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Harvey’s Budget
As we know, a budget is a plan expressed in quantitative, usually monetary,
terms covering a specified period of time, usually one year. Practically all companies,
except some of the smallest, prepare budgets. Many companies refer to their annual
budget as a profit plan, since it shows the planned activities that the company
expects to undertake in its responsibility centers in order to obtain its profit goal.
Almost all nonprofit organizations also prepare budgets.
In this case, Harvey Manufacturing manufactures and sells two industrial
products: a self-balancing screw driver and a self-balancing saw. Both products are
manufactured in a single plant. Harvey’s general manager, Mr. Lipscomb, and
president, Mr. Owens, want a budget prepared for the fiscal year 2013. They have
asked various employees to gather information that they believe will be necessary
for preparation of a budget. Neither Mr. Lipscomb nor Mr. Owens is skilled in budget
preparation. Both executives have used budgets and have participated to some
degree in budget preparation in prior years, but neither has prepared a full budget.
Harvey’s sales typically peak in the summer months, beginning with May.
Harvey’s general manager, Mr. Lipscomb, recommends that the budget be prepared
with the units sold in the high sales months of May, June, and July be used as the
bases for determining the annual forecast. Mr. Lipscomb’s recommendation is that
annual sales be budgeted at 64,000 per month for screwdrivers and 42,000 per
month for saws. Mr. Lipscomb also believes that the budgeted selling price per unit
should be equal to the highest selling price that could be achieved in 2012. He would
like to budget 102 per unit for screwdrivers and 130 per unit for saws. Mr. Lipscomb
states that his management team experimented with pricing in the prior year,
beginning with the first month of the year.
Sales Budget (Screwdriver)
1st quarter
2nd quarter 3rd quarter 4th quarter
Total
Budgeted sales in units 159,000
189,000
189,000
183,000
720,000
Selling price per unit
98
101
101
100
Total budgeted sales
15,582,000
19,089,000 19,089,000 18,300,000 72,060,000
Expected cash collection (Screwdriver)
Sales Budget (Saw)
Budgeted sales in
units
Selling price per
unit
Total budgeted
sales
1st quarter
2nd quarter 3rd quarter 4th quarter
123,000
123,000
120,000
114,000
120
127
128
125
14,760,000
15,621,000 15,360,000 14,250,000 59,991,000
1st quarter
2nd quarter
3rd quarter
4th quarter
Total
480,000
Total
1st quarter
50%*15,582,000
7,791,000
7,791,000
50%*15,582,000
7,791,000
7,791,000
9,544,500
9,544,500
2nd quarter
50%*19,089,000
50%*19,089,000
9,544,500
9,544,500
9,544,500
9,544,500
3rd quarter
50%*19,089,000
50%*19,089,000
9,544,500
9,544,500
9,150,000
9,150,000
18,694,500
62,910,000
4th quarter
50%*18,300,000
Total
7,791,000
17,335,500
19,089,000
Expected cash collection (Saw)
1st quarter
2nd quarter
3rd quarter
4th quarter
Total
1st quarter
50%*14,760,000
7,380,000
50%*14,760,000
7,380,000
7,380,000
7,380,000
7,810,500
7,810,500
2nd quarter
50%*15,621,000
50%*15,621,000
7,810,500
7,810,500
7,680,000
7,680,000
3rd quarter
50%*15,360,000
50%*15,360,000
