Borkenstick Company

1. Prepare each of the following for June:

a. Sales Budet
Borkenstick Company is preparing budgets for June 2012.
Budgeted sales in units : Regular Sandals = 2.000 units
Deluxe Sandals =3.000 units

The selling price is : Regular = $80

Deluxe = $130

Expected Sales (units)

Price per Unit
Total Budgeted Sales

Borkenstick Company
Revenues Budget
For June 2012
Product
Regular
Deluxe
2.000
3.000
$
80 $
130
$ 160.000 $ 390.000

Total Revenues

550.000

b. Production Budget
The management at Borkenstick Company wants ending inventory as much as : Regular = 400
units; Deluxe = 600 units
On May 31, 250 units were on hand for Regular Product inventory and 650 units were on hand
For Deluxe Product Inventory
Borkenstick Company
Production Budget
For June 2012

Budgeted Sales
Add : Desired ending Inventory
Total Needs
Less : Beginning Inventory
Required Production (in units)

Regular
Deluxe
$
2.000 $
3.000 $
400
600
2.400
3.600
250
650
2.150
2.950

c. Direct Material Usage Budget in Quantity and Dollars

Total
5.000
1.000
6.000
900
5.100

Borkenstick Company
Direct Material Usage Budget in Quantity and Dollar
For The Month of June 2012
Material
Cloth
Wood
Physical Units Budget
Direct Materials Required for :
Regular (2.150 units x 1,3 yards; 0 bd-foot)
Deluxe (2,950 units 1.5 yds.; 2 bd-ft)
Total quantity of direct materials to be used

2.795
4.425
7.220

5.900
5.900

Cost budget
Available from beginning direct materials inventory
(under a FIFO cost-flow assumption)

2.146

4.040

Cloth: (7220 yd. 610 yd.) $3.50 per yd.

Wood: (5,900 800) $5 per bd-ft
Direct materials to be used this period

Total

23.135
$

25.281

25.500
29.540

Borkenstick Company
Direct Material Purchases Budget in Quantity and Dollar
For The Month of June 2012
Material
Cloth (yds)
Wood (ft)
Physical Units Budget
To be Used in production :
7220
5900
Add: Target ending direct material inventory
386
295
Total requirements
7.606
6.195
Deduct: beginning direct material inventory
610
800
Purchases to be made
6.996
5.395
Cost budget
Available from beginning direct materials inventory
Cloth: (6,996 yds. $3.50 per yd.)
$
24.486
Wood: (5,395 ft $5 per bd-ft)
Total
$
24.486

$
$

26.975
26.975

54.821

Total

51.461

d. Direct Manufacturing Labor Cost Budget

Borkenstick Company
Direct Manufacturing Labor Cost Budget
For The Month of June 2012
Product
Regular
Deluxe
Output Units Produced
2150
2950
Direct Manufacturing Labor-Hours per Unit
5
7
Total Hours
10.750
20.650
Hourly Wage Rate
10
10
Total
$
107.500 $
206.500 $

Total

31.400
314.000

e. Manufacturing Overhead Cost Budgets for processing and setup activities

Borkenstick Company
Manufacturing Overhead Cost Budget
For The Month of June 2012
Machine setup
(Regular 43 batches x 2 hrs./batch + Deluxe 59 batches x 3 hrs./batch) $12/hour
Processing (31,400 DMLH $1.20)
Inspection (5100 pairs x $0.90 per pair)
Total

Regular = 2.150/50 = 43 batches ; Deluxe = 2.950/50 = 59 batches

3.156
37680
4.590
45.426

f.

Budgeted of Unit Cost of Ending Finished Goods Inventory and Inventories Budget

Cloth
Wood
Direct Manufacturing Labor
Machine Setup
Processing
Inspection
Total

Borkenstick Company
Unit Costs of Ending Finished Goods Inventory
For the Month of June, 2012
Regular
Deluxe
Cost per
Input per
Input per
Total
Total
Unit of Input Unit of Output
Unit of Output
3,5
1,3
4,6
1,5
5,25
5
0
0,0
2
10
10
5
50,0
7
70
12
0,04
0,5
0,06
0,72
1,2
5
6,0
7
8,4
0,9
1
0,9
1
0,9
$
61,93
$
95,27

2 hours per setup 50 pairs per batch = 0.04 hour per unit
3 hours per setup 50 pairs per batch = 0.06 hour per unit

Borkenstick Company
Ending Inventories Budget
For the Month of June, 2012
Quantity
Direct Materials
Cloth (yards)
Wood (bd-feet)
Finished Goods
Regular
Deluxe
Total Ending Inventory

Total

Cost per Unit

386 $
295 $

3,5
5

$
$

1.351
1.475

400 $
600 $

61,93
95,27

$
$

24.772
57.162

2.826

$
$

81.934
84.760

g. Cost of Good Sold Budget

Borkenstick Company
Revenues Budget
For the Month of June 2012
Beginning finished goods inventory, June 1 ($15.500 + $61.750)
Direct materials used (requirement c )
Direct manufacturing labor (requirement d)
Manufacturing overhead (requirement e )
Cost of goods manufactured
Cost of goods available for sale
Deduct ending finished goods inventory, june 30 (requirement f)
Cost of goods sold

$
$

414.247
491.497
81.934
$ 409.563,00

h. Marketing and General Administration Costs Budget

Borkenstick Company
Marketing and General Administration Costs Budget
For the Month of June 2012
Marketing and General Administration (8% x $550.000)
Shipping (5.000 pairs / 40 pairs per shipment) x $10
Total

2. Cash Budget
Cash Budget
June 30, 2012
Cash balance, June 1

6,290

Add receipts
Collections from May accounts receivable

205,200

Collections from June accounts receivable

($550,000 60%)

77.250

54.821
314.000
45.426

330,000

$
$

44.000
1250
45.250

Total collection from customers

535,200

Total cash available for needs

$541,490

Deduct cash disbursements

Direct material purchases in May

10,400

Direct material purchases in June

($51,461 80%)

41,169

Direct manufacturing labor

314,000

Manufacturing overhead
( $45,426 70% and 30% is depreciation)

31,798

Nonmanufacturing costs
( $45,250 90% and 10% is depreciation)

40,725

Taxes

7,200

Dividends

10,000

Total disbursements

$455,292

Financing
Interest at 6% ($100,000 6% 1 12) (z)

500

Ending cash balance, June 30

(Total cash Total dibursements Interest)

85,698

3.
Budgeted Income Statement
For the Month of June, 2012
Revenues

$550,000

Cost of goods sold

$409,563

Gross margin

$140,437

Operating (nonmanufacturing) costs

Bad debt expense ($550,000 2%)

$45,250
11,000

Interest expense (for June)

500

Net income

56,750
$ 83,687

Budgeted Balance Sheet

June 30, 2012
Assets
Cash

Accounts receivable ($550,000 40%)

$220,000

Less: allowance for doubtful accounts

11,000

85,698

209,000

Inventories
Direct materials

Finished goods

2,826
81,934

Fixed assets

84,760

$580,000

Less: accumulated depreciation

($90,890 + 45,426 30% + 45,250 10%))
Total assets

109,043

470,957
$850,415

Liabilities and Equity

Accounts payable ($51,461 20%)

$ 10,292

Interest payable

500

Long-term debt

100,000

Common stock

200,000

Retained earnings (465,936 +83,687-10,000))

539,623

Total liabilities and equity

$850,415