Question 1 - Direct materials purchases budget
Coca-Cola Enterprises is the largest bottler of Coca-Cola in Western Europe. The company purchases Coke and Sprite concentrate from The Coca-Cola Company, dilutes and mixes the concentrate with carbonated water, and then fills the blended beverage into cans or plastic two-liter bottles. Assume that the estimated production for Coke and Sprite two-liter bottles at the Wakefield, UK, and bottling plant are as follows for the month of May:
Coke - 153,000 two-liter bottles
Sprite - 86,500 two-liter bottles
In addition, assume that the concentrate costs $75 per pound for both Coke and Sprite and is used at a rate of 0.15 pound per 100 liters of carbonated water in blending Coke and 0.10 pound per 100 liters of carbonated water in blending Sprite. Assume that two liters of carbonated water are used for each two-liter bottle of finished product. Assume further that two-liter bottles cost $0.08 per bottle and carbonated water costs $0.06 per liter.
Prepare direct materials purchases budget for May 2016, assuming inventories are ignored, because there are no changes between beginning and ending inventories for concentrate, bottles, and carbonated water.
Question 2 - Factory overhead cost budget
Sweet Tooth Candy Company budgeted the following costs for anticipated production for August 2016:
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Advertising expenses
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$232,000
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Production supervisor wages
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$135,000
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Manufacturing supplies
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14,000
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Production control wages
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32,000
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Power and light
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48,000
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Executive officer salaries
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310,000
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Sales commissions
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298,000
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Materials management wages
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39,000
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Factory insurance
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30,000
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Factory depreciation
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22,000
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Prepare a factory overhead cost budget, separating variable and fixed costs. Assume that factory insurance and depreciation is the only fixed factory costs.
Question 3 - Cost of goods sold budget
Delaware Chemical Company uses oil to produce two types of plastic products, P1 and P2. Delaware budgeted 35,000 barrels of oil for purchase in June for $90 per barrel. Direct labor budgeted in the chemical process was $240,000 for June. Factory overhead was budgeted $400,000 during June. The inventories on June 1 were estimated to be:
Oil - $15,200
P1 - 8,300
P2 - 8,600
Work in process - 12,900
The desired inventories on June 30 were:
Oil - $16,100
P1 - 9,400
P2 - 7,900
Work in process - 13,500
Use the preceding information to prepare a cost of goods sold budget for June 2017.
Question 4 - Schedule of cash collections of accounts receivable
OfficeMart Inc. has "cash and carry" customers and credit customers. OfficeMart estimates that 25% of monthly sales are to cash customers, while the remaining sales are to credit customers. Of the credit customers, 30% pay their accounts in the month of sale, while the remaining 70% pay their accounts in the month following the month of sale. Projected sales for the next three months of 2016 are as follows:
October - $58,000
November - 65,000
December - 72,000
The Accounts Receivable balance on September 30, 2016, was $35,000. Prepare a schedule of cash collections from sales for October, November, and December.
Question 5 - Forecast sales volume and sales budget
For 2016, Raphael Frame Company prepared the sales budget that follows. At the end of December 2016, the following unit sales data were reported for the year:
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Unit Sales
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8" x 10" Frame
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12" x 16" Frame
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East
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8,755
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3,686
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Central
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6,510
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3,090
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West
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12,348
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5,616
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Raphael Frame Company Sales Budget For the Year Ending December 31, 2016
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Product and Area
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Unit Sales Volume
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Unit Selling Price
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Total Sales
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8" x 10" Frame:
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East
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8,500
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$16
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$136,000
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Central
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6,200
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16
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99,200
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West
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12,600
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16
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201,600
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Total
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27,300
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$436,800
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12" x 16" Frame:
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East
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3,800
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$30
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$114,000
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Central
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3,000
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30
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90,000
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West
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5,400
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30
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162,000
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Total
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12,200
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$366,000
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Total revenue from sales
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$802,800
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For the year ending December 31, 2017, unit sales are expected to follow the patterns established during the year ending December 31, 2016. The unit selling price for the 8" x 10" frame is expected to increase to $17 and the unit selling price for the 12" x 16" frame is expected to increase to $32, effective January 1, 2017.
Instructions
1. Compute the increase or decrease of actual unit sales for the year ended December 31, 2016, over budget. Place your answers in a columnar table with the following format:
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Unit Sales, year Ended 2016
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Increase (Decrease) Actual Over Budget
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Budget
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Actual Sales
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Amount
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Percent
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8" x 10" Frame:
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East
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Central
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West
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12" x 16" Frame:
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East
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Central
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West
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2. Assuming that the increase or decrease in actual sales to budget indicated in part (1) is to continue in 2017, compute the unit sales volume to be used for preparing the sales budget for the year ending December 31, 2017. Place your answers in a columnar table similar to that in part (1) but with the following column heads. Round budgeted units to the nearest unit.
3. Prepare a sales budget for the year ending December 31, 2017.