Skates4us Pty Ltd manufactures and sells two products, original skates, known as Skates4all and personalized skates, known as Skates4u -

Skates4us Pty Ltd manufactures and sells two products, original skates, known as Skates4all and personalized skates, known as Skates4u. Generally the company sells 1 Skates4u (priced at $ 75 each) for every 3 Skates4all (priced at $50 each). This year, 2009, has been a fairly problematic year for the company, from a financial perspective, with the downturn in the economy affecting it. However all surveys carried out indicate that 2010 should be a much better one, and the managing director is keen to plan the next year’s operations via budgets and other information. He has also heard about the concept of “contribution” and wants two income statements – one that shows the gross profit and the other showing contribution. You have just been appointed as the newly qualified, assistant management accountant of Skates4u Pty Ltd and have been requested to prepare a number of schedules, using the excel spreadsheet program, that will assist in the preparation of information for management for the year ending 31 December 2010. You have also been requested to set up your documents in such a manner, as to make it easy to change them should the underlying assumptions change. To assist you at this task you have been provided with the following data based on the year ending 31 December 2009: 1. The sales (in units) of original skates for 2009 are as follows: Skates4all (In units) January 2009 27,000 February 2009 18,150 March 2009 16,500 April 2009 24,387 May 2009 33,930 June 2009 32,520 July 2009 28,590 August 2009 27,930 September 2009 29,430 October 2009 30,390 November 2009 32,673 December 2009(estimated) 36,000 2. The managing director would like you to base your initial calculations on these sales figures. In a bid to attract a larger market segment, the company has designed an advertising campaign that has indicated that both types of skates will attract a reduction in price of 10% in 2010. 3. The company seems to have the following collection pattern in relation to sales – 40% of the total sales each month are cash sales with the remainder being on credit. In relation to credit sales – 30% are collected in the month of sale, 45% in the following month and 24% in the second month following the sale. Generally around 1% of credit sales is never collected and is written off as bad. The accounts receivable balance as at 31 December 2009 is estimated at $1,500,000 and the allowance for doubtful debts at $100,000. As the Accounts Receivable balance consists of two major customers, collections have been estimated as follows: 75% of the balance will be received in January 2010 and the balance is expected in February 2010. 4. Skates4us purchases the “ready to assemble” (RTA) or “knocked down” (KD) skateboards which are used in the production of both skates4all and skates4u. The company’s present contract with the regular supplier enables us to purchase each skateboard at $5. The new contract effective from 1 July 2010 has a price increase of 5% per skateboard. According to the contract, payment for the skateboards is to be made as follows:  20% of the cost of the skateboards in the month of purchase and the remainder in the following month.  The amount owing to suppliers at 31 December 2009 is estimated to be $100,000 5. Additional costs incurred in producing the skate boards for sale are as follows:  Skates4all per unit – Direct Materials – estimated at $6 per skateboard Direct Labour – estimated at 1.5 direct labour hours  Skates4u per unit – Direct Materials – estimated at $9 per skateboard Direct Labour – estimated at 2.0 direct labour hours  Factory overhead is allocated to both products using a dual plant-wide rate as follows: Variable Manufacturing overheads – estimated at $1 per direct labour hour. Fixed Manufacturing overheads – estimated at $2 per skate board. Although the company’s policy is to include any over/under application of overheads in cost of goods sold in the income statement at the year end, you may ignore this in your calculations. 6. Administrative expenses are $25,500 per month, of which $5,500 represents depreciation expense. Additionally, a variable administrative expense per unit sold is estimated at $ 0.80. 7. Fixed selling expenses are $ 80,000 per month, and variable selling expenses are 2% of sales. All selling and administrative expenses are paid in the following month to which they are incurred. An allowance for doubtful debts of $12,500 per month is made each month. This is included in $80,000 noted above. 8. The firm’s ending inventory, in keeping with the firm’s new policy is:  Finished goods inventory should equal 20% of the sales requirements for the next month. An equal amount of ready to assemble or “knocked down” skate boards are also held on hand at the end of each year.  The company usually closes its factory on the 20th of December each year and reopens on the 15th of January in the following year. All skateboards are manufactured and completed before the Christmas “Shutdown” period.  In view of the skateboard festival to be held in January 2011 in Adelaide, the company would like to hold the following levels of inventory at the end of December 2010: Skates4all estimated at 8,000 units and skates4u estimated at about 2,000 units. For ease of budgetary calculations, closing finished goods inventory is valued on a normal costing basis, at December 2010 estimated prices, using the standard specifications given above. 