Schedule 6: Selling and Administrative Expense BudgetQ1Q2Q3Q4TotalPlanned sales (units)x variable rate per unitVariable expensesFixed expensesTotal selling and administrative expensesSchedule 7: Ending Finished Goods Inventory BudgetUnit cost computation:Direct materials (number of units of material/FG * cost per unit)Direct labor (number of units/FG* cost per unit)Overhead:Variable overhead (number of units * cost per unit)Fixed overhead (Total overhead /total units needed)Total cost per unit of finished goodsTotal finished goods ending inventory ( note: multiply total cost x units) Schedule 8: Cost of Goods Sold BudgetDirect materials used (Schedule 3)Direct labor used (Schedule 4)Overhead (Schedule 5)Budgeted manufacturing costsAdd: Beginning fiished goods inventory (Schedule 7)Cost of goods available for saleLess: Endig finished goods inventory (Schedule 7)Budgeted cost of goods soldSchedule 9: Cash BudgetQ2Q3Q4TotalBeginning cashCollections:Credit sales:Current quarterPrior quarterCash availableLess disbursementsDirect materials:Current quarterPrior quarterDirect laborOverheadSelling and admin.DividendsEquipmentTotal cash needsEnding cash

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Asked Nov 10, 2019
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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 SCHEDULE 6-9 

Schedule 6: Selling and Administrative Expense Budget
Q1
Q2
Q3
Q4
Total
Planned sales (units)
x variable rate per unit
Variable expenses
Fixed expenses
Total selling and administrative expenses
Schedule 7: Ending Finished Goods Inventory Budget
Unit cost computation:
Direct materials (number of units of material/FG * cost per unit)
Direct labor (number of units/FG* cost per unit)
Overhead:
Variable overhead (number of units * cost per unit)
Fixed overhead (Total overhead /total units needed)
Total cost per unit of finished goods
Total finished goods ending inventory ( note: multiply total cost x units)
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Schedule 6: Selling and Administrative Expense Budget Q1 Q2 Q3 Q4 Total Planned sales (units) x variable rate per unit Variable expenses Fixed expenses Total selling and administrative expenses Schedule 7: Ending Finished Goods Inventory Budget Unit cost computation: Direct materials (number of units of material/FG * cost per unit) Direct labor (number of units/FG* cost per unit) Overhead: Variable overhead (number of units * cost per unit) Fixed overhead (Total overhead /total units needed) Total cost per unit of finished goods Total finished goods ending inventory ( note: multiply total cost x units)

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Schedule 8: Cost of Goods Sold Budget
Direct materials used (Schedule 3)
Direct labor used (Schedule 4)
Overhead (Schedule 5)
Budgeted manufacturing costs
Add: Beginning fiished goods inventory (Schedule 7)
Cost of goods available for sale
Less: Endig finished goods inventory (Schedule 7)
Budgeted cost of goods sold
Schedule 9: Cash Budget
Q2
Q3
Q4
Total
Beginning cash
Collections:
Credit sales:
Current quarter
Prior quarter
Cash available
Less disbursements
Direct materials:
Current quarter
Prior quarter
Direct labor
Overhead
Selling and admin.
Dividends
Equipment
Total cash needs
Ending cash
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Schedule 8: Cost of Goods Sold Budget Direct materials used (Schedule 3) Direct labor used (Schedule 4) Overhead (Schedule 5) Budgeted manufacturing costs Add: Beginning fiished goods inventory (Schedule 7) Cost of goods available for sale Less: Endig finished goods inventory (Schedule 7) Budgeted cost of goods sold Schedule 9: Cash Budget Q2 Q3 Q4 Total Beginning cash Collections: Credit sales: Current quarter Prior quarter Cash available Less disbursements Direct materials: Current quarter Prior quarter Direct labor Overhead Selling and admin. Dividends Equipment Total cash needs Ending cash

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The selling and asdministrative expense budget has been prepared as below

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Schedule 6:Selling & Administrative Expense Budget in $ Total Q4 Q1 Q2 Q3 Planned Sales (units) A X variable rate per unit B Variable expenses (a*b) Fixed expenses Total selling & adminstrative budget (variable +fixed) 300000 70,000 10 65000 75000 90000 10 10 10 10 650000 750000 700000 900000 3000000 250000 250000 250000 250000 1000000 900000 1000000 950000 1150000 4000000

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Step 3

The finished goods inventory ha...

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Required annual production Annual sales Add. Ending inventory of 4th quarter Less. Opening inventory of qtr 1 Required production Units Units 300000 10000 0 310000 Schedule 7:Ending Finished goods Inventory budget Unit cost computation Direct materials(number of units of material/FG cost per unit)(3 80) Direct labor (number of units/FG cost per unit)(5 10) Overhead $ Q4 Q1 Q2 Q3 240 240 240 240 240 50 50 50 50 50 30 Variable Overhead (number of units cost per unit)(5 6) Fixed Overhead(Total overhead/total units needed)@12.903 Total cost per unit of finished goods Total finished goods ending inventory (note:multiply total cost x units) 30! 30 30 30 13 (4000000/310000) 332.90 13 13 13 13 12.903 332.90 332.90 332.90 332.90 4993548 3329032 4327741.94 6658065

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