Cours Project B

8/4/2019 Cours Project B

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Marina MorganFantastic, Inc

Historical Information

Sales in Gallons

Year Super Stupendous

2001 411,000 none2002 412,000 none

2003 405,000 186,2502004 430,000 223,500

2005 420,000 268,200

Projected Selling Price for 2006 per gallon

Super Stupendous

$10.30 $15.45

Inventory and material information

Beginning Inventory

Desired

Ending

Inventory

Cans 56,550 cans 61,700 cans

PigmentSuper 63,300 lbs 70,000Stp'dous 49,700 53,750 lbs

Finished Good InvSuper 31,700 gal 35,000 galStp'dous 24,850 gal 27,000 gal

2005 PricesCans $0.40

Super pigment $2.75 per poundStupendous pigment $3.75 per pound

Expected 2006 prices:Cans $0.02 increase over 2005 pricesSuper pigment $0.14 increase over 2005 prices

Stupendous pigment $0.19 increase over 2005 prices

Usage Standards

Marina Morgan


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Super 2 pounds per gallon

Stupendous 2 pounds per gallon

Direct Labor and machine hour information information

2005 labor rate - both departments $8.25 per hour

Expected 2006 rate increase $0.25 Per hour rate increase over 2005

Production standards and informationSuper Stp'dous

Machine hours/gallon 0.12 hours 0.12 hours

Labor hours per machine hr. 1.25 hours 1.25 hours2005 machines available 26 20Annual capacity per machine 15,000 gal 15,000 gal

Machine hours per machine 1,800 hours 1,800 hoursMaximum annual hours per employee 2,000 hours 2,000 hours

Employees per supervisor 8 8

Overhead information

2005 information

Variable FixedIndirect materials $0.20 per gal

Indirect labor rate-annual $50,000 per supervisorEmployee fringe benefits 20% of wagesHealth benefits per employee $1,500 per employee

Utilities $0.40 per MhrMaintenance $0.20 per Mhr $10,000 annually*

Insurance $50,000 annually*Property taxes $10,000 annually*Supplies $5,000 annually*

Depreciation - mfg $250,000 annually**

* These items are allocated to dpts based upon production levels in gallons**The 2005 alloction ws $141,300 for Super and $108,700 to Stupendous

It is expected that the following changes will occur in 2006:

Variable Fixed

Marina Morgan


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Indirect materials no change

Indirect labor rate-annual 2.50% increase per employeeEmployee fringe benefits no changeHealth benefits per employee $200 increase per employee

Utilities no changeMaintenance $0.05 inc.per Mhr $500 annual increase*

Insurance $500 annual increase*Property taxes 8% annual increase*

Supplies $200 annual increase*Depreciation - mfg 2005 equip no changeDepreciation- new purchases Five year life**

* These items are allocated to dpts based upon production levels in gallons

**The 2005 alloction ws $141,300 for Super and $108,700 to Stupendour

2005 depreciation Super Stupendous

$141,300 $108,700

Cash Increase DebtPurchases for each new piece of equipment $5,000 $25,000

Selling department information

2005 information

Variable Fixed

Commissions $0.35 per can

Salaries $15,000 per representativeFringe benefits 20% commissions 20% salaries

Health benefits $1,500 per representative

Advertising $10

per 100 cans

sold

Meals&entertainment $50 per week per representativeDepreciation $7,500


Variable Fixed

Commissions no change

Marina Morgan


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Salaries No change

Fringe benefits no change no change salariesHealth benefits $200 increase per representative

Advertising $12

per 100 canssold

Meals&entertainment $60 per week per representative

Depreciation no change

It is expected number of sales reps Employees during 2006 10

Administrative Department Information

2005 information

Variable Fixed

Salaries $250,000 annualFringe benefits 20% wages

Health benefits $1,500 per employeeProfessional fees $20,000 annually

Office supplies $0.03 per gal soldTelephone $0.02 per gal sold

Depreciation $6,000 annually


Variable Fixed

Salaries 3% annual increaseFringe benefits no change

Health benefits $200 increase per employeeProfessional fees $1,500 annual increase

Office supplies $0.01 inc per gal soldTelephone $0.0025 inc per gal sold

Depreciation no change

It is expected number of admin. Employees during 2006 9

It is expected that interest rates will be 7.50%

2005 Balance sheet

Cash 150,000

Marina Morgan


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Fantastic, Inc.

