Accounting ACCT 221 project help

  

ACCT 221 group project.xls
acct_221_group_project.xls

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I-21.02
Storm Tools has formed a new business unit to produce battery-powered drills. The business unit
was formed by the transfer of selected assets and obligations from the parent company. The
unit’s initial balance sheet on January 1 contained cash ($500,000), plant and equipment
($2,500,000), notes payable to the parent ($1,000,000), and residual equity ($2,000,000).
The business unit is expected to repay the note at $50,000 per month, plus all accrued interest at
1/2% per month. Payments are made on the last day of each month.
The unit is scheduled to produce 25,000 drills during January, with an increase of 2,500 units per
month for the next three months. Each drill requires $40 of raw materials. Raw materials are
purchased on account, and paid in the month following the month of purchase. The plant
manager has established a goal to end each month with raw materials on hand, sufficient to meet
25% of the following month’s planned production.
The unit expects to sell 20,000 drills in January; 25,000 in February, 25,000 in March, and 30,000
per month thereafter. The selling price is $100 per drill. Half of the drills will be sold for cash
through a website. The others will be sold to retailers on account, who pay 40% in the month of
purchase, and 60% in the following month. Uncollectible accounts are not material.
Each drill requires 20 minutes of direct labor to assemble. Labor rates are $24 per hour. Variable
factory overhead is applied at $9 per direct labor hour. The fixed factory overhead is $25,000 per
month; 60% of this amount is related to depreciation of plant and equipment. With the exception
of depreciation, all overhead is funded as incurred.
Selling, general, and administrative costs are funded in cash as incurred, and consist of fixed
components (salaries, $100,000; office, $40,000; and advertising, $75,000) and variable
components (15% of sales).
Prepare a monthly comprehensive budget plan for Storm’s new business unit for January through
March. The plan should include the (a) sales and cash collections budget, (b) production budget,
(c) direct materials purchases and payments budget, (d) direct labor budget, (e) factory overhead
budget, (f) ending finished goods budget (assume total factory overhead is applied to production
at the rate of $11.73 per direct labor hour), (g) SG&A budget, and (h) cash budget.
Name:
Date:
I-21.02
Section:
STORM TOOLS
Sales Budget
For the Three Months January to March
January
February
March
Expected Cash Collections From Sales
STORM TOOLS
Production Budget
For the Three Months January to March
January
February
March
Name:
Date:
I-21.02
Section:
STORM TOOLS
Direct Materials Budget
For the Three Months January to March
January
February
March
Expected Cash Payments for Materials Purchases
STORM TOOLS
Direct Labor Budget
For the Three Months January to March
January
February
March
Name:
Date:
I-21.02
Section:
STORM TOOLS
Factory Overhead Budget
For the Three Months January to March
January
February
March
Per Unit Cost
Per Unit Total
STORM TOOLS
Ending Finished Goods Inventory
31-Mar
Units
STORM TOOLS
Selling, General, and Administrative Budget
For the Three Months January to March
Name:
Date:
I-21.02
Section:
January
February
March
STORM TOOLS
Cash Budget
For the Three Months January to March
January
Beginning cash balance
Plus: Customer receipts
Available cash
Less disbursements:
Direct materials
Direct labor
Factory overhead
SG&A
Total disbursements
Cash surplus/(deficit)
Financing:
Planned repayment
Interest on note (1/2% of unpaid balance)
Ending cash balance
February
March

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