Developing a
Master Budget for a Manufacturing Organization:Boston
Computer Accessories assembles a computer networking device from kits of
imported

components.
You have been asked to develop a quarterly and annual operating budget and
proforma

contribution
income statements for 2011. You have obtained the following information:

Beginning-of-year
balances

Cash

$
40,000.00

Accounts
receivable (previous quarter's sales) $ 15,000.00

Raw
materials

300
kits

Finished
goods

400
units

Accounts
payable

$
40,000.00

Borrowed
funds

$
10,000.00

Desired
end-of-year inventory balances

Raw
materials

500
kits

Finished
goods

200
units

Desired
end-of-quarter balances

Cash

$
10,000.00

Raw
materials as a portion of next quarter's production 20%

Finished
goods as a portion of next quarter's sales 15%

Manufacturing
costs

Standard
cost per unit

Units
Unit price Total

Raw
materials

1
kit $ 40.00 $ 40.00

Direct
labor hours at rate

0.8
hour $ 20.00 $ 16.00

Variable
overhead/labor hour

0.8
hour $ 10.00 $ 8.00

Total
standard variable cost

$
64.00

Fixed
cost per quarter

Cash

$
40,000.00

Depreciation

$
10,000.00

Total
fixed manufacturing costs per quarter

$
50,000.00

Selling
and administrative costs

Variable
cost per unit

$
5.00

Fixed
costs per quarter

Cash

$
20,000.00

Depreciation

$
5,000.00

Total

$
25,000.00

Interest
rate per quarter

4%

Portion
of sales collected

In
the quarter of the sale

75%

In
the subsequent quarter

24%

Uncollectible
(bad debts)

1%

Portion
of purchases paid

 

In
the quarter of the purchase

75%

In
the subsequent quarter

25%

Unit
selling price

$
110.00

Sales
forecast

Quarter

First
Second Third Fourth

Units

2,400
1,500 2,000 3,100

Additional
information:

• All cash
payments except purchases are made quarterly as incurred.

• All borrowings
occur at the start of the quarter.

• All repayments
on borrowings occur at the end of the quarter.

• All interest
on borrows funds is paid at the end of each quarter.

• Borrowings and
repayments may be made in any amount.

Required: (Use of
Excel is strongly encouraged. Your answer should contain seven separate

schedules, one
for each requirement)

a. A sales
budget for each quarter and the year.

b. A
production budget for each quarter and the year.

c. A purchases
budget for each quarter and the year.

d. A
manufacturing cost budget for each quarter and the year.

e. A selling
and administrative expense budget for each quarter and the year.

f. A cash
budget for each quarter and the year.

g. A pro-forma contribution income statement for each budget and
the year