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CH 06 Illustration

The document provides information to prepare operating and cash budgets for Animal Gear Company for April. It includes details on the products made, direct materials used, production units, costs of goods sold, manufacturing and non-manufacturing expenses. It also provides additional information needed for the cash budget, such as cash from sales, material and expense payment terms, planned capital expenditures, existing loan and tax obligations. The budgets will forecast revenues, production needs, inventory levels, costs, income and ending cash for the month.

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59 views2 pages

CH 06 Illustration

The document provides information to prepare operating and cash budgets for Animal Gear Company for April. It includes details on the products made, direct materials used, production units, costs of goods sold, manufacturing and non-manufacturing expenses. It also provides additional information needed for the cash budget, such as cash from sales, material and expense payment terms, planned capital expenditures, existing loan and tax obligations. The budgets will forecast revenues, production needs, inventory levels, costs, income and ending cash for the month.

Uploaded by

lauhouian20
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Operating budget.

Animal Gear Company makes two pet carriers, the Cat-allac and the Dog-eriffic. They are both
made of plastic with metal doors, but the Cat-allac is smaller. Information for the two products for
the month of April is given in the following tables:

Animal Gear accounts for direct materials using a FIFO cost-flow assumption.

Animal Gear uses a FIFO cost-flow assumption for finished-goods inventory.

Animal Gear uses an activity-based costing system and classifies overhead into three activity
pools: Setup, Processing, and Inspection. Activity rates for these activities are $105 per setup-hour,
$10 per -machine-hour, and $15 per inspection-hour, respectively. Other information follows:

If necessary, round up to calculate number of batches.


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Nonmanufacturing fixed costs for March equal $32,000, half of which are salaries. Salaries are
expected to increase 5% in April. Other nonmanufacturing fixed costs will remain the same. The
only variable nonmanufacturing cost is sales commission, equal to 1% of sales revenue.

1. Revenues budget
2. Production budget in units
3. Direct material usage budget and direct material purchases budget
4. Direct manufacturing labor cost budget
5. Manufacturing overhead cost budgets for each of the three activities
6. Budgeted unit cost of ending finished-goods inventory and ending inventories budget
7 Cost of goods sold budget
8. Nonmanufacturing costs budget
9. Budgeted income statement (ignore income taxes)

Cash budget.
Assume the following: Animal Gear (AG) does not make any sales on credit. AG sells only to the
public and accepts cash and credit cards; 90% of its sales are to customers using credit cards, for
which AG gets the cash right away, less a 2% transaction fee.
Purchases of materials are on account. AG pays for half the purchases in the period of the purchase
and the other half in the following period. At the end of March, AG owes suppliers $8,000.
AG plans to replace a machine in April at a net cash cost of $13,000.
Labor, other manufacturing costs, and nonmanufacturing costs are paid in cash in the month
incurred except of course depreciation, which is not a cash flow. Depreciation is $25,000 of the
manufacturing cost and $10,000 of the nonmanufacturing cost for April.
AG currently has a $2,000 loan at an annual interest rate of 12%. The interest is paid at the end of
each month. If AG has more than $7,000 cash at the end of April it will pay back the loan. AG
owes $5,000 in income taxes that need to be remitted in April. AG has cash of $5,900 on hand at
the end of March.

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