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Roles	What do they know
Sales Manager	You want to sell 10,000 units in April, 15,000 in May, 8,000 units in June at $20 each.
Business Development	You know that our competitor is struggling with manufacturing and supply is low, and your POV is that demand will increase by 10% in April and May
Manufacturing Supervisor	You have seen that raw material supply shipments are being delayed - and you want to keep 15% of next months production needs on hand- also you would like 15% of raw material needs on hand for production of product for next month. You know it takes .5 hours standard to make each unit.
Human Resources	Has settled the labors union by guaranteeing 40 hours minimum a week at $12/hour, but no OT. You expect 5500 direct labor hours standard per month. Based on our payroll system you can expect 1/2 the direct labor to be paid in the month it was incurred and the second 1/2 in the following month.
Purchasing Agent	Your POV is that Supply of raw material is plentiful and you agree with the Manufacturing Supervisor that in fact shipments are slow do to trucking constraints, you want to keep 10% of raw material on hand for next months production needs. The price of wood is not expected fluctuate in the next 3 months at $1/lb standar rate. You know each unit manufactured requires a standard 4lb of wood.
Accounts Receivable Manager	Based on historical data you know that 50% of the current month sales are collected in month while 45% are collected the following month, 5% are never collected.
Treasure	Your goal is to keep $40,000 in the bank as a balance. We have a line of credit we can borrow from- when we fall short
Accountant	Has calculated fixed Manufacturing Overhead as follows (each month)
	Rent	15,000.00
	Property Tax	3,000.00
	Indirect Material	5,000.00
	Indirect Labor	8,000.00
	Variable Manufacturing Overhead at
	Utilities	$.5 per unit produced
Controller	Your goal is to help guide and lead the team, and increase profit share over the next quarter, while keeping costs under control. Last years sales goal for the same 3 months was set at 32,000 units which we met. We did that with only keeping 10% of units produced on hand.
Accounts Payable	You know that 50% of our purchases (VE) are paid the same month incurred and the reminder paid the following month. However our expenses (FE) are paid for in the month we incur them. While utilities are paid the 10th of the following month of production.

We manufacture and sell baseball bats, attached is the cross functional working team that has been assigned to come up with a plan for next quarter.

Work with the knowledge you are given to present a plan (budgets) to the board.

Sales Budget

April

May

June

July

# Units

10,000

Price

20

20

20

20

Total Rev

200,000

Production Budget

April

May

June

# Units to sell

-

-

-

10,000

Add desired end Inv

Total needed

-

-

-

Less Beg Inv

2,000

Units to be Produced

Direct Material

April

May

June

Production in Units

-

-

-

Materials per unit

4

4

4

Production Needs

-

-

-

Add desired ending Inventory

6,000

Total Needed

-

-

Less Beg Inventory

3,000

-

-

Material to be purchased

-

Direct-Labor

April

May

June

Production in Units

-

-

-

Direct Labor Hours per unit

Labor hours required

-

-

-

Hours guaranteed

Labor hours paid

Wage rate

Total direct labor cost

0

0

0

Overhead Budget

April

May

June

Rent

Property Tax

Indirect Material

Indirect Labor

Utilities

Total

Cash Receipts Budget

April

May

June

Accounts Rec 3/31

$50,000

April Sales

May Sales

June Sales

Total cash collection

Cash Disbursement Budget

April

May

June

Purchases Raw Material

March

$20,000

April

May

June

Direct Labor Cost

March

$33,000

April

May

June

Variable Manufacturing OH

$5,000

Fixed Manufacturing OH

Total Cash Disbursements

Cash Budget

April

May

June

Beginning cash Balance

40000

Add cash collections

Total cash available

Less Disbursements

Expected Balance

Target Balance

Excess (deficiency)

Questions

How did you decide on how many units to sell over the next 3 months?

How did the sales goal affect your production budget?

Assume Actual purchases for May of Direct Material were 2% less than budged and Actual price paid for material was $.90/ lb. Calculate the Direct material price variance. Is this a favorable or unfavorable variance?

Assume actual direct labor hours for April were 5,300 with an actual average rate of $12.50, calculate the direct labor rate variance, and determine if this is a favorable or unfavorable variance.

For May actual fixed overhead totaled $34,000, calculate the fixed overhead budget variance, is the favorable or unfavorable?

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