# September 2023 Module 6 Budget Problem

2024 Country Cookin’ Inc. Assignment Help

Module 6 Budget Problem 2023

Module 6 – Budget Problem  Country  Cookin’ Inc. begins the budgeting  process for the following year in the 1st quarter of the current year. With the information provided below,  prepare the sales, production and direct materials budgets for the 1st  quarter of next year. Also determine  the budgeted manufacturing cost per unit and prepare the budgeted income  statement for January of next year.  Country  Cookin’ Inc. sells the cooker/smokers  they manufacture to various retailers for \$130 each. Each cooker/smoker requires 11 ounces of  raw material, which is purchased by Country Cookin’ Inc. for \$8.00 per  ounce. To prepare for next month’s  production, Country Cookin’ Inc. likes to maintain an ending stock of raw  material equal to 10% of the production requirements for the current month. The company would also like to maintain an  ending stock of finished cooker/smokers equal to 20% of next month’s  sales. Sales are projected to be  6,000 for January, 8,000 for February and 14,000 for March.  Your Company expects to  sell 12,000 cooker/smokers in April and needs 132,000 ounces of direct  materials for production.  15% of sales from  Country Cookin’ Inc. to retailers are cash sales, while the remaining 85% are  sold on account. Additional budgeted information includes:  Month  1st Quarter  Projections For Next Year January February March  Direct labor \$ 24,000  \$ 34,500  \$ 51,000  \$ 1,09,500 Manufacturing overhead:  Variable \$ 28,800  \$ 41,400  \$ 61,200  \$ 1,31,400 Fixed 1 \$ 41,000  \$ 41,000  \$ 41,000  \$ 1,23,000 Total operating expenses 2 \$ 71,000  \$ 74,000  \$ 95,000  \$ 2,40,000 Each cooker/smoker  requires 0.25 of an hour of direct labor at the rate of \$15.00 per hour.  Country Cookin’ Inc.  estimated at the beginning of the year that it would produce 307,500  cooker/smokers next year.  Interest expense is  budgeted at zero since the company has no outstanding debt.  Income tax expense is  budgeted at 35% of income before taxes.  Based on the above  information, the accountant has prepared the following budget for the first  quarter of the coming year.  1 Next year’s 1st quarter  sales budget for Country Cookin’ Inc.  Country  Cookin’ Inc.  Sales  Budget  For the  Quarter Ended March 31  Month 1st Quarter  January February March  Unit sales 6,000  8,000  14,000  28,000 Unit selling price \$130 \$130 \$130 \$130 Total sales revenue \$ 7,80,000  \$ 10,40,000  \$ 18,20,000  \$ 36,40,000 Type of Sale  Cash sales \$ 1,17,000  \$ 1,56,000  \$ 2,73,000  \$ 5,46,000 Credit sales 6,63,000  8,84,000  15,47,000  30,94,000 Total sales revenue \$ 7,80,000  \$ 10,40,000  \$ 18,20,000  \$ 36,40,000 2 Next year’s 1st quarter  production budget for Country Cookin’ Inc.  Country  Cookin’ Inc.  Production  Budget  For the  Quarter Ended March 31  Month 1st Quarter  January February March  Unit sales 6,000  8,000  14,000  28,000 Plus: Desired ending inventory 1,600  2,800  2,400  6,800 Total needed 7,600  10,800  16,400  34,800 Less: Beginning inventory 1,200  1,600  2,800  5,600 Units to produce 6,400  9,200  13,600  29,200 3 Next year’s 1st quarter  direct materials budget for Country  Cookin’.  Country  Cookin’ Inc.  Direct  Materials Budget  For the  Quarter Ended March 31  Month 1st Quarter  January February March  Units to be produced 6,400  9,200  13,600  29,200 x Ounces of direct materials needed per unit 11  11  11  11 Ounces needed for production 70,400  1,01,200  1,49,600  3,21,200 Plus: Desired ending inventory of direct materials 7,040  10,120  14,960  32,120 Total ounces needed 77,440  1,11,320  1,64,560  3,53,320 Less: Beginning inventory of direct materials 7,744  7,040  10,120  24,904 Ounces to purchase 69,696  1,04,280  1,54,440  3,28,416 x Cost per ounce \$8.00 \$8.00 \$8.00 \$8.00 Total cost of direct materials purchases \$ 5,57,568  \$ 8,34,240  \$ 12,35,520  \$ 26,27,328 4 Next year’s budgeted  manufacturing cost per unit for Country Cookin’ Inc.  Country  Cookin’ Inc.  Budgeted  Manufacturing Cost per Unit  January Direct materials \$88.00 Direct labor 3.75  Manufacturing overhead:  Variable 4.50  Fixed 1.60 hint: you must take into  account total annualized fixed costs in relation to total expected units for  the year  Cost of manufacturing each widget \$97.85 5 Next year’s budgeted  income statement for the month ended January 31 for Country Cookin’ Inc.  Country  Cookin’ Inc.  Budgeted  Income Statement  For the  month ended January 31  Sales Revenue \$ 7,80,000 Less: Cost of goods sold 5,87,100  Gross profit 1,92,900  Less: Operating expenses 71,000  Operating income \$1,21,900 Less: Interest expense 0  Less: Income tax expense 42,665  Net income \$79,235

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