Question

Scenario: Styles Wing Bicycle Company manufactures and sells 2 sizes of bicycles, 21.5 inch and 22.5 inch. Sales Their sales team has committed to the following projected monthly unit sales for the next year. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov 21.5 Bike 368 472 633 616 443 345 322 317 317 317 328 22.5 Bike 320 410 550 535 385 300 280 275 275 275 285 Dec 420 365 The selling price for the 21.5 inch bike is $455. For the 22.5 inch bike it is $490. The desired ending inventory for each month is 15% of the following month's sales for the 21.5 inch bike and 12% for the 22.5 inch bike. The inventory at January 1 of the budget year is expected to be 55 units of the 21.5 inch bike and 38 units of the 22.5 inch bike. The projected sales for Jan of the year following the budget are 385 of the 21.5 inch bike and 350 for the 22.5 inch bike. Materials The total materials for the 21.5 inch bike and 22.5 inch bike are $164.45 and $186.30 respectively (Bill of Materials in workbook for information purposes). The production department would like to have an ending raw materials inventory of 20% of the next month's production requirements. Desired ending production inventory for December is $15,700 for 21.5 inch bike and $15,300 for 22.5 inch bike. Beginning raw materials inventory value for Jan of the budget year are $16,370 for the 21.5 inch bike and $18,597 for the 22.5 inch bike. Direct Labor Direct labor is 3.9 hours at $15.25 per hour for the 21.5 inch bike and 4.4 hours at $15.25 per hour for the 22.5 inch bike (Process sheet in workbook for information purposes).

Answer 1

Unit sales	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Total
21.5 Bike	368	472	633	616	443	345	322	317	317	317	328	420	4898	385
22.5 Bike	320	410	550	535	385	300	280	275	275	275	285	365	4255	350
Total units	688	882	1183	1151	828	645	602	592	592	592	613	785	9153
Total Sales $
$ 455/21.5 Bike	167440	214760	288015	280280	201565	156975	146510	144235	144235	144235	149240	191100	2228590
$ 490/22.5 Bike	156800	200900	269500	262150	188650	147000	137200	134750	134750	134750	139650	178850	2084950
Total Bud.Sales $	324240	415660	557515	542430	390215	303975	283710	278985	278985	278985	288890	369950	4313540

Actual desired End.Inv.of the foll.mth. Sales units
21.5 Bike(15%)	70.8	95.0	92.4	66.5	51.8	48.3	47.6	47.6	47.6	49.2	63.0	57.8	57.8
22.5 Bike(12%)	49.2	66.0	64.2	46.2	36.0	33.6	33.0	33.0	33.0	34.2	43.8	42.0	42.0
Rounded desired End.Inv.of the foll.mth. Sales units
21.5 Bike(15%)	71	95.0	93	67	52	49	48	48	48	50	63	58	58.0
22.5 Bike(12%)	50	66.0	65	47	36	34	33	33	33	35	44	42	42.0

Production Budget
21.5 Bike sales	368	472	633	616	443	345	322	317	317	317	328	420	4898
22.5 Bike sales	320	410	550	535	385	300	280	275	275	275	285	365	4255
21.5 Bike(Des. E/I))	71	95.0	93	67	52	49	48	48	48	50	63	58	58.0
22.5 Bike(Des.E/I)	50	66.0	65	47	36	34	33	33	33	35	44	42	42.0
21.5 Bike(Tot.Inv.reqd.)	439	567	726	683	495	394	370	365	365	367	391	478	4956
22.5 Bike sales(Tot.Inv.reqd.)	370	476	615	582	421	334	313	308	308	310	329	407	4297
Less: 21.5 Bike(Beg.Inv.)	55	71	95	93	67	52	49	48	48	48	50	63	55
Less:22.5 Bike sales(Beg.Inv.)	38	50	66	65	47	36	34	33	33	33	35	44	38
21.5 Bike (units to produce)	384	496	631	590	428	342	321	317	317	319	341	415	4901
22.5 Bike (units to produce)	332	426	549	517	374	298	279	275	275	277	294	363	4259

Fixed Overhead
Salaries	5000	5000	5000	5000	5000	5000	5000	5000	5000	5000	5000	5000	60000
Utilities	2200	2200	2200	2200	2200	2200	2200	2200	2200	2200	2200	2200	26400
Depreciation	7200	7200	7200	7200	7200	7200	7200	7200	7200	7200	7200	7200	86400
Maintenance	2800	2800	2800	2800	2800	2800	2800	2800	2800	2800	2800	2800	33600
Insurance	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	24000
Property taxes	1200	1200	1200	1200	1200	1200	1200	1200	1200	1200	1200	1200	14400
Total Fixed OH	20400	20400	20400	20400	20400	20400	20400	20400	20400	20400	20400	20400	244800

S G& A
Bud. sales units	688	882	1183	1151	828	645	602	592	592	592	613	785	9153
Variable sg&A rate	11.2	11.2	11.2	11.2	11.2	11.2	11.2	11.2	11.2	11.2	11.2	11.2	11.2
Variable sg&A exp.	7706	9878	13250	12891	9274	7224	6742	6630	6630	6630	6866	8792	102514
Fixed SG&A exp.	18000	18000	18000	18000	18000	18000	18000	18000	18000	18000	18000	18000	216000
Total SG&A exp.	25706	27878	31250	30891	27274	25224	24742	24630	24630	24630	24866	26792	318514
Less: Non-cash sg&a	7800	7800	7800	7800	7800	7800	7800	7800	7800	7800	7800	7800	93600
Cash sg&a	17906	20078	23450	23091	19474	17424	16942	16830	16830	16830	17066	18992	224914

Ending Inventory Budget
21.5 Bike(Des. E/I))	71	95	93	67	52	49	48	48	48	50	63	58	58
22.5 Bike(Des.E/I)	50	66	65	47	36	34	33	33	33	35	44	42	42
21.5 Bike $ Raw mat.*164.45	16313	20754	19405	14077	11248	10558	10426	10426	10492	11215	13649	15700	15700
22.5 Bike$ Raw mat.*186.30	15873	20456	19263	13935	11103	10396	10247	10247	10321	10954	13525	15300	15300