7,680,000
7,680,000
7,125,000
7,125,000
14,805,000
52,866,000
4th quarter
50%*14,250,000
Total
7,380,000
15,190,500
Production Budget (Screwdriver)
1st quarter
Budgeted sales
159,000
Add: Ending inventory 28,000
15,490,500
2nd quarter 3rd quarter 4th quarter Total
189,000
189,000
183,000
720,000
28,000
27,000
25,000
25,000
Total needs
187,000
Less:
Beginning
20,000
inventory
Required production
167,000
Production Budget (Saw)
1st quarter
Budgeted sales
123,000
Add: Ending inventory 10,000
Total needs
133,000
Less:
Beginning
8,000
inventory
Required production
125,000
217,000
216,000
208,000
745,000
28,000
28,000
27,000
20,000
189,000
188,000
181,000
725,000
2nd quarter
123,000
10,000
133,000
3rd quarter
120,000
9,000
129,000
4th quarter
114,000
10,000
124,000
Total
480,000
10,000
490,000
10,000
10,000
9,000
8,000
123,000
119,000
115,000
482,000
Direct material purchase budget (Saws)
Metal
1st quarter
2nd quarter
3rd quarter
4th quarter Total
125,000
4
500,000
123,000
4
492,000
119,000
4
476,000
115,000
4
460,000
482,000
4
1,928,000
Add: Ending inventory 49,200
47,600
46,000
48,000
48,000
Total needs
549,200
Less:
Beginning
426,000
inventory
Material
to
be
123,200
purchased
Unit cost
8
Total DM cost
985,600
539,600
522,000
508,000
1,976,000
49,200
47,600
46,000
426,000
490,400
474,400
462,000
1,550,000
8
3,923,200
8
3,795,200
8
8
3,696,000 12,400,000
Production
Material per unit
Product need
Plastic
1st quarter
2nd quarter
3rd quarter
4th quarter Total
125,000
3
375,000
123,000
3
369,000
119,000
3
357,000
115,000
3
345,000
482,000
3
1,446,000
Add: Ending inventory 47,970
46,410
44,850
48,000
48,000
Total needs
422,970
Less:
Beginning
43,500
inventory
Material
to
be
379,470
purchased
Unit cost
5
Total DM cost
1,897,350
415,410
401,850
393,000
1,494,000
47,970
46,410
44,850
43,500
367,440
355,440
348,150
1,450,500
5
1,837,200
5
1,777,200
5
5
1,740,750 7,252,500
2nd quarter
189,000
5
945,000
65,800
1,010,800
3rd quarter
188,000
5
940,000
63,350
1,003,350
4th quarter
181,000
5
905,000
60,000
965,000
Total
725,000
5
3,625,000
60,000
3,685,000
66,150
65,800
63,350
534,000
944,650
937,550
901,650
3,151,000
8
7,557,200
8
7,500,400
8
7,213,200
8
25,208,000
Production
Material per unit
Product need
Direct
material
purchase
budget
(Screwdriver)
Metal
1st quarter
Production
167,000
Material per unit
5
Product need
835,000
Add: Ending inventory 66,150
Total needs
901,150
Less:
Beginning
534,000
inventory
Material
to
be
367,150
purchased
Unit cost
8
Total DM cost
2,937,200
Plastic
1st quarter
Production
167,000
Material per unit
3
Product need
501,000
Add: Ending inventory 51,030
Total needs
552,030
Less:
Beginning
43,500
inventory
Material
to
be
508,530
purchased
Unit cost
5
Total DM cost
2,542,650
2nd quarter
189,000
3
567,000
50,760
617,760
3rd quarter
188,000
3
564,000
48,870
612,870
4th quarter
181,000
3
543,000
48,000
591,000
Total
725,000
3
2,175,000
48,000
2,223,000
51,030
50,760
48,870
43,500
566,730
562,110
542,130
2,179,500
5
2,833,650
5
2,810,550
5
2,710,650
5
10,897,500
2nd quarter
189,000
1
189,000
22,560
211,560
3rd quarter
188,000
1
188,000
21,720
209,720
4th quarter
181,000
1
181,000
21,000
202,000
Total
725,000
1
725,000
21,000
746,000
22,680
