Storm Tools has formed a new business unit to produce battery-powered drills.Thebusiness unit was formed by the transfer of selected assets and obligations from theparent company

Storm Tools has formed a new business unit to produce battery-powered drills.Thebusiness unit was formed by the transfer of selected assets and obligations from theparent company.The unit’s initial balance sheet on January 1 contained cash($500,000),plantandequipment($2,500,000),notespayabletotheparent($1,000,000), and residual equity ($2,000,000).The business unit is expected to repay the note at $50,000 per month, plus allaccrued interest at 1/2% per month.Payments are made on the last day of eachmonth.The unit is scheduled to produce 25,000 drills during January, with an increase of2,500 units per month for the next three months.Each drill requires $40 of rawmaterials.Raw materials are purchased on account, and paid in the month followingthe month of purchase.The plant manager has established a goal to end each monthwith raw materials on hand, suFcient to meet 25% of the following month’s plannedproduction.The unit expects to sell 20,000 drills in January; 25,000 in ±ebruary, 25,000 in March,and 30,000 per month thereafter.The selling price is $100 per drill.Half of the drillswill be sold for cash through a website. The others will be sold to retailers on account,who pay 40% in the month of purchase, and 60% in the following month.Uncollectible accounts are not material.Each drill requires 20 minutes of direct labor to assemble.Labor rates are $24 perhour.Variable factory overhead is applied at $9 per direct labor hour.The ²xedfactory overhead is $25,000 per month; 60% of this amount is related to depreciationof plant and equipment.With the exception of depreciation, all overhead is funded asincurred.Selling, general, and administrative costs are funded in cash as incurred, and consistof ²xed components (salaries, $100,000; oFce, $40,000; and advertising, $75,000)and variable components (15% of sales).Prepare a monthly comprehensive budget plan for Storm’s new business unit forJanuary through March.The plan should include the (a) sales and cash collectionsbudget, (b) production budget, (c) direct materials purchases and payments budget,(d) direct labor budget, (e) factory overhead budget, (f) ending ²nished goods budget(assume total factory overhead is applied to production at the rate of $11.73 perdirect labor hour), (g) SG&A budget, and (h) cash bud

Looking for a Similar Assignment? Order now and Get 10% Discount! Use Coupon Code "Newclient"