ACC522 Managerial Accounting Assignment
Complete this assignment in groups of at least two.
Submit this assignment in both electronic and hard copy formats.
Prepare the budgets using MS Excel and submit an electronic copy of the MS Excel template with the report.
All members must contribute equitably to the project.
The due date is 4th December 2017
You are provided with the following information for Al Kalood Co. Ltd. Al Kalood makes a very popular undyed cloth sandal in one style, but in regular and deluxe. The regular sandals have cloth soles and the deluxe sandals have cloth-covered wooden soles. Al Kalood is preparing its budget for June 2015 and has estimated sales based on past experience. Information for the month of June is as follows:
Direct materials: cloth $5.25 per meter
Direct materials: wood $7.50 per b.f.
Direct manufacturing labor $15 per direct manufacturing labor-hour
Input quantities per pair of sandals
Direct materials: cloth 1.3 meters 1.5 meters
Direct materials: wood 0 2 board foot (b.f.)
Direct manufacturing labor hours 5 7 hours
Set-up hours per batch 2 hours 3 hours
Inventory information, direct materials
Beginning inventory 610 meters 800 b.f.
Target ending inventory 386 meters 295 b.f.
Cost of beginning inventory $3,219 $6,060
Sales and inventory information, finished goods
Expected sales in units 2,000 3,000
Selling price $120 $195
Target ending inventory in units 400 600
Beginning inventory in units 250 650
Beginning inventory in dollars $23,250 $92,625
Al Kalood accounts for inventory (both direct materials and finished goods) using the FIFO cost flow assumption.
All the sandals are made in batches of 50 pairs of sandals. Al Kalood incurs manufacturing overhead costs, marketing and general administration, and shipping costs. Besides materials and labor, manufacturing costs include setup, processing, and inspection costs. Al Kalood ships 40 pairs of sandals per shipment. Al Kalood uses activity-based costing and has classified all overhead costs for the month of June as shown in the following chart:
Cost type Denominator activity Rate
Setup Set-up hours $18 per setup-hour
Processing Direct manufacturing labor hrs. $1.80 per DMLH
Inspection Number of pairs of sandals $1.35 per pair
Marketing and general administration Sales revenue 8%
Shipping Number of shipments $15 per shipment
Al Kalood’s balance sheet for May 31 is as follows:
Al Kalood’s balance sheet as of May 31
Accounts receivable $324,000
Less: allowance for doubtful debts 16,200 307,800
Direct materials 9,279
Finished goods 115,875
Fixed assets $870,000
Less: Accumulated depreciation 136,335 733,665
Total assets $1,176,000
Liabilities and equity
Accounts payable $15,000
Taxes payable 10,800
Interest payable 750
Long-term debt 150,000
Common stock 300,000
Retained earnings 698,904
Total liabilities and equity $1,176,054
The following additional data is provided:
All sales are on account; 60% are collected in the month of the sale, 38% the following month and 2% are written off as bad debts.
All purchases of materials are on account. Al Kalood pays for 80% of purchases in the month of purchase and 20% in the following month.
All other costs are paid in the month incurred, including the declaration and payment of $15,000 cash dividend in June.
Al Kalood is making monthly interest payments of 0.5% on a $150,000 long term loan.
Al Kalood plans to pay the $10,800 of taxes owed as of May 31 in the month of June.
30% of processing, setup, and inspection costs and 10% of marketing and general administration and shipping costs are deprecation.
Al Kalood has a policy of having a cash balance of at least $9,000 at the end of every month. Al Kalood has a line of credit with the local bank.
Prepare the following budgets for Al Kalood for the month of June:
Direct material purchases budget
Direct labor budget
Relevant manufacturing overhead budgets
Budgeted income statement
Cash budget with relevant receipts and payment schedules attached as notes
Budgeted balance sheet as of June 30, 2015