NameSchedule 1- Sales Budget오2Q1Q3Q4TotalUnitsUnit priceTotal SalesSchedule 2 - Production Budget오2오4Q1Q3TotalSales in UNITSPlus: Desired finished goods ending inventoryTotal needsLess: Beginning finished goods inventoryFinished goods production needs Schedule 3: Direct Materials Purchases BudgetQ1Q2Q3Q4TotalProduction unitsx Materials per unitProduction needs for direct materialsPlus: Desired ending inventory of direct materialsTotal needsLess: Beginning direct materials inventoryPurchases of direct materialsx Cost per unitDirect materials purchases costSchedule 4: Direct labor BudgetQ1Q2Q3Q4TotalProduction unitsxLabor Hours per unitLabor hours neededx Cost per labor hourTotal direct labor costSchedule 5: Overhead BudgetQ1Q2Q3Q4TotalBudgeted hoursx Variable rate per hourBudgeted variable overheadBudgeted fixed overheadTotal Overhead

Question
Asked Nov 7, 2019

Optima Company is a high-technology organization that produces a mass-storage system. The design of Optima's system is unique and represents a breakthrough in the industry. The units Optima produces combine positive features of both compact and hard disks. The company is completing its fifth year of operations and is preparing to build its master budget for the coming year (20X1). The budget will detail each quarter's activity and the activity for the year in total. The master budget will be based on the following information:

Fourth-quarter sales for 20X0 are 55,000 units.

Unit sales by quarter (for 20X1) are projected as follows:

First quarter 65,000    
Second quarter 70,000    
Third quarter 75,000    
Fourth quarter 90,000    

The selling price is $400 per unit. All sales are credit sales. Optima collects 85% of all sales within the quarter in which they are realized; the other 15% is collected in the following quarter. There are no bad debts.There is no beginning inventory of finished goods. Optima is planning the following ending finished goods inventories for each quarter:

First quarter 13,000 units    
Second quarter 15,000 units    
Third quarter 20,000 units    
Fourth quarter 10,000 units    

Each mass-storage unit uses 5 hours of direct labor and three units of direct materials. Laborers are paid $10 per hour, and one unit of direct materials costs $80.

There are 65,700 units of direct materials in beginning inventory as of January 1, 20X1. At the end of each quarter, Optima plans to have 30% of the direct materials needed for next quarter's unit sales. Optima will end the year with the same amount of direct materials found in this year's beginning inventory.

Optima buys direct materials on account. Half of the purchases are paid for in the quarter of acquisition, and the remaining half are paid for in the following quarter. Wages and salaries are paid on the 15th and 30th of each month.

Fixed overhead totals $1 million each quarter. Of this total, $350,000 represents depreciation. All other fixed expenses are paid for in cash in the quarter incurred. The fixed overhead rate is computed by dividing the year's total fixed overhead by the year's budgeted production in units.

Variable overhead is budgeted at $6 per direct labor hour. All variable overhead expenses are paid for in the quarter incurred.

Fixed selling and administrative expenses total $250,000 per quarter, including $50,000 depreciation.

Variable selling and administrative expenses are budgeted at $10 per unit sold. All selling and administrative expenses are paid for in the quarter incurred.

The balance sheet as of December 31, 20X0, is as follows:

Assets
Cash   $ 250,000  
Direct materials inventory   5,256,000  
Accounts receivable   3,300,000  
Plant and equipment, net   33,500,000  
     Total assets   $42,306,000  
Liabilities and Stockholders’ Equity
Accounts payable   $ 7,248,000*  
Capital stock   27,000,000  
Retained earnings   8,058,000  
     Total liabilities and stockholders’ equity   $42,306,000  
* For purchase of direct materials only.

Optima will pay quarterly dividends of $300,000. At the end of the fourth quarter, $2 million of equipment will be purchased.

