Accounting Finance – Answer 2 budget questions.

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See the attachment for the budget that you will use to answer question #11 and #12.

The only questions that need to be answered are #11 and #12. Which are:

11.      Explain why each budget is prepared. Why would management want to see each budget.

12:   Analyze your results.  Do the budgets look favorable? Explain. why or why not?

For #11: In your answers explain budgets #1 to #10 in two or three sentences. Then explain in two sentences or more why management would want to see each budget.

For #12: Analyze the results by answering. Use the numbers from the budgets to answer why or why not.

Look over the

Zigby Manufacturing Budget 2015

and answer questions #11 and #12 from the budget.

Accounting Finance – Answer 2 budget questions.
Zigby Manufacturing Budget 2015 Sales Budget: Sales Budget April May June Quarter Budgeted Sales in Units 20,500 19,500 20,000 60,000 Budgeted Unit Selling Price 23.85 23.85 23.85 23.85 Budgeted Sales $488,925 $465,075 $477,000 $1,431,000 Production Budget Production Budget April May June Quarter Budgeted Sales in Units 20,500 19,500 20,000 60,000 Add Desired Ending Inventory 15,600 (19,500*80%) 16,000 (20,000*80%) 16,400 (20,500*80%) 48,000 Required Unit of Available Production 36,100 35,500 36,400 108,000 Less Opening Inventory 16,400 15,600 (19,500*80%) 16,000 (20,000*80%) 48,000 Production Needed $19,700 $19,900 $20,400 $60,000 Raw Materials Budget: Raw Materials Budget April May June Quarter Production Needed 19,700 19,900 20,400 60,000 Raw Material Per Unit 0.5 0.5 0.5 0.5 Total Raw Material Needed 9,850 9,950 10,200 30,000 Add Desired Ending Inventory of Raw Materials 4,975 (9,950*50%) 5,100 (10,200*50%) 4,000 14,075 Less Opening Inventory of Raw Materials 4,925 4,975 (9,950*50%) 5,100 (10,200*50%) 15,000 Raw Material to be Purchased 9,900 10,075 9,100 29,075 Material Price Per Unit 20 20 20 20 Total Cost of Raw Material Purchases $198,000 $201,500 $182,000 $581,500 Direct Labor Budget: Direct Labor Budget April May June Quarter Production Needed 19,700 19,900 20,400 60,000 Labor Requirement Per Unit (in hours) 0.5 0.5 0.5 0.5 Total Hours Needed 9,850 9,950 10,200 30,000 Labor Cost Per Hour 15 15 15 15 Total Cost of Direct Labor $147,750 $149,250 $153,000 $450,000 Factory Overhead Budget: Factory Overhead Budget April May June Quarter Variable overhead at $2.70 per hour 26,595 26,865 27,540 81,000 Depreciation 20,000 20,000 20,000 60,000 Total overhead expenses $46,595 $46,865 $47,540 $141,000 Selling Expense Budget: Selling Expenses Budget April May June Quarter Sale Commission 39,114 37,206 38,160 114,480 = 8% of Sales Sales Manager Salary 3,000 3,000 3,000 9,000 Total Selling Expense $42,114 $40,206 $41,160 $123,480 General and Administrative Expense Budget: General and Administrative Expense Budget April May June Quarter Administrative Salaries 12,000 12,000 12,000 36,000 Interest on long term notes at 0.9% 4,500 4,500 4,500 13,500 Total General and administrative Expense $16,500 $16,500 $16,500 $49,500 Cash Budget: Cash Budget April May June Opening Balance 40,000 83,346 124,295 Collections from customers 488,925 481,770 468,653 Total cash available $528,925 $565,116 $592,948 Less: Payments For: Variable Overhead 26,595 26,865 27,540 Sales Commission 39,114 37,206 38,160 Sales Salaries 3,000 3,000 3,000 Direct Labor 147,750 149,250 153,000 Dividends 10,000 Equipment Purchase 130,000 Total cash Payments 433,579 440,821 569,700 Surplus/Deficit 95,346 124,295 23,248 Add: Short-Term Notes availed 16,752 Less: Short-Term Notes repaid (12,000) Less: Interest on Short-Term Note 120 Balance at end of month $83,346 $124,295 $40,000 End of Month Loan Balance $16,752 Budgeted Income Statement for the Entire Second Quarter: Budgeted Income Statement for the Entire Second Quarter Quarter Ending June 30, 2015 Sales Revenue (60,000 units) 1,431,000 Less: Cost of Goods Sold (19.85/unit) * 60,000 1,191,000 Gross Margin 240,000 Less: Other Operating expenses Sales Representative commission 8% * sales 114,480 Sales Manager salary 9,000 Administrative salaries 36,000 Interest on Long-Term Note 0.9% 13,500 Less: Interest on Short-Term Note 120 173,100 Income Before Taxes 66,900 Less: Income Tax payable at 35% 23,415 Net Income 43,485 Budgeted Balance Sheet as of the End of the Second Calendar Quarter: Budgeted balance sheet as of the end of the second calendar quarter June, 30th, 2015 Current Assets: Cash 40,000 Accounts Receivables 333,900 Raw Materials Inventory 80,000 Finished goods Inventory 325,540 Total current assets $779,440 Fixed Assets: Equipment (Gross) 730,000 Less: Accumulated Depreciation 210,000 Equipment (net) 520,000 Total Assets 1,299,440 Liabilities and Equity Accounts Payable 182,000 Short-Term Notes Payable 16,752 Income Tax payable 23,415 Total Current Liabilities 222,167 Long-term Notes payable 500,000 Common Stock 335,000 Retained Earnings 242,273 Total Equity 577,273 Total Liabilities and Equity $1,299,440 Explain why each budget is prepared. Why would management want to see each budget? Analyze your results. Do the budgets look favorable? Explain.

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