This assignment is worth 30 marks
Sun Worship Leisure Wear manufactures swimwear and accessories for men and women. They operate out of rented premises in Burleigh Heads where the factory is split into a manufacturing and storage area and a retail space.
The business produces 4 products:
• Bikinis for women
• Board shorts for men
• Beach Towels
• Beach Bags
You, as the management accountant for the firm, have been asked to prepare a range of budgets for the 2018 year. The following information has been gathered:
Sales Bikini Board short Towel Beach Bag
January 2018 1,600 1,200 200 400
February 2018 1,400 1,100 180 300
March 2018 1,300 1,160 160 260
April 2018 1,000 1,000 120 140
May 2018 400 600 60 80
June 2018 500 700 40 40
July 2018 400 500 40 40
August 2018 200 400 40 40
September 2018 1,300 1,160 160 260
October 2018 1,200 1,100 180 300
November 2018 1,200 1,100 180 300
December 2018 1,500 1,200 200 400
January 2019 1,600 1,400 220 440
February 2019 1,400 1,200 200 400
Bikini Board short Towel Beach Bag
Selling Price $100 $75 $55 $45
Product Bikini Board short Towel Beach Bag
Direct Materials & Direct Labour per unit
Fabric $18.75 $31.25 $26.25 $25
Elastic/Trim $13.50 $3.00 $5.25 $1.5
Direct Labour (sewing time/machine hours)
1 hour 0.75 hours 0.4 hours 0.6 hours
Other Cost information: Production Related Costs Operating Costs
Direct Labour $28/hour
Indirect Labour $1/unit
Indirect Materials $2/unit
Utilities $550/month $50/month
Insurance $2,400/year $6,000/year
Factory Supervisor’s Salary $52,000/year
Administration Staff Wages $2,500/month
General Office Expenses $1,500/month
Rent $5,600/month $1,400/month
Repairs and Maintenance See below
Inventory: At the end of each month the business plans to have 50% of the following month’s sales units in s
tock as finished goods and 75% of the direct materials required for the next month’s production.
Cash Collections: 20% of sales are through the retail outlet at the factory. These customers pay for their purchases at the time of sale. The remainder of sales are to businesses that resell Sun Worship Leisure Wear products. Credit is extended to all business customers. It is estimated 60% of these sales are collected in the month of sale and the remaining 40% are collected in the following month.
Cash Payments: All purchases, other than the purchase of direct materials, are paid at the time the expense is incurred. It is estimated 30% of accounts payable will be paid in the month the direct materials are purchased and the remaining 70% will be paid in the following month.
The interest rate payable on the loan is 6% per annum. Interest is paid monthly. The loan is on an interest only basis and the principle can be repaid at any time.
Depreciation of plant and equipment totals $9,000 for the year. Depreciation is recorded monthly.
Repairs and maintenance related to manufacturing plant and equipment is estimated to be $2,500 each quarter payable in March, June, September, and December.
Variable manufacturing overhead is allocated based on machine hours.
Fixed manufacturing overhead is allocated based on units of production.Ignore GST and Income Tax. Round amounts other than unit costs to nearest dollar value.
The opening Balance Sheet is provided below:
Sun Worship Leisure Wear
Balance Sheet
As at 31 December 2017
Assets
Current Assets
Cash 32,250
Accounts Receivable 123,650
Finished Goods Inventory 99,150
Materials Inventory 114,375
Total Current Assets $369,425
Non-current Assets
Equipment 85,000
Less: Accumulated Depreciation ( 8,000)
Total Non-Current Assets $77,000