22,560
21,720
18,000
188,880
187,160
180,280
728,000
3
566,640
3
561,480
3
540,840
3
2,184,000
Handles
1st quarter
Production
167,000
Material per unit
1
Product need
167,000
Add: Ending inventory 22,680
Total needs
189,680
Less:
Beginning
18,000
inventory
Material
to
be
171,680
purchased
Unit cost
3
Total DM cost
515,040
Direct labor budget (Screwdriver)
1st quarter
Production
167,000
Direct labor per unit
2
Labor hours paid
334,000
Hourly wage rate
12
2nd quarter
189,000
2
378,000
12
3rd quarter
188,000
2
376,000
12
4th quarter
181,000
2
362,000
12
Total
725,000
2
1,450,000
12
Total direct labor costs 4,008,000
4,536,000
4,512,000
4,344,000
17,400,000
Manufacturing overhead budget (Screwdriver)
1st quarter
Budgeted DL hours
334,000
Variable MOH rate
1.5
Total VMOH
501,000
Fixed MOH
214,000
Total MOH
715,000
Less: non cash
156,000
Cash disbursements
559,000
2nd quarter
378,000
1.5
567,000
214,000
781,000
156,000
625,000
3rd quarter
376,000
1.5
564,000
214,000
778,000
156,000
622,000
4th quarter
362,000
1.5
543,000
214,000
757,000
156,000
601,000
Total
1,450,000
1.5
2,175,000
214,000
2,389,000
156,000
2,233,000
Direct labor budget (Saws)
1st quarter
2nd quarter
3rd quarter 4th quarter
Production
Direct labor per unit
Labor hours paid
Hourly wage rate
125,000
3
375,000
16
123,000
3
369,000
16
119,000
3
357,000
16
Total direct labor costs
6,000,000
5,904,000
5,712,000 5,520,000 23,136,000
115,000
3
345,000
16
Total
482,000
3
1,446,000
16
Manufacturing overhead budget (Saws)
Budgeted DL hours
Variable MOH rate
Total VMOH
Fixed MOH
Total MOH
Less: non cash
Cash disbursements
1st quarter
2nd quarter
3rd quarter 4th quarter
125,000
1.5
187,500
214,000
401,500
156,000
245,500
123,000
1.5
184,500
214,000
398,500
156,000
242,500
119,000
1.5
178,500
214,000
392,500
156,000
236,500
Cash budget (Screwdriver)
1st quarter
Beginning cash
$1,800,000
balance
Add: Cash collection $7,791,000
Total cash available $9,591,000
Less: Cash
disbursement
Direct material
Metal
$2,937,200
Plastic
$2,542,650
Handles
$515,040
Direct labor
$4,008,000
MOH
$559,000
Selling and admin.
$250,000
Exp.
Total disbursement $10,811,890
Excess (Deficiency)
($1,220,890)
Financing
Borrowing
$2,220,890
Repayments
Interests
Total financing
Ending cash balance $1,000,000
115,000
1.5
172,500
214,000
386,500
156,000
230,500
Total
482,000
1.5
723,000
214,000
937,000
156,000
781,000
2nd quarter
3rd quarter
4th quarter
$1,000,000
$1,967,010
$4,799,580
$17,335,500
$18,335,500
$19,089,000 $18,694,500 $62,910,000
$21,056,010 $23,494,080 $64,710,000
$7,557,200
$2,833,650
$566,640
$4,536,000
$625,000
$7,500,400
$2,810,550
$561,480
$4,512,000
$622,000
$7,213,200
$2,710,650
$540,840
$4,344,000
$601,000
$25,208,000
$10,897,500
$2,184,000
$17,400,000
$2,407,000
$250,000
$250,000
$250,000
$1,000,000
$16,368,490
$1,967,010
$16,256,430 $15,659,690 $59,096,500
$4,799,580 $7,834,390 $5,613,500
$1,967,010
$4,799,580
Total
$1,800,000
$2,220,890
($2,220,890) ($2,220,890)
($355,342) ($355,342)
($2,576,232) ($355,342)
$5,258,158 $5,258,158
Cash disbursements
(Saw)
Beginning cash
balance
Add: Cash collection
Total cash available
Less: Cash
disbursement
Direct material
Metal
Plastic
Handles
Direct labor
MOH
Selling and admin.
