Question

Required information [The following information applies to the questions displayed below.) Iguana, Inc., manufactures bamboo picture frames that sell for $20 each. Each frame requires 4 linear feet of bamboo, which costs $1.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $13 per hour. Iguana has the following inventory policies: • Ending finished goods inventory should be 40 percent of next month's sales. • Ending direct materials inventory should be 30 percent of next month's production. Expected unit sales (frames) for the upcoming months follow: March April May June July August 325 350 400 500 475 525 Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $6,000 ($500 per month) for expected production of 5,000 units for the year. Selling and administrative expenses are estimated at $550 per month plus $0.60 per unit sold. Iguana, Inc., had $12,000 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the credit sales, 50 percent is collected during the month of the sale, and 50 percent is collected during the month following the sale. Of direct materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Direct materials purchases for March 1 totaled $2,000. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $250 in depreciation. During April, Iguana plans to pay $4,000 for a piece of equipment.

Answer 1

Part 1: | 1 | Budgeted sales revenue 2 budgeted production in units 3 budgted cost of raw material 4 budgeted direct labor cost 5 budgeted manufacturing overhead 6 budged cost of goods sold 7 Total Budgeted selling and administrative budget april 7,000 370 2,346 2,405 | 611 4,900 760 may 8,000 440 2,730 2,860 632 5,600 790 june 10,000 490 2,949 3,185 647 7,000 850 2nd Qtr 25,000 1,300 8,025 8,450 1,890 17,500 2,400

April May June Quarter Part 2: IGUANA, INC Budgeted Income Statement For the Quarter Ending June Budgeted sales revenue Budgeted cost of goods sold 7000.00 8000.00 10000.00 4900.00 5600.00 7000.00 25000.00 17500.00 Budgeted Gross Margin Budgeted Selling and Administrative Expenses 2100.00 760.00 2400.00 790.00 3000.00 7500.00 850.00l 2400.00 Budgeted Net Operating Income 1340.00 1610.00 2150.00 5100.00

June Part 3: 1.cash receipts March sales(325*20*20%*50%) cash sales April Sales April 650.00 5600.00 May Total 650.00 6400.00 8000.00|20000.00 700.00 50.00% 50.00% of of 1,400 1,400 700.00 700.00 700.00 May- Sales 800.00 50.00% 50.00% of of 1,600 1,600 800.00 800.00 800.00 June - Sales 50.00% of 2,000 1000.00 1000.00 7900.00 9800.00 24650.00 Budgeted cash receipts 6950.00 2.Budgeted cash payments Inventory Purchase *** direct labor cost manufacturing overhead selling expense Equipment Purchase Budgeted cash payment april 2276.80 2405.00 361.00 760.00 4000.00 9802.80 may june Quarter 2653.20 2905.20 7835.20 2860.00 3185.00 382.00 397.00 1140.00 790.00 850.00 2400.00 0 o 4000.00 6685.20 7337.20 23825.20 3)cash budget Beginning Cash Balance Add: Cash Collection Less: Cash payments Preliminary Cash Balance Borrowing/ (Repayment) Ending Cash Balance april may june Quarter 12000.00 10147.20 10362.00 12000.00 6950.00 7900.00 9800.00 24650.00 9802.80 6685.20 7337.20 23825.20 9147.20 11362.00 12824.80 12824.80 1000.00 - 1000.00 10147.20 10362.00 12824.80 12824.80

April 350 Quarter 1,250 Working Note : 1.sales budget Budgeted units sales x selling price per unit Total Budgeted Sales Cash ( 80%) Credit (20%) 20 May 400 - 20 8,000 6,400 1,600 June 500 20 10,000 8,000 2,000 7,000 5,600 1,400 25,000 20,000 5,000 1 2) Production budget Budgeted units sales Add: Desired Ending Inventory ( 40% of next month unit sale) Total Needs Less: Beginning Inventory Required production in units April May June July 350 400 500 475 160 200 190 210 510 600 690 685 140_ 160_ 200_ 190 370 - 440| 490 495 April 370 4 1,480 528 588 3).direct material budget required production in units of finished goods x units of raw material needed per unit of finished goods units of raw material needed to meet production Add: Desired Ending Inventory ( 30% of next month production need) Total Needs Less: Beginning Inventory Required Inventory Purchase x cost per unit cost of raw material to be purchased May June 440 490 _ 4_4 1,760 1,960 594 2,348 2,554 528 588 1,820 1,966 1.50 1.50 2,730 2,949 Quarter 1,300 4 5,200 594 5,794 444 5,350 1.50 8,025 2,008 444 1,564 1.50 2,346

4). direct labor budget April May June Quarter required production in units of finished goods | 370 440 490 1,300 x hours require per unit (30/60) | 0.50 0.50 0.50 0.50 total hours required 185 220 245 650 x cost per hour 13. 13. 13. 13 direct labor cost 2,405 2,860 3,185 8,450 5.budgeted manufacturing overhead required production in units of finished goods x variable cost per unit allocated variable overhead fixed overhead Total budgeted manufacturing overhead Less: depreciation cash paid for manufacturing overhead April May June Quarter 370 440 490 1,300 0.30 0.30 0.30 0.30 111.00 132.00 147.00 390.00 500.00 500.00 500.00 1,500.00 611.00 632.00 647.00 1,890.00 - 250.00 - 250.00 - 250.00 - 750.00 361.00 382.00 397.00 1,140.00 7). selling expense budget Budgeted units sales x variable expense per unit vairable selling expense add : fixed expense total april 350 0.60 210 550 760 may 400 0.60 240 550 790 june 500 0.60 300 550 850 Quarter 1,250 0.60 750 1,650 2,400 6.cost of goods sold unit sold x unit cost** cost of goods sold April 350 14.00 | 4,900 May 400 14.00 5,600 June 500 14.00 7,000 Quarter 1,250 14.00 17,500 **calculation of unit cost direct material (4*1.5) direct labor (0.5*13) variable manufacturing overhead fixed manufacturing overhead (6000/5000) unit cost 6.00 6.50 0.30 1.20 14.00

May June Total *** cash payment for material purchase March Purchase (2000*20%) April 400.00 400.00 April Purchase 1876.80 80.00% 20.00% of of 2,346 2,346 1876.80 469.20 469.20 May- Purchase 2184.00 80.00% 20.00% of of 2,730 2,730 2184.00 546.00 546.00 June - Purchase 80.00% of 2,949 2359.20 2359.20 2653.20 2905.207835.20 Total Cash payment 2276.80