I.

1.

Number of Ways
200 300 400
Total Costs
Fixed Costs $ 200,000 $ 200,000 $ 200,000
Variable Costs $ 100,000 $ 150,000 $ 200,000
Total Costs
Cost per way Transport
Fixed Costs $ 1000 $ 666.67 $ 500
Variable Costs $ 500 $ 500 $ 500
Total Cost per way $ 1500 $ 1166.67 $ 1000

2. Break-even ways
Fixed Costs / (Income per way – variable cost per way)
= $ 200,000 / ($ 7000 - $ 500)
= $ 200,000 / $ 65,00
= 30.76 ways
3. Break-even ways on variable cost increase by 10 %
= Fixed Costs / (Income per way – variable cost per way)
= $ 200,000 / ($ 7000 – ($ 500 x 10%))
= $ 200,000 / ($ 7000 - $ 550)
= $ 200,000 / $ 6450
= 31 ways

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II.
1. Planning Budget

Budget labor hours (Q) 8000

Direct Labor $ 15.8 Q $ 126,400
Indirect Labor $ 3200 + 1.5 Q $ 15,200
Utilities $ 5400 + 0.7 Q $ 11,000
Supplies $1200 + 0.5 Q $ 5,200
Equipment Depreciation $ 20,000 + 2.5 Q $ 40,000
Factory Rent $ 7500 $ 7500
Property Taxes $ 3000 $ 3000
Factory Administration $ 12,000 + 1.5 Q $ 24,000
Total Expense $ 232,300
 2. Flexible Budget

Budget labor hours (Q) 8200

Direct Labor $ 15.8 Q $ 129,560
Indirect Labor $ 3200 + 1.5 Q $ 15,500
Utilities $ 5400 + 0.7 Q $ 11,140
Supplies $1200 + 0.5 Q $ 5,300
Equipment Depreciation $ 20,000 + 2.5 Q $ 40,500
Factory Rent $ 7500 $ 7500
Property Taxes $ 3000 $ 3000
Factory Administration $ 12,000 + 1.5 Q $ 24,300
Total Expense $ 236,800

3. Performance Report

Budget labor hours 8000 8200 Actual

(Q) Cost
Direct Labor $ 126,400 3160 U $ 129,560 5240 U $ 134,800
Indirect Labor $ 15,200 300 U $ 15,500 2100 U $ 17,600
Utilities $ 11,000 140 U $ 11,140 40 F $ 11,100
Supplies $ 5,200 100 U $ 5,300 300 F $ 5,000
Equipment $ 40,000 500 U $ 40,500 1800 U $ 42,300
Depreciation
Factory Rent $ 7500 0 $ 7500 500 U $ 8,000
Property Taxes $ 3000 0 $ 3000 200 F $ 2,800
Factory $ 24,000 300 U $ 24,300 700 U $ 25,000
Administration
Total Expense $ 232,300 4500 U $ 236,800 9800 U $ 246,600

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III.
1. Sales Budget

Year 2 Quarters Year

1 2 3 4
Budgeted Sales Unit 10000 11000 12100 13310 46410
Selling Price per unit $ 12 $ 12 $ 12 $ 12 $ 12
Total Sales $120,000 $132,000 $145,200 $159,720 $556920
 Bases on the budgeted sales above, the schedule of expected cash
collections is prepared as follow.

Year 2 Quarters Whole

1 2 3 4 Year
AR, Beginning Bal; $ 75,000 $ 75,000
1st Q sales x 75%, 25% $ 90,000 $ 30,000 $120,000
2ndQ sales x 75%, 25% $ 99,000 $ 33,000 $132,000
3rd Q sales x 75%, 25% $ 108,900 $ 36,300 $145,200
4th Q sales x 75% $ 119,790 $119,790
Total Cash collections $ 165,000 $129,000 $141,900 $156,090 $591,990

2. Production Budget is prepared as follow

Year 2 Quarters Whole Year 3

1 2 3 4 Year Q-1
Budgeted Unit Sales 10000 11000 12100 13310 46410 14641
Ending Finished Goods (+) 2200 2420 2662 2928 2928 3221
Total needs 12200 13420 14762 16238 49338 17862
Beg Finished Goods (-) 12000 2200 2420 2662 12000 2928
Required production 200 11220 12342 13576 37338 14934

3. Direct Material Budget and schedule of expected cash payment for

purchase of materials

Year 2 Quarters Whole Year 3

1 2 3 4 Year Q-1
Required production 200 11220 12342 13576 37338 14934
Raw material needs per unit (x) 5 5 5 5 5 5
Production needs 1000 56100 61710 67880 186690 74670
Ending Raw material (+) 5610 6171 6788 7467 7467
Total needs 6610 62271 68498 75347 194157
Beg Raw material (-) 24000 5610 6171 6788 24000
Raw material to be purchased 0 56661 62327 68559 170157
Based on the raw material to be purchased above, expected cash payment
are computed as follow

Year 2 Quarters Whole

1 2 3 4 Year
Raw material to be purchased 0 56661 62327 68559 170157
RM cost ($0.80 per foot) 0 $45,329 $49,862 $54,847 $150,038

AP Beginning Bal: $70,000 $70,000

1st Q purchase x 60%, 40% 0 0 0
2ndQ purchase x 60%, 40% $27,197 $18,132 $45,329
3rd Q purchase x 60%, 40% $29,917 $19,945 $49,862
4th Q purchase x 60% $32,908 $32908
Total Cash payable $70,000 $27,197 $48,049 $52,853 $198,099

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