GROUP ASSIGNMENT

BUDGETING FOR OPERATIONS IN MANUFACTURING FIRM

DTN Boat Company is a manufacturing company that makes fishing boat. The boats are made of
fiberglass and wood and DTN only make one type – a 15-foot fishing boat. Subird actual balance sheet
for 2023 is shown in the table 1 below:

DTN Boat Company

Balance Sheet (Actual)
December 31,2023
Assets
Current assets:
Cash $ 137,000
Accounts receivable 60,000
Direct materials inventory1 8,000
Finish goods inventory2 50,000 $ 255,000
Long-term assets:
Land $ 231,500
Building and equipment 1,500,000
Less acumulated depreciation (120,000) $ 1,611,500
Total assets $1,866,500
Liabilites and Stockholder’s Equity
Current liabilities:
Account payable3 $ 10,000
Income taxes payable3 96,000 $ 106,000
Stockholder’s equity:
Common stock, $5 par $ 1,000,000
Paid-in captial in excess of par 250,000
Retained earnings 510,500 1,706,500
Total liabilities and stockholder’s equity $1,866,500
Notes:
1
Composed of 600 board feet of lumber and 400 feet of fiberglass
2
Composed of 10 finished boats.
 3
Expected to be paid in the first quarter of 2024

- DTN Boat company has projected 2024 sales to be 100 boats. The anticipated sales price (giá bán
dự kiến) for each boat is $10,000.
- DTN Boat company projects its boat sales on a quarterly basis.
- The marketing department has effectively researched all the relevant variables in order to predict
the number of boats that will be sold each quarter. The data of sales volume is show in table 2
below:

DTN Boat Company

Sales Volume Estimation 2024
Quarter 1 20 boats
Quarter 2 40 Boats
Quarter 3 30 Boats
Quarter 4 10 Boats

- Based on past experience, DTN is able to collect approximately 80% of revenue from customers
in the quarter in which the sale took place, with the remaining 20% collected in the following
quarter.
- DTN Boat Company has determined that its desired ending inventory for each quarter should be
approximately 50% of projected sales for the next quarter. The fourth quarter’s ending inventory
is 15 boats, which is 50% of the next quarter’s (first quarter of 2025) expected sales.
- DTN’s engineers estimate that the standard amounts of wood and fiberglass needed per boat are
as follows:

15-Foot Boat
Direct materials requirements:
- Wood 100 board feet

- Fiberglass 40 square feet

- DTN’s purchasing agent has been able to purchase wood at $10 per board foot and fiberglass at
5$ per square foot. The purchasing agent expects that these prices will continue to be avaiable
through 2024.
- DTN’s management has decided to maintain s supply of 30% and 50% of the next quarter’s
production requirements for wood and fiberglass, respectively.
- DTN does not pay for raw materials at the time of the purchase, which means that DTN maintains
an accounts payable balance.
- DTN ‘s policy is to pay for 75% of its raw materials purchases in the current quarter, and the
remaining 25% in the subsequent quarter.
- The direct labor budget for DTN is based on an average hourly wage rate of $20 per hour for
production workers and 80 labor hours to make a 15-foot boat. The $20 per-hour wage rate
includes fringe benefits (i.e., the cost of sick leave, vacation pay, insurance, etc.) and payroll
taxes. Assume that DTN’s budgeted labor costs for each quarter are all paid in that same quarter.
- Assume that volume of direct labor hour is a good predictor of variable manufacturing overhead
cost for DTN, and that DTN uses direct labor hours to allocate these costs to each quarter.
- Total fixed costs are simply allocated evenly across the four quarters. The information about
variable and fix MOH is list in table below:

Variable MOH Costs

Indirect materials $1.5
Indirect labor 5
Utilities 1

Fixed MOH Costs

Property tax $ 2000
Insurance 1000
Depreciation – plant 15,000
Supervisor’s salaries 24,000
- Assume total estimated delivery expense for 2024 is $50,000. Sales Commission fee is 15% of
the selling price each boat. The information of fixed selling and administrative expense is as
follow:

Fixed S&A Expenses

Executives’ salaries $ 34,000
Depreciation expense 5,000
Advertising expense 10,000
Miscellaneous expense 2,500
- DTN Boat Company desired to maintain at least $100,000 cash balance at the end of each quarter.
The interest rate of 2024 is 10%. DTN plans to declare dividends of $30,000 in the first quarter of
 2024, which is expected to pay in the third quarter. DTN intends to purchase an equipment at the
end of 2024.

Requirement:

Task 1: Prepare the sales budget for DTN Boat Company following the form below:

DTN Boat Company

2024 Sales Budget
Q1 Q2 Q3 Q4 Total
Sales volume
Price
Revenue earned
Received in current quarter
Prior revenue collected
Collections from customers

Task 2: prepare production budget for DTN Boat Company following the form below:

DTN Boat Company

2024 Production Budget
Q1 Q2 Q3 Q4 Total
Sales volume
Desired ending inventory
Total boats needs
Less beginning inventory
Total boats to produce

Task 3: prepare Direct Materials budget for DTN Boat Company following the form below:
 DTN Boat Company
2024 Direct Materials Budget
Wood Q1 Q2 Q3 Q4 Total
Production volume
Standard feet per boat
Wood needed in production
Desired ending inventory
Total wood need
Less beginning inventory
Total wood purchase
Standard purchase price
Total wood purchases
Fiberglass Q1 Q2 Q3 Q4 Total
Production volume
Standard feet per boat
Fiberglass needed in production
Desired ending inventory
Total fiberglass need
Less beginning inventory
Total fiberglass purchase
Standard purchase price
Total fiberglass purchases
Q1 Q2 Q3 Q4 Total
Total materials purchases
Paid in current quarter
Current purchase payments
Prior purchase payments
Payments to suppliers