9. Negotiations on an enterprise bargaining agreement are presently in progress. The current wage rate is $12 per direct labour hour and it is expected that the new agreement will contain a wage increase 5% per hour, effective from 1 April 2010. 10. The factory overhead estimated for the year ended 2010 is given below: Variable manufacturing or factory overheads – $ 731,250 Fixed manufacturing or factory overheads – $ 900,000, (including depreciation of $200,000). All expenses accrue evenly over the year and cash payments in respect of factory overheads are paid in the following month to which it is incurred. You are required to: Prepare the supporting schedules as listed below for Skates4us Pty Ltd for the year ending 31 December 2010, using the excel spreadsheet provided on your portal for ACCM4100 Management Accounting. The design of each spreadsheet is your responsibility, and consideration should be given to the desired outcomes of each spreadsheet. You may ignore GST in your calculations. 1. A sales budget and budgeted net accounts receivable as at 31 December 2010 based on current conditions. In addition to this you are also required to prepare two other sales budgets (only):  The Optimistic Possibility – Assuming that the level of sales responds to the advertising campaign currently in place and increases sales volume by 25%, and  The Pessimistic Possibility – Assuming that the campaign fails and the present level of sales decreases by 15%. 2. Based on current conditions only:  A cost of goods sold budget and a production budget. The budgets must be designed so that you can calculate both the gross profit per absorption costing and the contribution per variable costing.  A schedule showing the purchase of ready to assemble (RTA) or “knocked down” skateboards, which should include the payment schedule indicating each month’s payments  Manufacturing Overheads Budget  An administration and selling expenses budget, including a segment showing the cash payments for every month, so that it can “feed” into the cash budget prepared by your colleague.  Any other schedules that you think are necessary to support the above calculations requested of you. Please also note that the schedules prepared by you should feed into the answer sheet in the spreadsheet and supports the answers arrived at. You need to make sure that the cells on the spreadsheet are linked in an appropriate manner to make it easy to change the assumptions and see the changes flow through the spreadsheet. DO NOT complete the spreadsheet with the answers manually calculated. The use of the data sheet facilitates this. You are required to hand in a hard copy of your budget support schedules with the assignment cover sheet attached AND to email the spread sheet to your lecturer for marking.
. Generally the company sells 1 Skates4u (priced at $ 75 each) for every 3 Skates4all (priced at $50 each). This year, 2009, has been a fairly problematic year for the company, from a financial perspective, with the downturn in the economy affecting it. However all surveys carried out indicate that 2010 should be a much better one, and the managing director is keen to plan the next year’s operations via budgets and other information. He has also heard about the concept of “contribution” and wants two income statements – one that shows the gross profit and the other showing contribution. You have just been appointed as the newly qualified, assistant management accountant of Skates4u Pty Ltd and have been requested to prepare a number of schedules, using the excel spreadsheet program, that will assist in the preparation of information for management for the year ending 31 December 2010. You have also been requested to set up your documents in such a manner, as to make it easy to change them should the underlying assumptions change. To assist you at this task you have been provided with the following data based on the year ending 31 December 2009: 1. The sales (in units) of original skates for 2009 are as follows: Skates4all (In units) January 2009 27,000 February 2009 18,150 March 2009 16,500 April 2009 24,387 May 2009 33,930 June 2009 32,520 July 2009 28,590 August 2009 27,930 September 2009 29,430 October 2009 30,390 November 2009 32,673 December 2009(estimated) 36,000 2. The managing director would like you to base your initial calculations on these sales figures. In a bid to attract a larger market segment, the company has designed an advertising campaign that has indicated that both types of skates will attract a reduction in price of 10% in 2010. 3. The company seems to have the following collection pattern in relation to sales – 40% of the total sales each month are cash sales with the remainder being on credit. In relation to credit sales – 30% are collected in the month of sale, 45% in the following month and 24% in the second month following the sale. Generally around 1% of credit sales is never collected and is written off as bad. The accounts receivable balance as at 31 December 2009 is estimated at $1,500,000 and the allowance for doubtful debts at $100,000. As the Accounts Receivable balance consists of two major customers, collections have been estimated as follows: 75% of the balance will be received in January 2010 and the balance is expected in February 2010. 