete Part A - Sales Budget on the budget tab by using the information found in the budgeted balance sheet above.
Consider assumption 1 while completing this critical element: Sales were 20,000 units in June 2015. Forecasted sales in units are as follows: July, 18,000; August, 22,000; September, 20,000; October, 24,000. The sales price per unit is $18.00 and the total product cost is $14.35 per unit.
You can find an example of a sales budget in Exhibit 22-5 on page 1324.
 



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