Question

Soprano Co. is in the process of preparing the second quarter budget for 2016, and the following data have been assembled • The company sells a single product at a selling price of $41 per unit. The estimated sales volume for the next six months is as follows March April 6.100 units 7,100 units 10,300 units by August 8.400 units 9.100 units 6.100 units All sales are on account. The company's collection experience has been that 42% of a month's sales are collected in the month of sale, 53% are collected in the month following the sale, and 5% are uncollectible. It is expected that the net realizable value of accounts receivable ... accounts receivable less allowance for uncollectible accounts) will be $132,553 on March 31, 2016. • Management's policy is to maintain ending finished goods inventory each month at a level egun to 53% of the next month's budgeted sales. The finished goods inventory on March 31, 2016, is expected to be 3.763 units. • To make one unit of finished product, 5 pounds of materials are required. Management's policy is to have enough materials on hand at the end of each month to equal 41% of the next month's estimated usage The raw materials inventory is expected to be 18,032 pounds on March 31, 2016 • The cost per pound of raw material is $5.00, and 75% of all purchases are paid for in the month of purchase, the remainder is paid in the following month. The accounts payable balance for raw material purchases is expected to be $46,988 on March 31, 2016 Required: a. Prepare a sales budget in units and dollars, by month and in total, for the second quarter (April, May and June) of 2016. April May June Expected sales in units Selling price per unit Total sales b. Prepare a schedule of cash collections from sales by month and in total for the second quarter of 2016 Apr May June Total Cash collections from Marcha April sales

Answer 1

1. sales budget

	April	May	June	Total
expected sales in unit	7100	10300	8400	25800
selling price per unit	41	41	41	41
Total sales	291100	422300	344400	1057800

2.cash collection

	April	May	June	Total
March sales	132553[6100*41]*53%			132553
April sales	122262[291100*42%]	154283[291100*53%]		276545
May sales		177366[422300*42%]	223819[422300*53%]	401185
June sales			144648[344400*42%]	144648
Total cash collections	254815	331649	368467	954931

3.production budget

	Apr	may	june	total	July
sales	7100	10300	8400	25800	9100
desired ending inventory of finished goods	5459[10300*53%]	4452[8400*53%]	4823[9100*53%]	4823	3233[6100*53%]
total goods needed	12559	14752	13223	40534	12333
Beginning inventory of finished goods	3763	5459	4452	3763	4823
units to be produced	8796[12559-3763]	9293[14752-5459]	8771	26860	7510

in format given

	a	m	j	t
beginning finished goods	3763	5459	4452	3763
units to be produced	8796	9293	8771	26860
goods available for sales	12559	14752	13223	30623
desired ending inventory	5459	4452	4823	4823
quantitiy of goods	7100	10300	8400	25800

4.material purchase budget

	a	m	june	total	july
beginning inventory of raw material	18032	19050.65	17980.55	18032
purchase of raw material	44998.65[19050.65+43980-18032]	45394.9[17980.55+46465-19050.65]	41269.95[15395.5+43855-17980.55]	131663.5
raw material available for use	63030.65	64445.55	59250.5	149695.5
desired ending inventory of raw material	19050.65[46465*41%]	17980.55[43855*41%]	15395.5[37550*41%]	15395.5
quantity if raw material to be used in production	43980[8796*5pounds]	46465[9293*5]	43855[8771*5]	134300	37550[7510*5]

5.payment budget

	April	May	June	Total
March purchase	46988			46988
april	164925[43980*5$*75%]	54975[43980*5*25%]		219900
may		174243.75[46465*5*75%]	58081.25[46465*5*25%]	232325
june			164456.25[43855*5*75%]	164456.25
Total cash payment	211913	229218.75	222537.5	663669.25