Exp.
Total disbursement
Excess (Deficiency)
Financing
Borrowing
Repayments
Interests
Total financing
Ending cash balance
1st quarter
2nd quarter
3rd quarter
4th quarter
Total
$1,800,000
$1,000,000
$4,033,600
$7,753,200
$1,800,000
$7,380,000
$9,180,000
$15,190,500
$16,190,500
$15,490,500 $14,805,000 $52,866,000
$19,524,100 $22,558,200 $54,666,000
$985,600
$1,897,350
$3,923,200
$1,837,200
$3,795,200
$1,777,200
$3,696,000
$1,740,750
$12,400,000
$7,252,500
$6,000,000
$245,500
$5,904,000
$242,500
$5,712,000
$236,500
$5,520,000
$230,500
$23,136,000
$781,000
$250,000
$250,000
$250,000
$250,000
$1,000,000
$9,378,450
($198,450)
$12,156,900
$4,033,600
$11,770,900 $11,437,250 $44,569,500
$7,753,200 $11,120,950 $10,096,500
$1,198,450
$1,000,000
$4,033,600
$7,753,200
$1,198,450
($1,198,450) ($1,198,450)
($191,752) ($191,752)
($1,390,202) ($191,752)
$9,730,748 $9,904,748
Budgeted Income Statement
Sales
$72,060,000
Cost of goods sold
$61,416,000
Gross margin
$10,644,000
Selling and admin. Exp.
$250,000
Operating income
$10,394,000
Interest expenses
($355,342)
Net income
$10,038,658
Budgeted Contribution
margin statement
Sales
$72,060,000
Less: Variable expenses
Metal
$25,208,000
Plastic
$10,897,500
Handles
$2,184,000
Direct labor
$17,400,000
Variable MOH
$2,175,000
Total variable expenses
$57,864,500
Contribution margin
$14,195,500
Less: Fixed expenses
F MOH
$214,000
Fixes S&A expenses
$250,000
Net income
$13,731,500
$1.65
$85.30
Budgeted Income Statement
Sales
$59,991,000
Cost of goods sold
$48,393,600
Gross margin
$11,597,400
Selling and admin. Exp.
$250,000
Operating income
$11,347,400
Interest expenses
($191,752)
Net income
$11,155,648
Budgeted Contribution margin statement
Sales
$59,991,000
Less: Variable expenses
Metal
$12,400,000
Plastic
$7,252,500
Handles
Direct labor
$23,136,000
Variable MOH
$723,000
Total variable expenses
$43,511,500
Contribution margin
$16,479,500
Less: Fixed expenses
F MOH
$214,000
Fixes S&A expenses
$250,000
Net income
$16,015,500
$1.94
$100.82
Narrative Report
As we know, the budget serves as an aid in marking and coordinating
short-range plans, a device for communicating these plans to the various
responsibility center managers, a way of motivating managers to achieve their goals,
a benchmark for controlling ongoing activities, a basis for evaluating the
performance of responsibility centers and their managers, and a means of educating
managers. The three principal parts of the master budget are an operating budget,
showing planned operations for the coming year, including revenues, expenses, and
changes in inventory and other working capital items; a cash budget, showing the
anticipated sources and use of cash in that year; a capital expenditure budget,
showing planned changes in property, plant, and equipment.
According to the forms, I want to choose the saw to be a main product. From
the forms, almost everything about the saw shows an efficient figure to help the
company to get more profit in the market. These two products almost have the same
situation and do not have big differences about the selling unit during the 2012.
However, the big difference is the production cost was used as twice as the total
budget of saws. In my opinion, the analysis provides a lot of valuable information
that can be used to be a basis for strategy decisions. In sum, I think the saw is much
more valuable for the company.