Task 4: prepare Direct Labor Budget for DTN Boat Company following the form below:
 DTN Boat Company
2024 Direct Labor Budget
Q1 Q2 Q3 Q4 Total
Production volume
Standard hours per boat
Budgeted labor hours
Standard wage rate per hour
Direct labor cost

Task 5: prepare Manufacturing Overhead Budget for DTN Boat Company following the form
below:

DTN Boat Company

2024 Manufacturing Overhead Budget
Variable MOH costs Q1 Q2 Q3 Q4 Total
Total labor hour
Variable MOH rates per hour: $
Indirect materials
Indirect labor
Utilities
Total variable MOH costs
Fixed MOH cost per quarter Q1 Q2 Q3 Q4 Total
Insurance
Depreciation – plant
Supervisor’s salaries
Total fixed MOH costs
Total Q1 Q2 Q3 Q4 Total
Total MOH costs
Less depreciation
Total MOH payments

Task 6: prepare Annual Budgeted Production Cost Sheet for DTN Boat Company following the
form below:
 DTN Boat Company
2024 Budgeted Product Cost Sheet
$ Total
Direct materials cost per boat

- Wood

- Fiberglass

Direct labor cost per boat

Variable MOH cost per boat
Total variable cost per boat
Total fixed MOH
Divided by production volume
Fixed MOH cost allocated per boat
Total production cost per boat

Task 7: prepare Selling and Administrative (S&A) Expense Budget for DTN Boat Company
following the form below:
 DTN Boat Company
2024 Selling and Administrative (S&A) Expense Budget
Variable S&A expenses Q1 Q2 Q3 Q4 Total
Sales volume
Variable expense per boat sold: $

- Deliver
y expense

- Sales
commissions
Total variable S&A expenses
Fixed S&A expenses per $ Q1 Q2 Q3 Q4 Total
quarter
Executives’ salaries
Depreciation expense
Advertising expense
Miscellaneous expense
Total fixed S&A expenses
Total Q1 Q2 Q3 Q4 Total
Total S&A expenses
Less depreciation
Total S&A payments

Task 8: prepare Cash Budget for DTN Boat Company following the form below:
 DTN Boat Company
2024 Cash Budget
Q1 Q2 Q3 Q4 Total
Receipts:

- Collections from
customers
Payments:

- Direct materials

- Direct labor

- Manufacturing
Overhead

- Selling and
Administrative expenses

- Income tax payment

for 2023

- Interest payment

- Dividends

- Equipment purchase

Total payments
Financing:

- Beginning cash balance

- Total receipts

- Total payments

Cash available

- Minimum cash balance

desired

- Cash excess
(deficiency)

- Borrowings

- Repayments of
principle
Total financing inflows (outflows)
Ending cash balance

Task 9: prepare Budgeted Cost of Goods Sold for DTN Boat Company following the form below:

DTN Boat Company

Budgeted Cost of Goods Sold
For the year Ended December 31, 2024
Direct materials purchases $132,000
Direct materials beginning inventory $6,000+$2,000=$8,000
Less direct materials ending inventory $10,500+$3,500=$14,000
Direct materials costs in production $126,000
Direct labor costs in production $168,000
MOH costs in production $105,000

- Cost of goods manufactured $399,000

Finished goods beginning inventory $50,000

Less finish goods ending inventory 15*$3,800=$57,000

- Cost of goods sold $392,000

Task 10: prepare Budgeted Income Statement for DTN Boat Company following the form below:

DTN Boat Company

Budgeted Income Statement
For the year Ended December 31, 2024
Sales revenue 100*$10,000=$1,000,000
Cost of goods sold $392,000

- Gross margin $608,000

Selling and Administrative expense $251,500

- Operating income $356,500

Interest expense
Net income before tax
Income taxes (40%)
Net income after tax
Task 11: prepare Budgeted Balance Sheet for DTN Boat Company following the form below:

DTN Boat Company

Budgeted Balance Sheet
December 31,2024
Assets
Current assets:
Cash
Accounts receivable
Direct materials inventory1
Finish goods inventory2
Long-term assets:
Land
Building and equipment
Less acumulated depreciation
Total assets
Liabilites and Stockholder’s Equity
Current liabilities:
Account payable3
Income taxes payable3
Stockholder’s equity:
Common stock, $5 par
Paid-in captial in excess of par
Retained earnings
Total liabilities and stockholder’s equity

Task 12: prepare Budgeted Statement of Cash Flows for DTN Boat Company following the form
below:
 DTN Boat Company
Budgeted Income Statement
For the year Ended December 31, 2024
Cash flow from operating activities:
Net income
Adjustment:

- Depreciation

- Accounts receivable increase (decrease)

- Direct materials inventory increase (decrease)

- Finished goods inventory increase (decrease)

- Account payable increase (decrease)

- Income taxes payable increase (decrease)

Net cash provided by operating activities

Cash flow from investment activities

- Purchase of equipment

Net cash used in investment activities

Cash flow from financing activities

- Cash obtained from borrowing

- Payment of dividends

Net cash used in financing activities:

- Net increase (decrease) in cash

Beginning cash balance

Ending cash balance