The justonemore company produces and sells organic plain potato chips. the one-pound family size bag of chips has two direct materials – potatoes and packaging. justonemore is preparing budgets for the second quarter ending june 30, 2019. for each requirement below prepare budgets by month for april, may, and june, and a total budget for the quarter.
the previous year’s sales (2018) for the corresponding period were:
april 60,000 bags
may 70,000 bags
june 85,000 bags
july 75,000 bags
august 65,000 bags
the company expects the above volume of sales to increase by 6% for the period april 2019 – august 2019. the budgeted selling price for 2019 is $11.00 per bag of chips. the company expects 20% of its sales to be cash (cod) sales. the remaining 80% of sales will be made on credit. prepare a sales budget for justonemore.
the company desires to have finished goods inventory on hand at the end of each month equal to 12 percent of the following month's budgeted unit sales. on march 31, 2019, justonemore expects to have 7,632 bags of chips on hand. prepare a production budget.
the final product (bags of chips) requires two direct materials: potatoes and packaging. 4 pounds of raw potatoes are required for each one-pound bag of potato chips. management desires to have materials on hand (i. e., pounds of potatoes) at the end of each month equal to 25 percent of the following month's production needs. the beginning materials inventory, april 2019, is expected to be 66,504 pounds. potatoes cost $1.10 per pound.
packaging material is purchased by the roll and 50 bags of chips are produced from each roll. the packaging is made from biodegradable, organic plant fiber that extends the shelf life of the potato chips while preserving its freshness. management desires to have packaging on hand at the end of each month equal to 15 percent of the following month's production needs. the beginning inventory of packaging (i. e., rolls of packaging material) in april 2019 is expected to be 200 rolls. packaging is expected to cost $13 per roll.
note, budgeted production in july is required in order to complete the direct materials budget for june. also, use the @roundup function to round up to the nearest whole number of pounds of potatoes and number of rolls of packaging material to purchase. further, because two direct materials are required for production – potatoes and rolls of packaging - you will need a separate schedule for each direct material. prepare a direct materials budget.
each bag of chips requires 0.15 hours of direct labor. each hour of direct labor costs the company $21. prepare a direct labor budget.
justonemore budgets indirect materials (e. g., salt, oil) at $0.04 per bag. justonemore treats indirect labor and utilities as mixed costs. the variable components are $0.45 per bag for indirect labor and $0.15 per bag for utilities. the following fixed costs per month are budgeted for indirect labor, $20,000, utilities, $3,000, and other, $10,000. prepare a manufacturing overhead budget.
variable selling and administrative expenses are $1.05 per bag of chips sold. fixed selling and administrative expenses are $40,000 per month. these costs are not itemized, i. e., the budget has only two line items – variable operating expenses and fixed operating expenses. prepare an operating expenses budget.
prepare a budgeted manufacturing cost per unit budget. refer to exhibit 9-11 for guidance. to calculate fmoh/unit calculate total fmoh for the year and divide this by budgeted production for the year. the total production volume for the year is budgeted at 850,000 bags.
prepare a budgeted income statement for the quarter for justonemore. assume interest expense of $0, and income tax expense of 21% of income before taxes.