Question

C) Complete a manufacturing overhead budget from the given information:

	July	August	September	Total
Budgeted MHs	2,000	5,000	7,000	14,000

The company’s variable overhead rate is $4 per machine hour (MH). Total expected fixed overhead costs are $12,000 per month. Total non-cash fixed overhead expenses are $3,000 per month.

	July	August	September	Total
Budgeted MHs
VMOH rate
VMOH costs
FMOH costs
Total MOH costs
Less: non-cash
Cash disbursements for MOH

D) Complete a cash budget from the given information:

	July	August	September
Cash Receipts	$500,000	$425,000	$375,000
Cash Disbursements:
For materials	$250,000	$205,000	$185,000
For selling & admin	$100,000	$115,000	$95,000
For equipment	$200,000	$105,000	$0

The company started July with $40,000 in cash account. The company desires to keep a minimum cash balance of $50,000 at all times. The company can borrow at 12% interest (annual rate). Borrowing happens at the beginning of a month and repayments happen at the end of a month.

	July	August	September	Total
Beginning Cash bal.
+Cash receipts
=Cash Available
Less: Cash Disburse.
For materials
For S&A
For equipment
=Total cash disburse.
Excess/(Deficiency)
Borrowing
Repayment
Interest
Ending Cash bal.

Answer 1

	July	August	September	Total
Budgeted MHs (a)	2,000	5,000	7,000	14,000
VMOH rate (b)	$4	$4	$4	$4
VMOH Costs (c = a*b)	$8,000	$20,000	$28,000	$56,000
FMOH Costs (d)	$12,000	$12,000	$12,000	$36,000
Total MOH Costs (c + d)	$20,000	$32,000	$40,000	$92,000
Less: Non-Cash	($3,000)	($3,000)	($3,000)	($9,000)
Cash Disbursements for MOH	$17,000	$29,000	$37,000	$83,000
	July	August	September	Total
Beginning cash bal.	$40,000	$60,000	$50,000	$150,000
+ Cash Receipts	$500,000	$425,000	$375,000	$1,300,000
= Cash Available (a)	$540,000	$485,000	$425,000	$1,450,000
Less: Cash Disburse.
For materials	$250,000	$205,000	$185,000	$640,000
For S&A	$100,000	$115,000	$95,000	$310,000
For Equipment	$200,000	$105,000	$0	$305,000
= Total Cash Disburse. (b)	$550,000	$425,000	$280,000	$1,255,000
Excess/ (Deficiency) (a - b)	($10,000)	$60,000	$145,000	$195,000
Borrowing ($10,000 + $50,000)	$60,000			$60,000
Repayment ($60,000 - $600 - $50,000); ($60,000 - $9,400)	$0	($9,400)	($50,600)	($60,000)
Interest ($60,000*12/100*1/12); ($50,600*12/100*6/12)	$0	($600)	($506)	($1,106)
Ending Cash Bal.	$60,000	$50,000	$93,894	$193,894