Question

Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each frame requires 4 linear feet of bamboo, which costs $3.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $11 per hour. Iguana has the following inventory policies:

• Ending finished goods inventory should be 40 percent of next month’s sales.
• Ending raw materials inventory should be 30 percent of next month’s production.

Expected unit sales (frames) for the upcoming months follow:   

March	300
April	300
May	350
June	450
July	425
August	475

Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $9,600 ($800 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $850 per month plus $0.60 per unit sold.

     Iguana, Inc., had $12,800 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 raw materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Raw materials purchases for March 1 totaled $3,500. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $200 in depreciation. During April, Iguana plans to pay $3,500 for a piece of equipment.

1.)Compute the budgeted cash payments for Iguana.

Answer 1

March July Aug 425 Compute the Budgeted Cash receipts for Iguana Particulars Total Sales units Total Sales in $ (units x $30) Cash Sales (80%) Credit Sales (20%) 50% recepits from Credit sales - same month 50% recepits of credit sales -previous month Total Cash Received (A+B+C) April 300 9000 7200 1800 900 A May 300 9000 7200 1800 900 900 9000 June 350 10500 8400 2100 1050 900 10350 450 13500 10800 2700 1350 1050 13200 12750 10200 2550 1275 1350 12825 475 14250 11400 2850 1425 1275 14100 B C 350 475 1900 5700 A B Raw Material Requirement Particulars March Total Sales units Required bamboo @ 4 feet per unit Cost of Bamboo @ $ 3.00 per foot Closing Stock @ 30% of next Month's Sale Opening stock Total Raw Material to be purchased (A+B-C) 80% payment made during month 20% of previous month's payment Total Payment to be made for raw material * 20% payment of March purchases in April = $3500 x 20% = $700 April May June July Aug 300 300 450 425 1200 1200 1400 1800 1700 3600 3600 4200 5400 5100 1080 1260 1620 1530 1710 1080 1260 1620 1530 3780 4560 5310 5280 3024 3648 4248 4224 700* 756 912 1062 $ 3,724.00 $4,404.00 $ 5,160.00 $5,286.00 1710 April 300 Labour Requirement Particulars March Total Sales units 300 Finished Goods Inventory (40% of next month's Sales) 120 140 Opening Inventory Total Units produced 420 320 Labour hours required @ 0.5 hour per unit 160 Labour charges @ $11 per hour $ 2,310.00 $ 1,760.00 *Opening Inventory of March is not available and sales September is not available 120 May 350 180 140 390 195 $ 2,145.00 June 450 170 180 440 220 $ 2,420.00 July August 425 475 190 170 190 445 285 222.5 142.5 $2,447.50 $ 1,567.50 210

390 A B C D Overhead Payments Units Sold Units Produced Variable manufacturing exp @ $0.30 per unit Fixed Manufacturing exp @ $800 per month Selling & Admin overhead-Variable @ Unit sold < $0.60 Selling & Admin overhead- (Fixed $850 - Depreciation $200) Total Overhead Payments (A+B+C+D) March April 300 300 420 320 $ 126.00 $ 96.00 $ 800.00 $ 800.00 $ 180.00 $ 180.00 $ 650.00 $ 650.00 $ 1,756.00 $ 1,726.00 May June July 350 450 425 440 445 $ 117.00 $ 132.00 $ 133.50 $ 800.00 $ 800.00 $ 800.00 $ 210.00 $ 270.00 $ 255.00 $ 650.00 $ 650.00 $ 650.00 $ 1,777.00 $ 1,852.00 $1,838.50 2 Budgeted Cash Payments Payment for Raw Materials Labour Payments Overheads Payments Payment for piece of equipment April May June $ 3,724.00 $ 4,404.00 $ 5,160.00 $ 1,760.00 $ 2,145.00 $ 2,420.00 $ 1,726.00 $ 1,777.00 $ 1,852.00 $ 2,500.00 $ 9,710.00 $ 8,326.00 $ 9,432.00 June Total $5,286.00 $ 18,574.00 $2,447.50 $ 8,772.50 $1,838.50 $ 7,193.50 $ 2,500.00 $9,572.00 $ 27,468.00

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