*PLEASE COMPLETE PER THE TEMPLATE PROVIDED (: 

Name
Schedule 1- Sales Budget
오2
Q1
Q3
Q4
Total
Units
Unit price
Total Sales
Schedule 2 - Production Budget
오2
오4
Q1
Q3
Total
Sales in UNITS
Plus: Desired finished goods ending inventory
Total needs
Less: Beginning finished goods inventory
Finished goods production needs
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Name Schedule 1- Sales Budget 오2 Q1 Q3 Q4 Total Units Unit price Total Sales Schedule 2 - Production Budget 오2 오4 Q1 Q3 Total Sales in UNITS Plus: Desired finished goods ending inventory Total needs Less: Beginning finished goods inventory Finished goods production needs

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Schedule 3: Direct Materials Purchases Budget
Q1
Q2
Q3
Q4
Total
Production units
x Materials per unit
Production needs for direct materials
Plus: Desired ending inventory of direct materials
Total needs
Less: Beginning direct materials inventory
Purchases of direct materials
x Cost per unit
Direct materials purchases cost
Schedule 4: Direct labor Budget
Q1
Q2
Q3
Q4
Total
Production units
xLabor Hours per unit
Labor hours needed
x Cost per labor hour
Total direct labor cost
Schedule 5: Overhead Budget
Q1
Q2
Q3
Q4
Total
Budgeted hours
x Variable rate per hour
Budgeted variable overhead
Budgeted fixed overhead
Total Overhead
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Schedule 3: Direct Materials Purchases Budget Q1 Q2 Q3 Q4 Total Production units x Materials per unit Production needs for direct materials Plus: Desired ending inventory of direct materials Total needs Less: Beginning direct materials inventory Purchases of direct materials x Cost per unit Direct materials purchases cost Schedule 4: Direct labor Budget Q1 Q2 Q3 Q4 Total Production units xLabor Hours per unit Labor hours needed x Cost per labor hour Total direct labor cost Schedule 5: Overhead Budget Q1 Q2 Q3 Q4 Total Budgeted hours x Variable rate per hour Budgeted variable overhead Budgeted fixed overhead Total Overhead

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check_circleExpert Solution
Step 1

Prepare sales budget:

Total
Q1
Q2
Q3
Q4
Particulars
(S)
(S)
(S)
(S)
Sales units (A)
65,000
75,000
300,000
70,000
90,000
Selling price (B)
400
400
400
400
400
Sales (AxB)
26,000,000 28,000,000 30,000,000 36.000.000 120,000,000
Table (1
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Total Q1 Q2 Q3 Q4 Particulars (S) (S) (S) (S) Sales units (A) 65,000 75,000 300,000 70,000 90,000 Selling price (B) 400 400 400 400 400 Sales (AxB) 26,000,000 28,000,000 30,000,000 36.000.000 120,000,000 Table (1

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Step 2

Prepare the production budget.

Q2
Q1
Q3
Q4
Total
Particulars
(S)
(S)
(S)
(S)
(S)
Expected sales
65,000 70,000 75,000 90,000 300,000
Add: Closing units
13.000 15.000 20.000 10.000
58.000
78,000 85,000 95,000 100,000 358,000
Less: Opening units
O13.000 15.000 20.000
48.000
Production units
78,000 72.000 80,000 80.000 310,000
Table (2)
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Q2 Q1 Q3 Q4 Total Particulars (S) (S) (S) (S) (S) Expected sales 65,000 70,000 75,000 90,000 300,000 Add: Closing units 13.000 15.000 20.000 10.000 58.000 78,000 85,000 95,000 100,000 358,000 Less: Opening units O13.000 15.000 20.000 48.000 Production units 78,000 72.000 80,000 80.000 310,000 Table (2)

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Step 3

Prepare direct materials purchas...

Q1
Q2
Q3
Q4
Total
Particulars
(S)
(S)
Expected material
required for production
930,000
240,000
234,000
216,000
240,000
Add: Closing units. 30%
of sales units of next
month
63,000
65,700
81,000
67,500
65,700
65.700
Less: Opening units
65.700
63.000
67.500
81.000
Material units expected to
be purchased (A)
930,000
231,300
220,500
253,500
224,700
Material cost: $80 per unit
18,504,000 17,640,000 20,280,000 17,976,000 74,400,000
(Ax$80)
X
Table (3)
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Q1 Q2 Q3 Q4 Total Particulars (S) (S) Expected material required for production 930,000 240,000 234,000 216,000 240,000 Add: Closing units. 30% of sales units of next month 63,000 65,700 81,000 67,500 65,700 65.700 Less: Opening units 65.700 63.000 67.500 81.000 Material units expected to be purchased (A) 930,000 231,300 220,500 253,500 224,700 Material cost: $80 per unit 18,504,000 17,640,000 20,280,000 17,976,000 74,400,000 (Ax$80) X Table (3)

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