Reference no: EM132372573
The Master Budget
1. Sales Budget
2. Production Budget
3. Direct Materials Purchases Budget
4. Direct Labor Budget
5. Overhead Budget
6. Ending Finished Goods Budget
7. Cost of Goods Sold Budget
8. Selling and Administrative Expenses Budget
9. Capital Budget
10. Cash Budget
Texas Rex sells t-shirts. Expected sales for each quarter is 1000, 1200, 1500, and 2000 t-shirts at $10.00 each. They anticipate no price change.
Texas Rex, Inc.
Sales Budget
For the year ending December 31, 2018
Q1 Q2 Q3 Q4 Total
Units
Unit Selling Price _______ _______ ________ _______ ________
Budgeted Sales
A production budget tells management how many units must be produced to satisfy anticipated sales and ending inventory needs.
Assume the company requires 20% of the next quarter's sales in ending inventory and that beginning inventory of t-shirts for the first quarter of the year was 180.
Texas Rex, Inc.
Production Budget
For the year ending December 31, 2018
Q1 Q2 Q3 Q4 Total
Sales in Units
Desired Ending Inv. _______ _______ ________ _______ ________
Total Needs
Less Beginning Inv. _______ _______ ________ _______ ________
Units to be Produced
The Direct Materials Budget tells management how much must be bought to support production and the cost of those purchases.
Plain t-shirts cost $3.00 each, and ink (for the screen printing) cost $0.20 per ounce. The factory needs one plain t-shirt and five ounces of ink for each logoed t-shirt that it produces. Texas Rex's policy is to have 10% of the following quarter's needs in ending inventory. The factory has 58 plain t-shirts and 390 ounces of ink on hand on January 1. At the end of the year, the desired ending inventory is 106 plain t-shirts and 530 ounces of ink.
Texas Rex, Inc.
Direct Materials Budget
For the year ending December 31, 2018
Plain t-shirts: Q1 Q2 Q3 Q4 Total
Units to be Produced
Direct Materials per unit_______ _______ ________ _______ ________
Production Needs
Desired Ending Inv. _______ _______ ________ _______ ________
Total Needs
Less Beginning Inv. _______ _______ ________ _______ ________
Direct Materials
To be Purchased
Cost per t-shirt _______ _______ ________ _______ ________
Total T-shirt Purchase
Cost
Ink: Q1 Q2 Q3 Q4 Total
Units to be Produced
Direct Materials per unit_______ _______ ________ _______ ________
Production Needs
Desired Ending Inv. _______ _______ ________ _______ ________
Total Needs
Less Beginning Inv. _______ _______ ________ _______ ________
Direct Materials
To be Purchased
Cost per ounce _______ _______ ________ _______ ________
Total Ink Purchase Cost
Total Cost of
All Direct Materials
The Direct Labor Budget shows how many hours are required for production and the total cost of those hours. It takes 0.12 hours to produce one t-shirt. The average wage cost per hour is $10.
Texas Rex, Inc.
Direct Labor Budget
For the year ending December 31, 2018
Q1 Q2 Q3 Q4 Total
Units to be Produced
Direct Labor time per unit_______ _______ ________ _______ ________
Total Hours Needed
Avg. Wage cost per hour_______ _______ ________ _______ ________
Total Direct Labor Cost
The overhead budget shows forecasted variable and fixed overhead costs for the coming year. For Texas Rex the variable overhead rate is $5 per direct labor hour. Fixed overhead is budgeted at $1645 per quarter.
Texas Rex, Inc.
Overhead Budget
For the year ending December 31, 2018
Q1 Q2 Q3 Q4 Total
Budgeted Direct Labor hours
Variable Overhead Rate _______ _______ ________ ________ _______
Budgeted Variable Overhead
Budgeted Fixed Overhead _______ _______ ________ _______ ________
Total Overhead Cost
Calculate the Total Unit Cost:
Direct Materials
Direct Labor
Overhead
Total Unit Cost
Texas Rex, Inc.
Ending Finished Goods Inventory Budget
For the year ending December 31, 2018
Logo T-shirts
Unit Cost ____________
Total Ending Inventory
Texas Rex, Inc.
Cost of Goods Sold Budget
For the year ending December 31, 2018
Direct Materials Used
Direct Labor Used
Overhead ____________
Budgeted Manufacturing Costs
Beginning Finished Goods ____________
Cost of Goods Available for Sale
Less Ending Finished Goods _____________
Budgeted Cost of Goods Sold
Assume the variable Selling and Administrative Expenses are $0.10 per unit.
Administrative salaries are $1420 per quarter.
Utilities are $50 per quarter.
Depreciation is $150 per quarter.
Advertising for Quarters 1 through 4 are $100, $200, $800, $500, respectively.
Texas Rex, Inc.
Selling and Administrative Expenses Budget
For the year ending December 31, 2018
Q1 Q2 Q3 Q4 Total
Planned Sales in units
Var. S & Adm Exp _______ _______ ________ _______ ________
Per unit
Total Variable Expenses
Fixed S & Adm Expenses _______ _______ ________ _______ ________
Total Fixed Expenses _______ _______ ________ _______ ________
Total S & Adm Expenses
Texas Rex expects the following Cash Receipts in each quarter:
Q1 Q2 Q3 Q4
$10,600 $11,850 $14,775 $19,625
Texas Rex believes the amount of cash needed for payments on account for raw materials each quarter is:
Q1 Q2 Q3 Q4
$4,594 $5,039 $6,219 $6,819
The Cash Budget is critically important to the survival of businesses. It tells management how much cash is available and shortfalls of cash need to be anticipated and handled through expense reductions or financing.
Assume that Texas Rex's beginning cash balance is $5200. The company requires a $1000 minimum cash balance for the end of each quarter. Money can be borrowed in increments of $1000. Interest is 12% per year. Borrowings take place at the beginning of a quarter and repayments occur at the end of a quarter.
Budgeted depreciation is $540 per quarter for overhead and $150 per quarter for selling and administrative expenses. The company plans to purchase additional screen printing equipment at a cost of $6500 in the first quarter. Corporate income taxes are expected to be $3469 and will be paid at the end of the fourth quarter.
Texas Rex, Inc.
Cash Budget
For the year ending December 31, 2018
Q1 Q2 Q3 Q4 Total
Beginning Cash Balance
Cash Collections _______ _______ ________ _______ ________
Total Cash Available
Less Cash Payments for:
Raw Materials
Direct Labor
Overhead
S & Adm Expenses
Income Taxes
Equipment _______ _______ ________ _______ ________
Total Disbursements
Excess (deficiency) of cash
Financing:
Borrowings
Repayments
Interest _______ _______ ________ _______ ________
Total Financing
Ending Cash Balance