Week 3 Written Assignment – Problems and Exercises

 Week 3 Written Assignment – Problems and Exercises in $21 only

Please complete the following exercises using the templates below:

Chapter 5:Page 195 – Problem 9: Breakeven Analysis and Planning Future Sales

Excel Template

Chapter 6:Pages 232 and 233 – Problem 2: Preparing a Comprehensive Budget

Excel Template

P9. Bar Company has a maximum capacity of 500,000 units per year. Variable manufacturing costs are $25 per unit. Fixed overhead is $900,000 per year. Variable selling and administrative costs are $5 per unit, and fixed selling and administrative costs are $300,000 per year. The current sales price is $36 per unit.

Required

1. What is the breakeven point in

(a) Sales units

(b) Sales dollars?

2. How many units must Bar Company sell to earn a profit of $600,000 per year?
3. A strike at one of the company’s major suppliers has caused a shortage of materials, so the current year’s production and sales are limited to 400,000 units. To partially offset the effect of the reduced sales on profit, management is planning to reduce fixed costs to $1,000,000. Variable cost per unit is the same as last year. The company has already sold 30,000 units at the regular selling price of $36 per unit.

a. What amount of fixed costs was covered by the total contribution margin of the first 30,000 units sold?
b. What contribution margin per unit will be needed on the remaining 370,000 units to cover the remaining fixed costs and to earn a profit of $290,000 this year?

Bathworks produces hair and bath products. Bathworks’ owner would like to have an estimate of the company’s net income in the coming year.

Required
Project Bathworks’s net income next year by completing the operating budgets and budgeted income statement that follows. Assume that the selling price will remain constant.

1. Sales budget:

Bathworks

Sales Budget

For the year Ended December 31

Quarter
1234Year
Sales in units4,0003,0005,0005,00017,000
SELLING price per unitX$5X?X?X?X?
Total sales$24,000????

2. Production budget:

Bathworks

Production Budget

For the year Ended December 31

Quarter
1234year
Sales in units4,000????
Plus desired units of ending finished goods inventory300??600600
Desired total units4,300????
Less desired units of beginning

Finished goods inventory b

????400
Total products units3,900????

a. Desired units of ending finished goods inventory 5 10% of next quarter’s budgeted sales.
b. Desired units of beginning finished goods inventory 5 10% of current quarterâ’s budgeted sales.

3. Direct materials purchases budget:

Bathworks

Direct Materials Purchases Budget

For the year Ended December 31

quarter
1234Year
Total production units3,9003,2005,0005,10017,200
Ounces per unitX4X4X4X4X4
Total production needs in ounces15,600????
Plus desired ounces of ending direct materials inventory 12,560??3,6003,600
18,160????
Less desired ounces of beginning
Direct materials inventory3,120???3,120
Total ounces of direct materials to be purchased15,040????
Cost per ounceX$0.10X?X?X?X?
Total cost of direct materials purchases$1,504????

a. Desired ounces of ending direct materials inventor = 20% of next quarter’s budgeted production needs in ounces.

b. Desired ounces of beginning direct materials inventory = 20% of current quarte’s budgeted production needs in ounces.

4. Direct labor budget:

Bathworks

Direct labor Budget

For the year Ended December 31

Quarter
1234Year
Total production units3,900????
Direct labor hours per unitX0.10X?X?X?X?
Total direct labor hours390????
Direct labor cost per hourX$20X?X?X?X?
Total direct labor cost$7,8,00????

5. Overhead budget:

Bathworkds

Overhead Budget

For the Year Ended December 31

Quarter
1234year
Variable costs:
Factory supplies($0.05)$195$?$?$?$?
Employee benefits ($0.25)975????
Inspection($0.10)390????
Maintenance and repairs($0.15)585????
Utilities($0.05)195????
Total variable overhead costs$2,340$?$?$?$?
Total fixed overhead costs4,300????
Toal overhead costs$6,640$?$?$?$?

6. Selling and administrative expenses budget:

Bathworks

Selling and administrative Expenses Budget

For the year Ended December 31

Quarter
1234Year
Variable selling and administrative expenses:
Delivery expenses(0.10)$400$?$?$?$?
Sales commission($0.15)600????
Accounting ($0.05)200????
Other administrative espenses($0.20)800????
Total variable selling and administrative expenses$2,000$?$?$?$?
Total fixed selling and administrative expenses5,000????
Total selling and administrative expenses$7,000$?$?$?$?

7. Cost of goods manufactured budget: 31

Bathworks
Cost of Goods Manufactured Budget
For the Year Ended December
Direct materials used:
Direct materials inventory, beginning$?
Purchases?
Cost of direct materials availale for use$?
Less direct materials inventory, ending?
Cost of direct materials used$?
Direct labor costs?
Overhead costs?
Total manufacturing costs$?
Work in process inventory, beginning?
Less work in process inventory, ening?
Cost of goods manufactured$?
Units produced?
Manufactured cost per unit$?

8. Budgeted income statement:

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