Question

Roles What do they know Sales Manager You want to sell 10,000 units in April, 15,000...

Roles What do they know
Sales Manager You want to sell 10,000 units in April, 15,000 in May, 8,000 units in June at $20 each.
Business Development You know that our competitor is struggling with manufacturing and supply is low, and your POV is that demand will increase by 10% in April and May
Manufacturing Supervisor You have seen that raw material supply shipments are being delayed - and you want to keep 15% of next months production needs on hand- also you would like 15% of raw material needs on hand for production of product for next month. You know it takes .5 hours standard to make each unit.
Human Resources Has settled the labors union by guaranteeing 40 hours minimum a week at $12/hour, but no OT. You expect 5500 direct labor hours standard per month. Based on our payroll system you can expect 1/2 the direct labor to be paid in the month it was incurred and the second 1/2 in the following month.
Purchasing Agent Your POV is that Supply of raw material is plentiful and you agree with the Manufacturing Supervisor that in fact shipments are slow do to trucking constraints, you want to keep 10% of raw material on hand for next months production needs. The price of wood is not expected fluctuate in the next 3 months at $1/lb standar rate. You know each unit manufactured requires a standard 4lb of wood.
Accounts Receivable Manager Based on historical data you know that 50% of the current month sales are collected in month while 45% are collected the following month, 5% are never collected.
Treasure Your goal is to keep $40,000 in the bank as a balance. We have a line of credit we can borrow from- when we fall short
Accountant Has calculated fixed Manufacturing Overhead as follows (each month)
Rent                           15,000.00
Property Tax                              3,000.00
Indirect Material                              5,000.00
Indirect Labor                              8,000.00
Variable Manufacturing Overhead at
Utilities $.5 per unit produced
Controller Your goal is to help guide and lead the team, and increase profit share over the next quarter, while keeping costs under control. Last years sales goal for the same 3 months was set at 32,000 units which we met. We did that with only keeping 10% of units produced on hand.
Accounts Payable You know that 50% of our purchases (VE) are paid the same month incurred and the reminder paid the following month. However our expenses (FE) are paid for in the month we incur them. While utilities are paid the 10th of the following month of production.
We manufacture and sell baseball bats, attached is the cross functional working team that has been assigned to come up with a plan for next quarter.
Work with the knowledge you are given to present a plan (budgets) to the board.
Sales Budget April May June July
# Units          10,000
Price 20 20 20 20
Total Rev        200,000
Production Budget April May June
# Units to sell                   -                     -                   -            10,000
Add desired end Inv
Total needed                   -                     -                   -  
Less Beg Inv            2,000
Units to be Produced
Direct Material April May June
Production in Units                   -                     -                   -  
Materials per unit                    4                    4                  4
Production Needs                   -                     -                   -  
Add desired ending Inventory          6,000
Total Needed                   -                     -  
Less Beg Inventory            3,000                   -                   -  
Material to be purchased                   -  
Direct-Labor April May June
Production in Units                   -                     -                   -  
Direct Labor Hours per unit
Labor hours required                   -                     -                   -  
Hours guaranteed
Labor hours paid
Wage rate
Total direct labor cost 0 0 0
Overhead Budget April May June
Rent
Property Tax
Indirect Material
Indirect Labor
Utilities
Total
Cash Receipts Budget April May June
Accounts Rec 3/31 $50,000
April Sales
May Sales
June Sales
Total cash collection
Cash Disbursement Budget April May June
Purchases Raw Material
March $20,000
April
May
June
Direct Labor Cost
March $33,000
April
May
June
Variable Manufacturing OH $5,000
Fixed Manufacturing OH
Total Cash Disbursements
Cash Budget April May June
Beginning cash Balance 40000
Add cash collections
Total cash available
Less Disbursements
Expected Balance
Target Balance
Excess (deficiency)
Questions
How did you decide on how many units to sell over the next 3 months?
How did the sales goal affect your production budget?
Assume Actual purchases for May of Direct Material were 2% less than budged and Actual price paid for material was $.90/ lb. Calculate the Direct material price variance. Is this a favorable or unfavorable variance?
Assume actual direct labor hours for April were 5,300 with an actual average rate of $12.50, calculate the direct labor rate variance, and determine if this is a favorable or unfavorable variance.
For May actual fixed overhead totaled $34,000, calculate the fixed overhead budget variance, is the favorable or unfavorable?

Homework Answers

Answer #1

A. How did you decide on how many units to sell over next 3 months.

As sale Manager wants to sell 10,000 units in April, 15,000 in May, 8,000 units in June at $20 each.

and the business development provided us information that our competitor is struggling with manufacturing and supply is low, so demand will increase by 10% in April and May.

while analyzing these information we came to the conclusion that

in the month of April units to be sold- 10,000*1.1 = 11,000

10% of 10,000 increased due to competitors weakness

in the month of MAY units to be sold- 15000*1.1 = 16,500

10% of 15,000 increased due to competitors weakness

in the month of June units to be sold 8,000

as stated by sales manager.

therefore total units which we are going to sell in next 3 months will be  

APRIL+MAY+JUNE (11000+16500+8000= 35,500)

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