Sales Volume Projection

Sales in Gallons

Year Super

2001 411,000 Stupendous2002 412,000 none2003 405,000 none2004 430,000 186,2502005 420,000 223,500

268,200

Super Paint Volume Projection using Exponential Smoothing

Year

Actual Sales

in Gallons Weight

Weighted

Sales

a es

Volume

Projection

for 2006

2001 411,000 1 411,0002002 412,000 2 824,0002003 405,000 3 1,215,0002004 430,000 4 1,720,0002005 420,000 5 2,100,000

Totals 6,270,000 418,000

15 6270000Stependous Paint Volume Projection using Growth Function

Known x's Known y'sYear Stupendous

2003 186,250 New x2004 223,500 Year2005 268,200 2006

Projection of Stupendous 2006 sales volume

321,840


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Fantastic Inc.

Sales Budget

For the Year Ended December 31, 2006

Super Paint

Stupendous

Paint Total

Projected Sales Volume 418,000 321,840 739,840

Selling Price $10.30 $15.45

Projected Sales $4,305,400 $4,972,428 $9,277,828


8/21

Fantastic Inc.

Production Budget


Super Paint

Stupendous

Paint Total

Projected Sales Volume 418,000 321,840 739,840Desired Ending Inventory 35,000 27,000 62,000

Units Needed 453,000 348,840 801,840Beginning Inventory 31,700 24,850 56,550

Projected Production 421,300 323,990 745,290


9/21

Fantastic Inc.

Direct Materials Budget


Super Paint

Stupendous

Paint Total

Cans (Units)

Projected Production-gallons xxxxxxxxxxx xxxxxxxxxxx 745,290 Cans 25,914.00Desired ending inventory xxxxxxxxxxx xxxxxxxxxxx 61,700 Super Pigment 202,300.00Stupendous 211,775.00

Units needed xxxxxxxxxxx xxxxxxxxxxx 806,990 Total 439,989.00Beginning inventory(gal) xxxxxxxxxxx xxxxxxxxxxx 56,550

Purchases needed xxxxxxxxxxx xxxxxxxxxxx 750,440Cost per unit xxxxxxxxxxx xxxxxxxxxxx $0.42

Cost of can purchases xxxxxxxxxxx xxxxxxxxxxx $315,185

Pigments (pounds)Projected Production-gallons 421,300 323,990Pounds per gallon 2 2

Pound needed for production 842,600 647,980

Desired ending inventory 70,000 53,750

Pounds needed 912,600 701,730Beginning inventory 63,300 49,700

Purchases needed in pounds 849,300 652,030Cost per pound $2.89 $3.94

Cost of pigments $2,454,477 $2,568,998 $5,023,475

xxxxxxxxx xxxxxxxxx $5,338,660


10/21

Fantastic Inc.

Direct Labor Budget


Super Paint

Stupendous

Paint TotalProjected employees needed

Projected production 421,300 323,990

Machine hours needed per gallon 0.12 0.12

Machine hours needed 50,556 38,879

Labor hours per machine hours 1.25 1.25

Labor hours needed 63,195 48,599 Please use ROUND function here

Maximum hours per employee 2,000 2,000

Projected employees needed 32 25 57 Watch for rounding here!!

Please be sure this is a whole number

Projected Labor costs Remember to round up!

Labor hours needed (from above) 63,195 48,599 Suggestion - use ROUNDUP function.

Predicted labor rate $8.50 $8.50

Labor dollars needed 537,158 413,092 950,250 This is the total wage figure for cash pa

Direct labor fringe benefits 107,432 82,618 190,050 This is an "other expense"

Direct labor health benefit 54,400 42,500 96,900 This is an "other expense"

Total Direct labor costs $698,989 $538,210 $1,237,199


11/21

Fantastic Inc.

Manufacturing Overhead Budget


Super Paint

Stupendous

Paint Total

Number of supervisorsDirect labor employees needed 32 25Direct labor employees/supervisor 8 8

Supervisors needed 4 4 8 Watch for whole number here!

Use round up functionManufacturing OverheadVariable overhead

Indirect materials $84,260 $64,798 $149,058Utilitities 20,222 15,552 35,774Variable maintenance 12,639 9,720 22,359

Total variable overhead 117,121 90,069 207,191

Fixed OverheadSupervisor salaries 205,000 205,000 410,000Supervisor fringe benefits 41,000 41,000 82,000Supervisor health insurance 6,800 6,800 13,600Fixed maintenance 5,952 4,548 10,500Insurance 28,625 21,875 50,500Property taxes 6,122 4,678 10,800Supplies 2,947 2,253 5,200Depreciation - manufacturing 159,300 120,700 280,000 Remember to depreciation old and new e

Total fixed overhead 455,746 406,854 862,600

Total manufacturing overhead $572,867 $496,923 $1,069,791


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nt


13/21

Fantastic Inc.

