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EXERCISE 7.

5) Southern Plastics Company SA produces three lines of plastic pens: Fine Point, Midpoint and Punto Grande. The CEO is i fill the post of head of budgets, but first want to make sure that person knows the art to put in evidence which to draw: It asks: a) The Production Budget b) The Budget Raw Material Requirements c) Materials Purchase Budget d) The Budget Direct Labor e) The Budget Indirect Manufacturing Costs f) The Budget and Administrative Expense g) The budget Ending Stocks h) Cost of Goods Sold Budget This relevant information is provided: FEATHERS midpoint 1 gr 3 grs 5 grs 0.03 $ 800000

MATERIALS component A Component B component C Hours Direct Labor Cost per hour of MOD I budgeted Sales Sem 2001

FINE POINT 1 gr 2 grs 5 grs 0.05 $ 500000 20.00

20.00

The B component cost is $ 2000 per kg. Kilogram the cost of A is considered to be equal to 5% of the cost of a kilogram of is estimated as the cost of component A MATERIALS Component B Component A Component C COST $ 2,000.00 x kgr $ 100.00 x kgr $ 100.00 x kgr COST 2.00 0.1 0.1

Component B = $ 2,000.00 x kgr Component A = 5% Component B Component A = $ 100.00

The Sales department believes it would be desirable to have an inventory for the period 700000 feathers, composed as fo 60% and 15% of Great Point. Inventory Final = FINE POINT= MIDPOINT = GREAT POINT= 700000 plumas 25% Inv. Final 60% Inv. Final 15% Inv. Final FEATHERS MIDPOINT 420000

INVENTORY Inventory Final

FINE POINT 175000

The stock of the year just completed an inventory of 500000 arrojn feathers, that is for each line the same percentage a inventory estimates.

Inventory Initial= FINE POINT= MIDPOINT = GREAT POINT=

500000 plumas 25% Inv. Final 60% Inv. Final 15% Inv. Final

INVENTORY Inventory Initial

FINE POINT 125000

FEATHERS MIDPOINT 300000

Unit costs for each product line were $ 5.00 for Fine Point, $ 7.00 for middle and $ 12.00 for large point last year. Last Year: Cost UNIT COST $ FINE POINT 5.00 $ MIDPOINT 7.00

MATERIALS Inventory Initial

FINE POINT 1050000 gr

MIDPOINT 2080000 gr

Desired Ending Inventory

900000 grs

800000 grs

Indirect manufacturing expenses are as follows (applied on the basis of hours of direct labor):

MANUFACTURING OVERHEAD Maintenance Costs insurance energy supervision accessories depreciation The pomp and sales management will include SELLING AND ADMINISTRATIVE EXPENSES Salaries Commissions Stationery and office tilies depreciation Miscellaneous Expenses

$ $ $ $ $

10,000 7,000 80,000 50% 10,000 12,000

$ $ $ $ $

35,000 3,500 50,000 20,000 40,000

Commissions

EXERCISE SOLUTION 7.5 PRODUCTION BUDGET


Plsticos del Sur S.A

ACCOUNTS projected Sales (+) Finished Produc Final Inv (-) Inv. Initial Finished Products REQUIRED PRODUCTION

FINE POINT 500000 plu 175000 -125000 550000 plu

FEATHERS MIDPOINT 800000 plu 420000 -300000 920000 plu

BUDGET OF RAW MATERIAL REQUIREMENT


Plsticos del Sur S.A

PRODUCT FINE POINT MIDPOINT BIG POINT GRAMS TOTAL REQUIRED PRODUCTION Total required production kilograms Cost per kilogram TOTAL

$ $

COMPONENT A 550000 grs 920000 grs 430000 grs 1900000 grs 1900 Kg 100.00 $ 190,000.00 $

COMPONENTB 1100000 grs 2760000 grs 2150000 grs 6010000 grs 6010 Kg 2,000.00 12,020,000.00

SHOPPING BUDGET MATERIAL


Plsticos del Sur S.A
RAW MATERIAL A RAW MATERIAL B 1900 Kg 6010 Kg 900 800 -1050 -2080 1750 Kg 4730 Kg $ 100.00 $ 2,000.00 $ 175,000 $ 9,460,000

Required Raw Material in Kg (+) Desired Ending Inventory (-) Initial Inventory (=) Purchase of Raw Material (*) Unit Cost (=) TOTAL PURCHASES

