payalmistry
Jan 19, 2011, 09:20 PM
Pet Animal Lovers (PAL) makes two elite pet carriers, Alley_Cat and Top_Dog. They are both made of
plastic but have metal doors. The Alley_Cat carrier is smaller than the Top_Dog carrier. Information about
the two products for the month of September is given below:
Input Prices
Direct materials
Plastic $4 per kilogram
Metal $3 per kilogram
Direct manufacturing labour $10 per direct
manufacturing
labour hour
Input quantities per unit of
output
Alley_Cat Top_Dog
Direct materials
Plastic 4 kilograms 6 kilograms
Metal 0.5 kilograms 1 kilogram
Direct manufacturing labourhours
(DMLH)
3 hours 5 hours
Machine–hours (MH) 10 MH 18 MH
Inventory information, direct
materials
Plastic Metal
Beginning inventory 250 kilograms 60 kilograms
Target ending inventory 380 kilograms 55 kilograms
Cost of beginning inventory $950 $180
Sales and inventory
information, finished goods
Alley_Cat Top_Dog
Expected sales in units 500 300
Selling price $160 $250
Target ending inventory in units 35 15
Course Profile for: ACCT19060, 2010 Term Three - Page 8
Beginning inventory in units 15 30
Beginning inventory in dollars $1,500 $5,580
PAL uses a FIFO cost flow assumption for finished goods inventory. It uses an activity based costing system
and classifies overheads into three activities - Set Up, Processing and Inspection. Activity rates for these
activities are $100 per set up hour, $5 per machine hour and $16 per inspection hour respectively. Other
information is as follows:
Cost driver information Alley_Cat Top_Dog
Number of units per batch 20 15
Set Up time per batch 1.5 hours 1.75 hours
Inspection time per batch 0.5 hours 0.6 hours
Non manufacturing fixed costs for September equal $36,000 of which half are salaries. Salaries are expected
to increase by 5% in September. The only variable non manufacturing cost is sales and commission, equal to
1% of sales revenue.
Required: (Show all workings)
Prepare the following for September.
1. Revenue budget.
2. Production budget in units.
3. Direct material usage budget and direct material purchases budget.
4. Direct manufacturing labour 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. Non manufacturing costs budget.
9. Budgeted Income statement (ignore income taxes).
Now assume that Pet Animal Lovers (PAL) does not make any sales on credit. They sell only to the public
and accept only cash and credit cards. Ninety percent of its sales are to customers using credit cards, for which
they get the cash right away less a three percent transaction fee.
Purchases of materials are on account. PAL pays for half the purchases in the period of the purchases in the
period of the purchase and the other half the following period. At the end of September, PAL owes suppliers
$8,500.
PAL plans to replace a machine in September at a net cost of $13,700.
Labour, other manufacturing costs and non manufacturing costs are paid in cash in the month incurred except
of course, depreciation, which is not a cash flow item. For September, $20,000 of the manufacturing cost and
$10,000 of the non manufacturing cost is depreciation.
PAL currently has a $2,000 loan at an annual interest rate of 12%. The interest is paid at the end of each
month.
If PAL has more than $10,000 cash at the end of September it will pay back the loan. PAL owes $5,000 in
income taxes that need to be paid in September. PAL has cash of $5,360 on hand at the end of August.
Required: (Show all workings)
1. Prepare a cash budget for September for Pet Animal Lovers.
plastic but have metal doors. The Alley_Cat carrier is smaller than the Top_Dog carrier. Information about
the two products for the month of September is given below:
Input Prices
Direct materials
Plastic $4 per kilogram
Metal $3 per kilogram
Direct manufacturing labour $10 per direct
manufacturing
labour hour
Input quantities per unit of
output
Alley_Cat Top_Dog
Direct materials
Plastic 4 kilograms 6 kilograms
Metal 0.5 kilograms 1 kilogram
Direct manufacturing labourhours
(DMLH)
3 hours 5 hours
Machine–hours (MH) 10 MH 18 MH
Inventory information, direct
materials
Plastic Metal
Beginning inventory 250 kilograms 60 kilograms
Target ending inventory 380 kilograms 55 kilograms
Cost of beginning inventory $950 $180
Sales and inventory
information, finished goods
Alley_Cat Top_Dog
Expected sales in units 500 300
Selling price $160 $250
Target ending inventory in units 35 15
Course Profile for: ACCT19060, 2010 Term Three - Page 8
Beginning inventory in units 15 30
Beginning inventory in dollars $1,500 $5,580
PAL uses a FIFO cost flow assumption for finished goods inventory. It uses an activity based costing system
and classifies overheads into three activities - Set Up, Processing and Inspection. Activity rates for these
activities are $100 per set up hour, $5 per machine hour and $16 per inspection hour respectively. Other
information is as follows:
Cost driver information Alley_Cat Top_Dog
Number of units per batch 20 15
Set Up time per batch 1.5 hours 1.75 hours
Inspection time per batch 0.5 hours 0.6 hours
Non manufacturing fixed costs for September equal $36,000 of which half are salaries. Salaries are expected
to increase by 5% in September. The only variable non manufacturing cost is sales and commission, equal to
1% of sales revenue.
Required: (Show all workings)
Prepare the following for September.
1. Revenue budget.
2. Production budget in units.
3. Direct material usage budget and direct material purchases budget.
4. Direct manufacturing labour 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. Non manufacturing costs budget.
9. Budgeted Income statement (ignore income taxes).
Now assume that Pet Animal Lovers (PAL) does not make any sales on credit. They sell only to the public
and accept only cash and credit cards. Ninety percent of its sales are to customers using credit cards, for which
they get the cash right away less a three percent transaction fee.
Purchases of materials are on account. PAL pays for half the purchases in the period of the purchases in the
period of the purchase and the other half the following period. At the end of September, PAL owes suppliers
$8,500.
PAL plans to replace a machine in September at a net cost of $13,700.
Labour, other manufacturing costs and non manufacturing costs are paid in cash in the month incurred except
of course, depreciation, which is not a cash flow item. For September, $20,000 of the manufacturing cost and
$10,000 of the non manufacturing cost is depreciation.
PAL currently has a $2,000 loan at an annual interest rate of 12%. The interest is paid at the end of each
month.
If PAL has more than $10,000 cash at the end of September it will pay back the loan. PAL owes $5,000 in
income taxes that need to be paid in September. PAL has cash of $5,360 on hand at the end of August.
Required: (Show all workings)
1. Prepare a cash budget for September for Pet Animal Lovers.