Question

Required information SB Problem PA8-1 to PA8-3 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 $2.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12 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 340 380 430 530 505 555 Variable manufacturing overhead is incurred at a rate of $0.20 per unit produced. Annual fixed manufacturing overhead is estimated to be $8,400 ($700 per month) for expected production of 6,000 units for the year. Selling and administrative expenses are estimated at $750 per month plus $0.50 per unit sold. Iguana, Inc., had $14,800 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 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 $4,500. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $280 in depreciation. During April, Iguana plans to pay $4,300 for a piece of equipment. PA8-3 (Algo) Preparing Cash Budget [LO 8-4) Required: 1. Compute the budgeted cash receipts for Iguana. 2. Compute the budgeted cash payments for Iguana. 3. Prepare the cash budget for Iguana. Assume the company can borrow in increments of $1,000 to maintain a $14,000 minimum cash balance. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the budgeted cash receipts for Iguana. (Do not round your intermediate calculations. Round final answers to 2 decimal places.) April May June 2nd Quarter Total Budgeted Cash Receipts Daired 8

Answer 1

April May June Total 850.00 850.00 7600.001 8600.00 10600.00 26800.00 950.00l of of 1.900 1,900 950.00 950.00 950.00 1.cash receipts March sales (340*25*20%*50%) cash sales April Sales 50.00% 50.00% May- Sales 50.00% 50.00% June - Sales 50.00% Budgeted cash receipts L of 1075.00 of 2,150 2,150 1075.00 1075.00 1075.00 2,650 of T 1325.00 1325.00 400.00 10625.00 13000.00 33025.00 9 2.Budgeted cash payments Inventory Purchase *** direct labor cost manufacturing overhead selling expense Equipment Purchase Budgeted cash payment april may june Quarter | 3594.40 3777.60 4113.60 11485.60 2400.00 2820.00 3120.00 8340.00 500.00 514.00 524.00 1538.00 940.00 965.00 1015.000 2920.00 4300.00 4300.00 11734.40 8076.60 8772.60 28583.60 3)cash budget Beginning Cash Balance Add: Cash Collection Less: Cash payments Preliminary Cash Balance Borrowing/ (Repayment) Ending Cash Balance april may june Quarter 14800.00 14465.60 15014.00 14800.00 9400.00 10625.00 13000.00 33025.00 11734.40 8076.60 8772.60 28583.60 12465.60 17014.00 19241.40 19241.40 2000.00 -2000.00 14465.60 15014.00 19241.40 19241.40

Working Note: 1.sales budget Budgeted units sales x selling price per unit Total Budgeted Sales Cash ( 80%) Credit (20%) April May 380 430 25 25 9,500 10,750 7,600 8,600 1,900 2,150 June 530 25 13,250 10,600 2,650 Quarter 1,340 25 33,500 26,800 6,700 July June 530 202 222 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 380 430 172 212 552 642 152 172 400 470 732 212 520 202 525 April May 400 470 June 520 Quarter 1,390 4 4 5,560 630 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 1,600 1,880 564_ 624)_ 2,164 2,504 480 564 1,684 1,940 2.00 2.00 3,368 3,880 2,080 630 2,710 624 2,086 2.00 4,172 6,190 480 5,710 2.00 11,420 1

1 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 400 0.50 200 12 2,400 May 470 0.50 235 12 2,820 June 520 0.50 260 12 3,120 Quarter 1,390 0.50 695 12 8,340 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 400 470 520 1,390 | 0.20 0.20 0.20 0.20 80.00 94.00 104.00 278.00 700.00 700.00 700.00 2,100.00 780.00 794.00 804.00 2,378.00 - 280.00-280.00 - 280.00 - 840.00 500.00 514.00 524.00 1,538.00 7). selling expense budget Budgeted units sales x variable expense per unit vairable selling expense add : fixed expense total april 380 0.50 190 750 may 430 0.50 215 750 965 june Quarter 530 1,340 0.50 0.50 265 | 670 750 2,250 1,015 2,920 940 965

pril May June Total *** cash payment for material purchase March Purchase (4500*20%) April 900.00 900.00 April Purchase of 2694.40 80.00% 20.00% 3,368 3,368 of 2694.40 673.60 673.600 May- Purchase 3104.00 80.00% 20.00% of of 3,880 3,880 3104.00 776.00 776.00 June - Purchase 80.00% of 4,172 3337.60 3337.60 4113.60 11485.60 Total Cash payment 3594.40 3777.60