Capital Expenditures Budget


Super Paint

Stupendous

Paint Total

Machine hours needed 50,556 38,879Machine hours per machine 1,800 1,800

Number of machine needed* 29 22 51 Remember to round up to a whole machine!!Machines Jan 1, 2006 26 20

Machine purchases needed($30,000 per machine) 3 2Cost per machine $30,000 $30,000 $30,000

Total cost of desired purchases $90,000 $60,000 $150,000

Cash outlay for purchases $15,000 $10,000 $25,000Increase in debt for purchases $75,000 $50,000 $125,000

* Remember to round up! For example:If you calculation determines that you will need 30.1 machines, you will have to purchase 31 machines.


14/21

Fantastic Inc.

Budgeted Cost of Goods Manufactured


Direct MaterialsBeginning Direct Materials Inventory $383,037 Remember to look at the Beginning Balance SheetMaterial Purchases 5,338,660

Direct materials available for use 5,721,697Ending Direct Materials Inventory 439,989

Total Raw Materials Used 5,281,708

Direct Labor 1,237,199Overhead 1,069,791

Cost of Goods Manufactured. $7,588,698

Units costs for products

Super Stupendous Total

Cost of materials per unit $6.20 $8.30 Remember the cost of the cans

Unit cost for Direct labor 1.66 1.66Unit Cost for overhead 1.36 1.53

Total unit cost for 2006 production 9.22 11.50Units in finished goods inventory 35,000 27,000

Value of finished goods inventory $322,661 $310,500 $633,161 Use this figure on the ending balance s


15/21

Fantastic Inc.

Selling Department Budget


Fixed Variable Total

Commissions $258,944 $258,944Salaries $150,000 150,000Selling fringe benefits 30,000 51,789 81,789Selling health benefits 17,000 17,000Advertising 88,781 88,781Meals & Entertainment 31,200 31,200Depreciation 7,500 7,500

Totals $235,700 $399,514 $635,000


16/21

Fantastic Inc.

Administrative Budget


Fixed Variable Total

Salaries $257,500 $257,500Administrative fringe benefits 51,500 51,500Administrative health benefits 15,300 15,300Professional fees 21,500 21,500Office supplies $29,594 29,594Telephone 12,947 12,947Depreciation 6,000 6,000

Total administative costs $351,800 $42,541 $394,341


17/21

Fantastic Inc.

Budgeted Income Statement (Absorption)


Sales $9,277,828

Cost of Sales

Beginning finished goods inventory $551,835 Remember to look at the beginning balance sheetCost of goods manufactured 7,588,698

Good available for sale 8,140,533Ending inventory 633,161 Remember to look at COGMfg statement

Cost of goods sold 7,507,372

Gross margin 1,770,456

Selling expenses 635,000Administrative expenses 394,341

Total selling and admin. Expenses 1,029,340

Operating Income 741,116Interest expense 93,750

Income before tax 647,366Income tax (40% rate) 258,946

Net income $388,419


18/21

Fantastic Inc.

Cash Budget


Increase in

Cash

Decrease in

Cash Total

Cash receipts $9,138,388Cash payments for materials $5,276,788Wages and commissions paid 2,224,663

Other expenses paid 820,765Interest paid on long-term debt 93,750Income taxes paid 258,946Cash paid for new fixed assets 25,000

Long-term debt repayment 255,000Dividend paid 200,000

Total increases and decreases 9,138,388 9,154,912 -16,524Prior year cash xxxxxxxxxx xxxxxxxxxx 150,000

Cash balance December 31, 2006 xxxxxxxxxx xxxxxxxxxx $133,476 Use this balance on the balance sheet


19/21

Fantastic Inc.

Balance Sheet

December 31, 2006

AssetsCash $133,476

Accounts receivable 966,440Inventory - raw materials 439,989 Remember to look at the COGMfgInventory - finished goods 633,161 Remember to look at the COGMfgPlant and equipment 1,925,000Less accumulated depreciation (895,000)

Total Assets $3,203,066

LiabilitiesAccounts payable $444,888Accrued wages 93,416 Be sure NOT to include employee benefitsAccrued other 67,880 Do not include non-cash expenses but remember employeeLong-term debt 995,000

Total liabilities $1,601,184

Stockholders' equityCommon stock 400,000Additional paid-in capital 495,000Retained earnings 707,095

Total stockholders' equity 1,602,095

Total liabilities and stockholders' equity $3,203,280


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rease.

Cours Project B

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