BUDGET DIRECT LABOR


Plsticos del Sur S.A
FINE POINT 550000 plu MIDPOINT 920000 plu

Planned Production

Hrs per Unit Total hrs Cost per hr COST OF DIRECT LABOR

$ $

0.05 27500 hrs 20.00 $ 550,000.00 $

0.03 27600 hrs 20.00 552,000.00

BUDGET GIF
Plsticos del Sur S.A
maintenance insurance energy supervision depreciation accessories TOTAL $ $ $ $ $ $ $ 10,000 7,000 80,000 809,000 12,000 10,000 928,000

BUDGET AND ADMINISTRATIVE EXPENSES


Plsticos del Sur S.A
Salaries Commissions Stationery and office tilies depreciation Miscellaneous Expenses TOTAL $ $ $ $ $ $ 35,000 3,500 50,000 20,000 40,000 148,500

INVENTORY FINAL BUDGET


Plsticos del Sur S.A
$ $ $ $ 90,000 1,600,000 70,000 1,760,000

TOTAL

FINISHED GOODS INVENTORY FINAL BUDGET


Plsticos del Sur S.A
COST PER UNIT FINE POINT Raw Material A Raw Material B Raw Material C Labor MANUFACTURING OVERHEAD PRODUCT UNIT COST $ $ $ $ $ $ 0.10 4.00 0.50 1.00 0.57 6.17 $ $ $ $ $ $ MIDPOINT 0.10 6.00 0.50 0.60 0.34 7.54

RATEGIF =

Total GIF Hrs Totales $ 928,000 80900 hrs 11.471 hrs

RATE GIF =

RATE GIF =

UNWANTED INVENTORY FINAL BUDGET


Plsticos del Sur S.A
FINE POINT MIDPOINT BIG POINT TOTAL 1,079,750 3,166,800 1,311,450 5,558,000

INITIAL INVENTORY WANTED BUDGET


Plsticos del Sur S.A
FINE POINT MIDPOINT BIG POINT TOTAL $ $ $ $ 625,000.00 2,100,000.00 900,000.00 3,625,000.00

BUDGET COST OF SALES


Plsticos del Sur S.A
INITIAL INVENTORY FINISHED GOODS (+) PRODUTION RM LABOR MANUFACTURING OVERHEAD (=) COST PRODUCTS AVAILABLE (-) INV. FINAL FINISHED PRODUCT (=) COST OF SALES

$ $ $

10,555,200 1,618,000 928,000

oint and Punto Grande. The CEO is interested in hiring an expert to o put in evidence which to draw:

FEATHERS midpoint 1 gr 3 grs 5 grs 0.03 20.00 800000 $

BIG POINT 1 gr 5 grs 5 grs 0.06 20.00 400000

al to 5% of the cost of a kilogram of B, the cost of the component C

COST gr gr gr

od 700000 feathers, composed as follows: 25% Fine Point, Midpoint

FEATHERS MIDPOINT 420000

GREAT POINT 105000

or each line the same percentage as the sales department for final

FEATHERS MIDPOINT 300000

GREAT POINT 75000

0 for large point last year.

MIDPOINT 7.00 $

GREAT POINT 12.00

MIDPOINT 2080000 gr

GREAT POINT 998000 gr

800000 grs

700000 grs

Mano de Obra

10%

SUELDOS

GET

FEATHERS MIDPOINT 800000 plu 420000 -300000 920000 plu

GREAT POINT 400000 plu 105000 -75000 430000 plu

REQUIREMENT

COMPONENTB 1100000 grs 2760000 grs 2150000 grs 6010000 grs 6010 Kg 2,000.00 $ 12,020,000.00 $

COMPONENT C 2750000 grs 4600000 grs 2150000 grs 9500000 grs 9500 Kg 100.00 950,000.00

ATERIAL
RAW MATERIAL B 6010 Kg 800 -2080 4730 Kg 2,000.00 $ 9,460,000 $ RAW MATERIAL C 9500 Kg 700 -998 9202 Kg 100.00 920,200

BOR
BIG POINT TOTAL 430000 plu

$ $

0.06 25800 hrs 20.00 516,000.00 $

80900 hrs 1,618,000

IVE EXPENSES

UDGET

FINAL BUDGET

BIG POINT $ $ $ $ $ $ 0.10 10.00 0.50 1.20 0.69 12.488

TOTAL

NAL BUDGET

ED BUDGET

ALES
$ $ 3,625,000.00 13,101,200

$ $ $

16,726,200.00 (2,953,200.00) 13,773,000.00

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