Harvey’s Budget
As we know, a budget is a plan expressed in quantitative, usually monetary,
terms covering a specified period of time, usually one year. Practically all companies,
except some of the smallest, prepare budgets. Many companies refer to their annual
budget as a profit plan, since it shows the planned activities that the company
expects to undertake in its responsibility centers in order to obtain its profit goal.
Almost all nonprofit organizations also prepare budgets.
In this case, Harvey Manufacturing manufactures and sells two industrial
products: a self-balancing screw driver and a self-balancing saw. Both products are
manufactured in a single plant. Harvey’s general manager, Mr. Lipscomb, and
president, Mr. Owens, want a budget prepared for the fiscal year 2013. They have
asked various employees to gather information that they believe will be necessary
for preparation of a budget. Neither Mr. Lipscomb nor Mr. Owens is skilled in budget
preparation. Both executives have used budgets and have participated to some
degree in budget preparation in prior years, but neither has prepared a full budget.
Harvey’s sales typically peak in the summer months, beginning with May.
Harvey’s general manager, Mr. Lipscomb, recommends that the budget be prepared
with the units sold in the high sales months of May, June, and July be used as the
bases for determining the annual forecast. Mr. Lipscomb’s recommendation is that
annual sales be budgeted at 64,000 per month for screwdrivers and 42,000 per
month for saws. Mr. Lipscomb also believes that the budgeted selling price per unit
should be equal to the highest selling price that could be achieved in 2012. He would
like to budget 102 per unit for screwdrivers and 130 per unit for saws. Mr. Lipscomb
states that his management team experimented with pricing in the prior year,
beginning with the first month of the year.
Sales Budget (Screwdriver)
1st quarter
2nd quarter 3rd quarter 4th quarter
Total
Budgeted sales in units 159,000
189,000
189,000
183,000
720,000
Selling price per unit
98
101
101
100
Total budgeted sales
15,582,000
19,089,000 19,089,000 18,300,000 72,060,000
Expected cash collection (Screwdriver)
Sales Budget (Saw)
Budgeted sales in
units
Selling price per
unit
Total budgeted
sales
1st quarter
2nd quarter 3rd quarter 4th quarter
123,000
123,000
120,000
114,000
120
127
128
125
14,760,000
15,621,000 15,360,000 14,250,000 59,991,000
1st quarter
2nd quarter
3rd quarter
4th quarter
Total
480,000
Total
1st quarter
50%*15,582,000
7,791,000
7,791,000
50%*15,582,000
7,791,000
7,791,000
9,544,500
9,544,500
2nd quarter
50%*19,089,000
50%*19,089,000
9,544,500
9,544,500
9,544,500
9,544,500
3rd quarter
50%*19,089,000
50%*19,089,000
9,544,500
9,544,500
9,150,000
9,150,000
18,694,500
62,910,000
4th quarter
50%*18,300,000
Total
7,791,000
17,335,500
19,089,000
Expected cash collection (Saw)
1st quarter
2nd quarter
3rd quarter
4th quarter
Total
1st quarter
50%*14,760,000
7,380,000
50%*14,760,000
7,380,000
7,380,000
7,380,000
7,810,500
7,810,500
2nd quarter
50%*15,621,000
50%*15,621,000
7,810,500
7,810,500
7,680,000
7,680,000
3rd quarter
50%*15,360,000
50%*15,360,000
7,680,000
7,680,000
7,125,000
