Managerial Accounting Assignment
We Gnomes Things Co. produces garden gnomes. Using the information provided on this sheet, prepare WGT's budget for the year 2016
Team Project Guidelines:
1. The project is due the Beginning of CLASS on November 17th
2. Email ONE copy of your Excel Spreadsheet prior to class. Make sure everyone's name is on it!
3. Grading scheme:
- Peer evaluation
- Business evaluation - Question 11
- Correct calculations and schedules (all but question 11)
4. Use the template provided to create the following:
Schedule 1: Sales Budget
Schedule 2: Cash receipts
Schedule 3: Production Budget in Units
Schedule 4: Direct Materials Purchases
Schedule 5: Cash Purchases Budget
Schedule 6: Direct Labor Budget
Schedule 7: Overhead Budget
Schedule 8: Selling and Administrative Expense Budget
Schedule 9: Ending Finished goods
Schedule 10: Budgeted cost of goods sold
Schedule 11: Cash Budget
Schedule 12: Budgeted Income Statement
Schedule 13: Budgeted Statement of Retained Earnings
Schedule 14: Budgeted Balance Sheet
WGT Balance Sheet
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01-01-2016
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Cash
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$ 22,000
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Accounts Receivable
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12,000
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Inventory Raw Materials
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350
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FG Inventory
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4,950
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Land
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8,000
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Buildings and Equip
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70,000
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Accum Depr
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(29,200)
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Total Assets
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$ 88,100
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Accounts Payable
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$ 2,580
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Capital Stock
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17,500
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RE
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68,020
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Total Liab and Stockholders
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$ 88,100
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Use the following to complete the team project:
1. The marketing department projects the following sales levels:
Quarter 1, 2016 8,700 Gnomes
Quarter 2, 2016 9,800 Gnomes
Quarter 3, 2016 4,200 Gnomes
Quarter 4, 2016 3,800 Gnomes
Quarter 1, 2017 4,600 Gnomes
Quarter 2, 2017 2,800 Gnomes
The statues are expected to sell for $45.00 EACH
1. WGT sell all merchandise on credit. Historically, WGT receives 50% of each quarter's sales during the quarter and 50% in the next quarter.
2. WGT plans to stock the ending inventory of finished goods to equal 45% of the next quarter's sales. Finished Goods inventory at 01-01-2016 is 300 statues at a cost of $16.5 per unit.
3. The statues are made with both cement and plaster. The statues each require 8.00 pounds of cement at a cost of $0.70 per pound.
In addition, the statues require 7 pounds of plaster at $0.60 per pound. At 12-31-2015 WGT had 500 pounds of cement on hand and no plaster on hand. WGT plans to keep 60% of the cement and 60% of the plaster required required for next quarter's production in inventory at the end of each quarter.
WGT pays for purchases as follows: 50% in the quarter purchased and 50% in the quarter following the purchase.
4. Each of the statue requires 0.7 hrs of direct labor at $7.25 per hour. Employees are paid on the last day of each month for that month's work. Other costs are paid in the quarter unless otherwise noted.
5. Variable overhead is estimated at $3.00 per direct labor hour. Fixed overhead costs are $40,000 per year. Fixed overhead includes depreciation of $8,000 per year.
6. Variable selling and administrative costs are $4.50 per unit. Fixed selling and administrative costs are $30,000 per year. (This includes $7,500 of depreciation per year)
7. WGT makes quarterly income tax payments of $8,000 The coprorate income tax rate is ### of net before taxes (consider underpayments on your balance sheet).
8. WGT pays quarterly dividends of $5,000 .
9. WGT will purchase additional equipment using cash on the following schedule (depreciation is already included above):
Quarter 1 $ 4,800
Quarter 2 $ 3,500
Quarter 3 $ -
Quarter 4 $ -
10. WGT has to maintain a minimum cash balance of $10,000 All borrowings are made at the end of the quarter and paid back at the end of the first quarter where there is a cash surplus to make the debt payments.
All borrowings and repayments are made in $1,000 increments. Interest is paid at the time of repayment and is calculated at 3.00% per year (no Compounding).
11. In addition to completing the budget, write a one to two page(s) executive summary as though you are the CFO and you are informing the CEO of the following informaton:
• What projections were made in creating the budget?
• Were these projections reasonable given the current economic environment and the industry in which WGT Co. operates
• What might occur if your projections are incorrect (some financial figures are helpful here, but not a full budget)
We note that actual dollar values for WGT Co. do not reflect current market values or conditions. Ignore the dollar values and discuss in general, the economic and industry trends for the industry WGT Co.