Question

[The following information applies to the questions displayed below.] Iguana, Inc., manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $2.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $14 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 April May June July August 370 440 490 590 565 615 Variable manufacturing overhead is incurred at a rate of $0.40 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,500 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.50 per unit sold. Iguana, Inc., had $11,200 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 sa 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 $4,500. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $340 in depreciation. During April, Iguana plans to pay $3,500 for a piece of equipment.

Answer 1

April 925.00 8800.00 May June Total 925.00 9800.00 11800.00 30400.00 1100.00 of of 2,200 2,200 1100.00 1100.00 1100.00 1.cash receipts March sales ( 370*25*20%*50%) cash sales April Sales 50.00% 50.00% May- Sales 50.00% 50.00% June - Sales 50.00% Budgeted cash receipts of 1225.00 2,450 2,450 of 1225.00 1225.00 1225.00 of 2,950 1475.00 1475.00 12125.00 14500.00 37450.00 10825.00 2.Budgeted cash payments Inventory Purchase *** direct labor cost manufacturing overhead selling expense Equipment Purchase Budgeted cash payment april may june Quarter | 4748.00 5322.00 5742.00 15812.00 3220.00 3710.00 4060.00 10990.00 444.00 472.00 492.00 1408.00 870.00 895.00 945.001 2710.00 3500.00 3500.00 12782.00 10399.00 11239.00 34420.00 0 3)cash budget Beginning Cash Balance Add: Cash Collection Less: Cash payments Preliminary Cash Balance Borrowing/ (Repayment) Ending Cash Balance april may june Quarter 11200.00 10243.00 10969.000 11200.00 10825.00 12125.00 14500.00 37450.00 12782.00 10399.00 11239.00 34420.00 9243.00 11969.00 14230.00 14230.00 1000.00 - 1000.00 0 10243.00 10969.00 14230.00 14230.00

April 440 Quarter 1,520 Working Note : 1.sales budget Budgeted units sales x selling price per unit Total Budgeted Sales Cash ( 80%) Credit (20%) 25 May 490 25 12,250 9,800 2,450 June 590 25 14,750 11,800 2,950 11,000 8,800 2,200 38,000 30,400 7,600 July April 440 196 May 490 236 June 590 226 565 246 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 811 636 176 460 726 196 530 816 236 580 226 585 May 530 June 580 Quarter 1,570 6,280 702 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 April 460 4 1,840 636 2,476 552 1,924 2.50 4,810 2,120 696 2,816 636 2,180 2.50 5,450 2,320 702 3,022 696 2,326 2.50 5,815 6,982 552 6,430 2.50 16,075

4). direct labor budget required production in units of finished goods x hours require per unit (30/60) total hours required x cost per hour direct labor cost April 460 0.50 230 14 3,220 May 530 0.50 265 . 14 3,710 June 580 0.50 290 . 14 4,060 Quarter 1,570 0.50 785 . 14 10,990 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 460 530 580 1,570 0.40 0.40 0.40 0.40 184.00 212.00 232.00 628.00 600.00 600.00 600.00 1,800.00 784.00 812.00 832.00 2,428.00 340.00 - 340.00 - 340.00 -1,020.00 444.00 472.00 492.00 1,408.00 may 490 0.50 7). selling expense budget Budgeted units sales x variable expense per unit vairable selling expense add : fixed expense total april 440 0.50 220 650 870 june 590 0.50 295 650 945 Quarter 1,520 0.50 760 - 1,950 2,710 245 650 895

May June *** cash payment for material purchase March Purchase (4500*20%) April 900.00 Total 900.00 April Purchase 80.00% 20.00% of of 4,810 3848.00 4,810 3848.00 962.00 962.00 May- Purchase 4360.00 80.00% 20.00% of of 5,450 5,450 4360.00 1090.00 1090.00 June - Purchase 80.00% of 5,815 4652.00 4652.00 4748.00 5322.00 5742.00 15812.00 Total Cash payment