7,125,000
14,805,000
52,866,000
4th quarter
50%*14,250,000
Total
7,380,000
15,190,500
Production Budget (Screwdriver)
1st quarter
Budgeted sales
159,000
Add: Ending inventory 28,000
15,490,500
2nd quarter 3rd quarter 4th quarter Total
189,000
189,000
183,000
720,000
28,000
27,000
25,000
25,000
Total needs
187,000
Less:
Beginning
20,000
inventory
Required production
167,000
Production Budget (Saw)
1st quarter
Budgeted sales
123,000
Add: Ending inventory 10,000
Total needs
133,000
Less:
Beginning
8,000
inventory
Required production
125,000
217,000
216,000
208,000
745,000
28,000
28,000
27,000
20,000
189,000
188,000
181,000
725,000
2nd quarter
123,000
10,000
133,000
3rd quarter
120,000
9,000
129,000
4th quarter
114,000
10,000
124,000
Total
480,000
10,000
490,000
10,000
10,000
9,000
8,000
123,000
119,000
115,000
482,000
Direct material purchase budget (Saws)
Metal
1st quarter
2nd quarter
3rd quarter
4th quarter Total
125,000
4
500,000
123,000
4
492,000
119,000
4
476,000
115,000
4
460,000
482,000
4
1,928,000
Add: Ending inventory 49,200
47,600
46,000
48,000
48,000
Total needs
549,200
Less:
Beginning
426,000
inventory
Material
to
be
123,200
purchased
Unit cost
8
Total DM cost
985,600
539,600
522,000
508,000
1,976,000
49,200
47,600
46,000
426,000
490,400
474,400
462,000
1,550,000
8
3,923,200
8
3,795,200
8
8
3,696,000 12,400,000
Production
Material per unit
Product need
Plastic
1st quarter
2nd quarter
3rd quarter
4th quarter Total
125,000
3
375,000
123,000
3
369,000
119,000
3
357,000
115,000
3
345,000
482,000
3
1,446,000
Add: Ending inventory 47,970
46,410
44,850
48,000
48,000
Total needs
422,970
Less:
Beginning
43,500
inventory
Material
to
be
379,470
purchased
Unit cost
5
Total DM cost
1,897,350
415,410
401,850
393,000
1,494,000
47,970
46,410
44,850
43,500
367,440
355,440
348,150
1,450,500
5
1,837,200
5
1,777,200
5
5
1,740,750 7,252,500
2nd quarter
189,000
5
945,000
65,800
1,010,800
3rd quarter
188,000
5
940,000
63,350
1,003,350
4th quarter
181,000
5
905,000
60,000
965,000
Total
725,000
5
3,625,000
60,000
3,685,000
66,150
65,800
63,350
534,000
944,650
937,550
901,650
3,151,000
8
7,557,200
8
7,500,400
8
7,213,200
8
25,208,000
Production
Material per unit
Product need
Direct
material
purchase
budget
(Screwdriver)
Metal
1st quarter
Production
167,000
Material per unit
5
Product need
835,000
Add: Ending inventory 66,150
Total needs
901,150
Less:
Beginning
534,000
inventory
Material
to
be
367,150
purchased
Unit cost
8
Total DM cost
2,937,200
Plastic
1st quarter
Production
167,000
Material per unit
3
Product need
501,000
Add: Ending inventory 51,030
Total needs
552,030
Less:
Beginning
43,500
inventory
Material
to
be
508,530
purchased
Unit cost
5
Total DM cost
2,542,650
2nd quarter
189,000
3
567,000
50,760
617,760
3rd quarter
188,000
3
564,000
48,870
612,870
4th quarter
181,000
3
543,000
48,000
591,000
Total
725,000
3
2,175,000
48,000
2,223,000
51,030
50,760
48,870
43,500
566,730
562,110
542,130
2,179,500
5
2,833,650
5
2,810,550
5
2,710,650
5
10,897,500
2nd quarter
189,000
1
189,000
22,560
211,560
3rd quarter
188,000
1
188,000
21,720
209,720
4th quarter
181,000
1
181,000
21,000
202,000
Total
725,000
1
725,000
21,000
746,000
22,680
22,560
21,720
18,000
