This paper circulates around the core theme of Compehensive budgeting problem: activity based costing, operating and financial budgets. Borkenstick makes a very popular undyed cloth sandal in one style, but in Regular and Deluxe. The Regular sandals have such soles and the Deluxe sandals have cloth co together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
Compehensive budgeting problem: activity based costing, operating and financial budgets.
Borkenstick
makes a very popular undyed cloth sandal in one style, but in Regular
and Deluxe. The Regular sandals have such soles and the
Deluxe
sandals have cloth covered wooden soles. Borkenstick is preparing its
budget for June 2012 , and has estimated sales based on past
experience.
OTHER INFORMATION FOR THE MONTH OF JUNE FOLLOWS:
Input Prices
Direct Materials
Cloth $3.50 per Yard
Wood $5.00 per board foot
Direct Manufacturing labor $10 per direct manufacturing labor- hour
INPUT QUANTITIES PER UNIT OF OUTPUT(PER PAIR OF SANDALS)
Direct Materials REGULAR DELUXE
Cloth 1.3 Yards 1.5 Yards
Wood 0 2 b.f
Direct manufacturing labor-hours (DMLH) 5 hours 7 hours
Setup-hours per batch 2 hours 3 hours
Inventory Information, Direct Materials Cloth Wood
Beginning Inventory 610 Yards 800 b.f.
Target ending inventory 386 yards 295 b.f
Cost of beginning inventory $2,146 $4,040
Borkenstick accounts for direct materials using a FIFO cost flow assumption.
Sales and Inventory Information, Finished Goods REGULAR DELUXE
Expected sales in units (pairs of sandals) 2000 3000
Selling Price $80 $130
Target ending inventory in units 400 600
Beginning inventory in units 250 650
Beginning inventory in dollars $15,500 $61,750
Borkenstick uses a FIFO cost flow assumption for finished goods inventory.
All
the sandals are made in bathces of 50 pairs of sandals. Borenstick
incurs manufacturing overhead costs, marketing and general admin, and
shipping costs.
Besides materials and labor, manufacturing costs
include setup, processing, and inspection costs. Borkenstick ships 40
pairs of sandals per shipment. Borkenstick uses
activity-based costing and has classified al overhead costs for the month of June as shown in the following chart.
COST TYPE Denominator Activity Rate
Maufacturing
Setup Setup hours $12 per setup-hours
Processing Direct manufacturing labor-hours $1.20 per DMLH
Inspection Number of pairs of sandals $0.90 per pair
Nonmanufacturing:
Marketing and general administration Sales revenue 8%
Shipping Number of shipments $10 per shipment
****Instructions:
2. Borkenstick’s balance sheet for May 31 follows. Use it and the
following information to prepare a cash budget for Borkenstick for June.
Round to dollars.
*All sales are on account; 60% are collected in
the month of the sale, 38% are collected the following month, and 2% are
never collected and written off as bad debt.
*All purchases of materials are on account. Borkenstick pays for 80%
of purchases in the month of purchase and 20% in the following month.
*All other costs are paid in the month incurred, including the declaration and payment of a $10,000 cash dividend in June.
*Borkenstick is making monthly interest payments of 0.5% (6% per year) on a $100,000 long term loan.
*Borkenstick plans to pay the $7200 pf taxes pwed as pf May 31 in the month of June. Income tax expense for June is zero
*30% of processing and setup costs, and 10% of marketing and general administration costs are depreciation
Borkenstick Balance Sheet as of May 31
ASSETS Liabilities and Equity
Cash $6,290 Account payable $10,400
Account receivable $216,000 Taxes payable 7,200
Less: Allowance for bad debts 10,800 205,200 Interest payable 500
Inventories Long-termdebt 100,000
Direct Materials 6,186 Common Stock 200,000
Finished Goods 77,250 Retained earnings 465,936
Fixed Assets $580,000 Total liabilities and equity $784,036
Less: Accumulated depreciation 90,890 489,110
Total Assets $784,036
