Randy’s Kayaks Inc Manufactures And Sells One Person Fiberglass Kayaks Randy’s Balance Sheet

Randy’s Kayaks, Inc. manufactures and sells one-person fiberglass kayaks. Randy’s balance sheet at the end of 2011was as follows: RANDY’S 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 Randy’s desires to have a minimum cash balance at the end of each quarter of $50,000. In order to maintain this minimum balance, Randy’s 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 2.Prepare a brief memo to management with specific comments and/or recommendations relating to the budget.

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