188,880
187,160
180,280
728,000
3
566,640
3
561,480
3
540,840
3
2,184,000
Handles
1st quarter
Production
167,000
Material per unit
1
Product need
167,000
Add: Ending inventory 22,680
Total needs
189,680
Less:
Beginning
18,000
inventory
Material
to
be
171,680
purchased
Unit cost
3
Total DM cost
515,040
Direct labor budget (Screwdriver)
1st quarter
Production
167,000
Direct labor per unit
2
Labor hours paid
334,000
Hourly wage rate
12
2nd quarter
189,000
2
378,000
12
3rd quarter
188,000
2
376,000
12
4th quarter
181,000
2
362,000
12
Total
725,000
2
1,450,000
12
Total direct labor costs 4,008,000
4,536,000
4,512,000
4,344,000
17,400,000
Manufacturing overhead budget (Screwdriver)
1st quarter
Budgeted DL hours
334,000
Variable MOH rate
1.5
Total VMOH
501,000
Fixed MOH
214,000
Total MOH
715,000
Less: non cash
156,000
Cash disbursements
559,000
2nd quarter
378,000
1.5
567,000
214,000
781,000
156,000
625,000
3rd quarter
376,000
1.5
564,000
214,000
778,000
156,000
622,000
4th quarter
362,000
1.5
543,000
214,000
757,000
156,000
601,000
Total
1,450,000
1.5
2,175,000
214,000
2,389,000
156,000
2,233,000
Direct labor budget (Saws)
1st quarter
2nd quarter
3rd quarter 4th quarter
Production
Direct labor per unit
Labor hours paid
Hourly wage rate
125,000
3
375,000
16
123,000
3
369,000
16
119,000
3
357,000
16
Total direct labor costs
6,000,000
5,904,000
5,712,000 5,520,000 23,136,000
115,000
3
345,000
16
Total
482,000
3
1,446,000
16
Manufacturing overhead budget (Saws)
Budgeted DL hours
Variable MOH rate
Total VMOH
Fixed MOH
Total MOH
Less: non cash
Cash disbursements
1st quarter
2nd quarter
3rd quarter 4th quarter
125,000
1.5
187,500
214,000
401,500
156,000
245,500
123,000
1.5
184,500
214,000
398,500
156,000
242,500
119,000
1.5
178,500
214,000
392,500
156,000
236,500
Cash budget (Screwdriver)
1st quarter
Beginning cash
$1,800,000
balance
Add: Cash collection $7,791,000
Total cash available $9,591,000
Less: Cash
disbursement
Direct material
Metal
$2,937,200
Plastic
$2,542,650
Handles
$515,040
Direct labor
$4,008,000
MOH
$559,000
Selling and admin.
$250,000
Exp.
Total disbursement $10,811,890
Excess (Deficiency)
($1,220,890)
Financing
Borrowing
$2,220,890
Repayments
Interests
Total financing
Ending cash balance $1,000,000
115,000
1.5
172,500
214,000
386,500
156,000
230,500
Total
482,000
1.5
723,000
214,000
937,000
156,000
781,000
2nd quarter
3rd quarter
4th quarter
$1,000,000
$1,967,010
$4,799,580
$17,335,500
$18,335,500
$19,089,000 $18,694,500 $62,910,000
$21,056,010 $23,494,080 $64,710,000
$7,557,200
$2,833,650
$566,640
$4,536,000
$625,000
$7,500,400
$2,810,550
$561,480
$4,512,000
$622,000
$7,213,200
$2,710,650
$540,840
$4,344,000
$601,000
$25,208,000
$10,897,500
$2,184,000
$17,400,000
$2,407,000
$250,000
$250,000
$250,000
$1,000,000
$16,368,490
$1,967,010
$16,256,430 $15,659,690 $59,096,500
$4,799,580 $7,834,390 $5,613,500
$1,967,010
$4,799,580
Total
$1,800,000
$2,220,890
($2,220,890) ($2,220,890)
($355,342) ($355,342)
($2,576,232) ($355,342)
$5,258,158 $5,258,158
Cash disbursements
(Saw)
Beginning cash
balance
Add: Cash collection
Total cash available
Less: Cash
disbursement
Direct material
Metal
Plastic
Handles
Direct labor
MOH
Selling and admin.
