KAYAKS, INC._Manufacturing Budget

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Description

KAYAKS, INC.

Balance Sheet

December 31, 2011

ASSETS

Cash——-$ 52,000

Accounts receivable—-1,200,000

Raw materials inventory* —120,000

Finished goods inventory** —–287,500

Plant assets, net of accumulated

Depreciation ———–2,135,000

Total Assets —–$ 3,794,500

LIABILITIES

Accounts payable —-$ 131,000

STOCKHOLDERS’EQUITY Common Stock—1,600,000

Retained Earnings ——2,063,500

Total Liabilities & SE —–$ 3,794,500

use in preparing the budget for 2012:

*40,000 pounds **1,000 kayaks

The following additional data is available for use in preparing the budget for 2012:

Cash collections (all sales are on account):

Collected in the quarter of sale————40%

Collected in the quarter after sale———60%

(Bad debts are negligible and can be ignored)

Cash disbursements for raw materials (all purchases are on account):

Cash paid in the quarter of purchase—-70%

Cash paid in the quarter after purchase —–30%

Desired quarterly ending Raw materials inventory—-40% of next quarter’s production needs.

Desired quarterly ending Finished goods inventory—— 10% of next quarter’s sales

Budgeted sales:

1st quarter 2012 ————————————10,000 kayaks

2nd quarter 2012 ————————————15,000 kayaks

3rd quarter 2012 ————————————16,000 kayaks

4th quarter 2012 ————————————14,000 kayaks

1st quarter 2013————————————10,000 kayaks

2nd quarter 2013 ————————————12,000 kayaks

Anticipated equipment purchases:

1st quarter 2012 ————————————$30,000

2nd quarter 2012 ————————————$0

3rd quarter 2012 ————————————$0

4th quarter 2012 ————————————$150,000

Quarterly dividends to be paid each quarter in 2012 —-$4,000

Expected sales price per unit ———$400

Standard cost data:

Direct materials ———-10 pounds per kayak @ $3 per pound

Direct labor———-10 hours per kayak @ $20 per hour

Variable manufacturing overhead—–$5 per direct labor hour

Fixed manufacturing overhead (includes $9,000 depreciation)— $103,125 per quarter

Variable selling expenses————$25 per kayak

Fixed selling and administrative expenses:

Insurance ———————————–$45,000 per quarter

Sales salaries ——————————-$30,000 per quarter

Depreciation ——————————–$6,000 per quarter

Income tax rate —————————–30%

Estimated income tax payments planned in 2012:

1st quarter ————————————$0

2nd quarter————————————$50,000

3rd quarter————————————$400,000

4th quarter ————————————$500,000

Kayak’s desires to have a minimum cash balance at the end of each quarter of $50,000. In order to maintain this minimum balance, They may borrow from its bank in $10,000 increments with an interest rate of 6%. Money is borrowed at the beginning of the quarter in which a shortage is expected. Repayments of all or a portion of the principle (plus accrued interest on the amount being repaid) are made at the end of any quarter in which the cash balance exceeds the required minimum.

Requirements:

1.Use the above information to prepare the following components of the master budget:

a. Sales budget with a schedule of expected cash collections for each quarter and the year as a whole

b. Production budget for each quarter and the year as a whole

c. Direct materials purchases budget with a schedule of expected cash disbursements for materials for

i. each quarter and the year as a whole

d. Direct labor budget for each quarter and the year as a whole

e. Manufacturing overhead budget with expected cash disbursements for each quarter and the year as

i. a whole

f. Ending finished goods inventory budget for the year

g. Selling and administrative expense budget with expected cash disbursements for each quarter and

i. the year as a whole

h. Cash budget for each quarter and the year as a whole

i. Budgeted income statement for the year

j. Budgeted balance sheet for the end of the year

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