## (Solved) Frosty Desserts Ltd is a producer and a wholesaler of fruit flavored frozen desserts and the company has experienced several years of steady growth...

1 Prepare a direct labour budget for the next 12 months (From July 2017 to June 2018) showing the direct labour hours needed for production and the direct labour cost for each month.

2 Prepare the Total manufacturing overhead budget for the next year, showing the monthly cash payments for manufacturing overheads.

3. Calculate the predetermined overhead rate for manufacturing overheads.

4 Calculate the manufacturing cost of ending inventory as at the end of the year. (June 2018)Â

5 Prepare the Total Selling and administrative expenses budget for the next year (From July 2017 to June 2018). Show the amount paid in cash for selling and administrative expenses each month.Â

Frosty Desserts Ltd is a producer and a wholesaler of fruit flavored frozen
desserts and the company has experienced several years of steady growth in
sales.
The companyâ€™s most popular product is their â€˜Raspberry Frangipani Tartâ€™. Jess
Wakefield, Frosty Dessertâ€™s marketing manager, has recently completed the
sales forecast of the â€˜Raspberry Frangipani tartâ€™ for the next 15 months and it is
displayed in the following table:
Sales forecast: Month Sales (Units)
June 2017
July 2017 30,000
35,000 August 2017 20,000 September 2017 45,000
October 2017 50,000 November 2017 40,000
December 2017 25,000
January 2018 20,000
February 2018
March 2018
April 2018
May 2018 25,000
15,000 20,000
30,000 June 2018 20,000
July 2018 30,000 August 2018 25,000 In May, Todd Martine, the companyâ€™s management accountant, compiled the
following data for the upcoming annual budget: _Selling price per unit of a Raspberry Frangipani tart is \$15.00. _All sales are on credit and the companyâ€™s collection pattern is as follows:
â€“ _70% collected in the month of sale, and
â€“ _30% collected in the month following sale. _The company aims to maintain finished goods of 15% of the following
monthâ€™s budgeted sales as the ending inventory. _Raw materials required to produce one Raspberry frangipani tart is 2
kilograms. And the raw materials cost is \$4.00 per kilogram. _The company plans to maintain an ending inventory amount of 10% of the
following monthâ€™s material requirement. _All the purchases are done on credit and the company policy on payment for
purchases is as follows: - 40% paid in the month of purchase
- 60% paid in the month following the purchase.
Purchases in May 2017 are; \$234,000. Direct labour requirement for production of a tart is 0.08hours per unit, and
the direct labour cost is paid \$25 per hour. Manufacturing overhead is applied to units on the basis of direct labour
hours. Fixed manufacturing overhead amounts to \$61,000 per month. The
remainder of the manufacturing overhead is variable and it is \$12 per direct
labour hour. Included in the fixed manufacturing overhead is \$25,000 of
equipment depreciation. Monthly fixed selling and administrative expenses are \$51,000 and there is a
non- cash amount of \$8,000 included in it. The variable selling and administrative overhead is \$0.60 per unit and it varies with the number of units
sold. Cash balance as at 1st June is \$58,000. And the company aims to maintain a
minimum cash balance of \$32,000 at the end of each month. The company policy is to maintain a 14% open line of credit for \$50,000 (if
required) .The Company borrows on the first day of the month and repays loans
on the last of the month. In August and November, the company aims to replace some of their old fixed
assets with new ones that will cost \$65,000 and \$30,000 respectively. They will
be paid for in cash. Cash dividend to be paid in December 2017 is \$20,000.

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