4. Skates4us purchases the “ready to assemble” (RTA) or “knocked down” (KD) skateboards which are used in the production of both skates4all and skates4u. The company’s present contract with the regular supplier enables us to purchase each skateboard at $5. The new contract effective from 1 July 2010 has a price increase of 5% per skateboard. According to the contract, payment for the skateboards is to be made as follows:  20% of the cost of the skateboards in the month of purchase and the remainder in the following month.  The amount owing to suppliers at 31 December 2009 is estimated to be $100,000 5. Additional costs incurred in producing the skate boards for sale are as follows:  Skates4all per unit – Direct Materials – estimated at $6 per skateboard Direct Labour – estimated at 1.5 direct labour hours  Skates4u per unit – Direct Materials – estimated at $9 per skateboard Direct Labour – estimated at 2.0 direct labour hours  Factory overhead is allocated to both products using a dual plant-wide rate as follows: Variable Manufacturing overheads – estimated at $1 per direct labour hour. Fixed Manufacturing overheads – estimated at $2 per skate board. Although the company’s policy is to include any over/under application of overheads in cost of goods sold in the income statement at the year end, you may ignore this in your calculations. 6. Administrative expenses are $25,500 per month, of which $5,500 represents depreciation expense. Additionally, a variable administrative expense per unit sold is estimated at $ 0.80. 7. Fixed selling expenses are $ 80,000 per month, and variable selling expenses are 2% of sales. All selling and administrative expenses are paid in the following month to which they are incurred. An allowance for doubtful debts of $12,500 per month is made each month. This is included in $80,000 noted above. 8. The firm’s ending inventory, in keeping with the firm’s new policy is:  Finished goods inventory should equal 20% of the sales requirements for the next month. An equal amount of ready to assemble or “knocked down” skate boards are also held on hand at the end of each year.  The company usually closes its factory on the 20th of December each year and reopens on the 15th of January in the following year. All skateboards are manufactured and completed before the Christmas “Shutdown” period.  In view of the skateboard festival to be held in January 2011 in Adelaide, the company would like to hold the following levels of inventory at the end of December 2010: Skates4all estimated at 8,000 units and skates4u estimated at about 2,000 units. For ease of budgetary calculations, closing finished goods inventory is valued on a normal costing basis, at December 2010 estimated prices, using the standard specifications given above. 9. Negotiations on an enterprise bargaining agreement are presently in progress. The current wage rate is $12 per direct labour hour and it is expected that the new agreement will contain a wage increase 5% per hour, effective from 1 April 2010. 10. The factory overhead estimated for the year ended 2010 is given below: Variable manufacturing or factory overheads – $ 731,250 Fixed manufacturing or factory overheads – $ 900,000, (including depreciation of $200,000). All expenses accrue evenly over the year and cash payments in respect of factory overheads are paid in the following month to which it is incurred. You are required to: Prepare the supporting schedules as listed below for Skates4us Pty Ltd for the year ending 31 December 2010, using the excel spreadsheet provided on your portal for ACCM4100 Management Accounting. The design of each spreadsheet is your responsibility, and consideration should be given to the desired outcomes of each spreadsheet. You may ignore GST in your calculations. 1. A sales budget and budgeted net accounts receivable as at 31 December 2010 based on current conditions. In addition to this you are also required to prepare two other sales budgets (only):  The Optimistic Possibility – Assuming that the level of sales responds to the advertising campaign currently in place and increases sales volume by 25%, and  The Pessimistic Possibility – Assuming that the campaign fails and the present level of sales decreases by 15%. 2. Based on current conditions only:  A cost of goods sold budget and a production budget. The budgets must be designed so that you can calculate both the gross profit per absorption costing and the contribution per variable costing.  A schedule showing the purchase of ready to assemble (RTA) or “knocked down” skateboards, which should include the payment schedule indicating each month’s payments  Manufacturing Overheads Budget  An administration and selling expenses budget, including a segment showing the cash payments for every month, so that it can “feed” into the cash budget prepared by your colleague.  Any other schedules that you think are necessary to support the above calculations requested of you. Please also note that the schedules prepared by you should feed into the answer sheet in the spreadsheet and supports the answers arrived at. You need to make sure that the cells on the spreadsheet are linked in an appropriate manner to make it easy to change the assumptions and see the changes flow through the spreadsheet. DO NOT complete the spreadsheet with the answers manually calculated. The use of the data sheet facilitates this. You are required to hand in a hard copy of your budget support schedules with the assignment cover sheet attached AND to email the spread sheet to your lecturer for marking.

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