Management Accounting: Budget Preparation for Investment in New Manufacturing Facility

Running head: MANAGEMENT ACCOUNTING
Management accounting
University Name
Student Name
Authors’ Note

2MANAGEMENT ACCOUNTING
Answer to Part A:
Preparation of basic master budget:
Cost of Goods Manufactured
Statement:
Particulars July August September TOTAL
Direct Material Consumed $59,90,400 $94,46,400
$1,10,59,20
0 $2,64,96,000
Direct Labor Cost $31,20,000 $49,20,000 $57,60,000 $1,38,00,000
PRIME COST $91,10,400 $1,43,66,400
$1,68,19,20
0 $4,02,96,000
Manufacturing Overhead
$6,25,00,44
4 $6,84,15,111
$7,11,75,28
9
$20,20,90,84
4
COST OF PRODUCTION
$7,16,10,84
4 $8,27,81,511
$8,79,94,48
9
$24,23,86,84
4
Add: Adjustment for WIP $0 $0 $0 $0
COST OF GOODS MANUFACTURED
$7,16,10,84
4 $8,27,81,511
$8,79,94,48
9
$24,23,86,84
4
Budgeted Production Volume 20800 32800 38400
Cost of Goods Manufactured per unit $3,442.83 $2,523.83 $2,291.52
Closing Stock of Finished Goods 6400 7200 9600
Value of Finished Goods
$2,20,34,10
6 $1,81,71,551
$2,19,98,62
2
Budgetary Income Statement:
Particulars Amount Amount
Sales Revenue
$41,47,20,00
0
Cost of Goods Manufactured
$24,23,86,84
4
Add: Opening Finished Goods
Inventory
$10,08,64,00
0
Cost of Goods Available for Sale
$34,32,50,84
4
Less: Closing Finished Goods Inventory $2,19,98,622
Cost of Goods Sold
-
$32,12,52,22
2

3MANAGEMENT ACCOUNTING
GROSS PROFIT $9,34,67,778
Selling & Administration Expenses -$9,42,74,300
Bad Debts -$68,13,700
NET OPERATING INCOME -$76,20,222
Subsidiary budget:
Sales Budget:
Particulars July August September October
Sales Volume in units 40000 32000 36000 48000
Selling Price per unit $3,840.00 $3,840.00 $3,840.00 $3,840.00
Budgeted Sales Revenue
$15,36,00,00
0
$12,28,80,00
0
$13,82,40,00
0
$18,43,20,00
0
Production Budget:
Particulars July August September October
Sales Volume in units 40000 32000 36000 48000
Add: Closing Inventory of
Finished Goods 6400 7200 9600
46400 39200 45600
Less: Opening Inventory of
Finished Goods 25600 6400 7200
Budgeted Production Volume 20800 32800 38400
Direct Labor Budget:
Quarters
Particulars July August
Septemb
er
Budgeted Production Volume 20800 32800 38400
Labor Hours required per unit 5 5 5
Total Direct Labor Hour
Required 104000 164000 192000
Direct Labor Cost per Hour $30.00 $30.00 $30.00

4MANAGEMENT ACCOUNTING
Budgeted Direct Labor Cost
$31,20,00
0
$49,20,00
0
$57,60,00
0
Purchase Budget:
Particulars July August September October
Budgeted Sales Volume 40000 32000 36000 48000
Budgeted Production Volume 20800 32800 38400
Gears required per unit 2 2 2
Total Gears Required 41600 65600 76800
Add: Closing Inventory of Gears 38400 43200 57600
80000 108800 134400
Less: Opening Inventory of Gears 48000 38400 43200
Budgeted Purchase Volume (in units) 32000 70400 91200
Gear Cost per unit $48.00 $48.00 $48.00
Total Cost of Gears
$15,36,00
0
$33,79,20
0 $43,77,600
Spindles required per unit 3 3 3 3
Total Lens Material required 62400 98400 115200
Add: Closing Inventory of Spindles 57600 64800 86400
120000 163200 201600
Less: Opening Inventory of Spindles 72000 57600 64800
Budgeted Purchase Volume (in units) 48000 105600 136800
Spindle Cost per unit $64.00 $64.00 $64.00
Total Lens Material Cost
$39,93,60
0
$62,97,60
0 $73,72,800
Budgeted Direct Material Purchase
$55,29,60
0
$96,76,80
0
$1,17,50,40
0
Direct Material Budget:
Particulars July August September
Total Gears required for Production 41600 65600 76800
Gear Cost per unit $48.00 $48.00 $48.00
Total Gear Cost
$19,96,80
0
$31,48,80
0 $36,86,400
Total Spindles required for Production 62400 98400 115200
Spindle Cost per unit $64.00 $64.00 $64.00