Exp.
Total disbursement
Excess (Deficiency)
Financing
Borrowing
Repayments
Interests
Total financing
Ending cash balance
1st quarter
2nd quarter
3rd quarter
4th quarter
Total
$1,800,000
$1,000,000
$4,033,600
$7,753,200
$1,800,000
$7,380,000
$9,180,000
$15,190,500
$16,190,500
$15,490,500 $14,805,000 $52,866,000
$19,524,100 $22,558,200 $54,666,000
$985,600
$1,897,350
$3,923,200
$1,837,200
$3,795,200
$1,777,200
$3,696,000
$1,740,750
$12,400,000
$7,252,500
$6,000,000
$245,500
$5,904,000
$242,500
$5,712,000
$236,500
$5,520,000
$230,500
$23,136,000
$781,000
$250,000
$250,000
$250,000
$250,000
$1,000,000
$9,378,450
($198,450)
$12,156,900
$4,033,600
$11,770,900 $11,437,250 $44,569,500
$7,753,200 $11,120,950 $10,096,500
$1,198,450
$1,000,000
$4,033,600
$7,753,200
$1,198,450
($1,198,450) ($1,198,450)
($191,752) ($191,752)
($1,390,202) ($191,752)
$9,730,748 $9,904,748
Budgeted Income Statement
Sales
$72,060,000
Cost of goods sold
$61,416,000
Gross margin
$10,644,000
Selling and admin. Exp.
$250,000
Operating income
$10,394,000
Interest expenses
($355,342)
Net income
$10,038,658
Budgeted Contribution
margin statement
Sales
$72,060,000
Less: Variable expenses
Metal
$25,208,000
Plastic
$10,897,500
Handles
$2,184,000
Direct labor
$17,400,000
Variable MOH
$2,175,000
Total variable expenses
$57,864,500
Contribution margin
$14,195,500
Less: Fixed expenses
F MOH
$214,000
Fixes S&A expenses
$250,000
Net income
$13,731,500
$1.65
$85.30
Budgeted Income Statement
Sales
$59,991,000
Cost of goods sold
$48,393,600
Gross margin
$11,597,400
Selling and admin. Exp.
$250,000
Operating income
$11,347,400
Interest expenses
($191,752)
Net income
$11,155,648
Budgeted Contribution margin statement
Sales
$59,991,000
Less: Variable expenses
Metal
$12,400,000
Plastic
$7,252,500
Handles
Direct labor
$23,136,000
Variable MOH
$723,000
Total variable expenses
$43,511,500
Contribution margin
$16,479,500
Less: Fixed expenses
F MOH
$214,000
Fixes S&A expenses
$250,000
Net income
$16,015,500
$1.94
$100.82
Narrative Report
As we know, the budget serves as an aid in marking and coordinating
short-range plans, a device for communicating these plans to the various
responsibility center managers, a way of motivating managers to achieve their goals,
a benchmark for controlling ongoing activities, a basis for evaluating the
performance of responsibility centers and their managers, and a means of educating
managers. The three principal parts of the master budget are an operating budget,
showing planned operations for the coming year, including revenues, expenses, and
changes in inventory and other working capital items; a cash budget, showing the
anticipated sources and use of cash in that year; a capital expenditure budget,
showing planned changes in property, plant, and equipment.
According to the forms, I want to choose the saw to be a main product. From
the forms, almost everything about the saw shows an efficient figure to help the
company to get more profit in the market. These two products almost have the same
situation and do not have big differences about the selling unit during the 2012.
However, the big difference is the production cost was used as twice as the total
budget of saws. In my opinion, the analysis provides a lot of valuable information
that can be used to be a basis for strategy decisions. In sum, I think the saw is much
more valuable for the company.

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