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 $30 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 direct materials Inventory should be 30 percent of next month's production. Expected unit sales (frames) for the upcoming months follow: 295 March April 29e May June 440 July August Variable manufacturing overhead is incurred at a rate of $0.20 per unit produced. Annual fixed manufacturing overhead is estimated to be $9.000 ($750 per month) for expected production of 5.000 units for the year. Selling and administrative expenses are estimated at $800 per month plus $0.50 per unit sold. Iguana, Inc., had $11.800 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 $2,600. All other operating costs are paid during the month Incurred. Monthly fixed manufacturing overhead Includes $190 In depreciation. During April. Iguana plans to pay $3.400 for a plece of equipment.

Answer 1

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Iguana
Sales Budget	March	April	May	June	2nd Qtr. Total	July	August	Note
Budgeted Sales units	295.00	290.00	340.00	440.00		415.00	465.00	A
Sell price per unit	30.00	30.00	30.00	30.00		30.00	30.00	B
Budgeted Sales Revenue	8,850.00	8,700.00	10,200.00	13,200.00	32,100.00	12,450.00	13,950.00	C=A*B
Cash sale is 80%	7,080.00	6,960.00	8,160.00	10,560.00	25,680.00			D=C*80%
Credit sale is 20%	1,770.00	1,740.00	2,040.00	2,640.00	6,420.00			E=C*20%
Answer 1
Budgeted cash receipts		April	May	June	2nd Qtr. Total
Cash sale		6,960.00	8,160.00	10,560.00	25,680.00			See D
50% of Credit sale in the same month		870.00	1,020.00	1,320.00	3,210.00			F= 50% of E
50% of Credit sale in the following same month		885.00	870.00	1,020.00	2,775.00			G= 50% of E of previous month.
Budgeted cash receipts		8,715.00	10,050.00	12,900.00	31,665.00			H=D+F+G
Budgeted Production in Units	March	April	May	June	2nd Qtr. Total	July	August
Budgeted Sales units	295.00	290.00	340.00	440.00		415.00	465.00	See A
Add: Closing	116.00	136.00	176.00	166.00		186.00		I= 40% of A of next month.
Less: Opening	118.00	116.00	136.00	176.00		166.00		J= 40% of A of same month.
Budgeted Production in Units	293.00	310.00	380.00	430.00		435.00		X
Budgeted cost of Raw Material Purchases	March	April	May	June	2nd Qtr. Total	July
Production Budget		310.00	380.00	430.00		435.00		See X
Bamboo required per unit		4.00	4.00	4.00		4.00		K
Bamboo required		1,240.00	1,520.00	1,720.00		1,740.00		L=K*X
Add: Closing		456.00	516.00	522.00				M= 30% of L of next month.
Less: Opening		372.00	456.00	516.00				N= 30% of L of same month.
Budgeted Raw Material Purchases		1,324.00	1,580.00	1,726.00				Y
Cost per foot		2.50	2.50	2.50				O
Budgeted cost of Raw Material Purchases	2,600.00	3,310.00	3,950.00	4,315.00				P=Y*O
80% paid in same month		2,648.00	3,160.00	3,452.00	9,260.00			Q=P*80%
20% paid in next month		520.00	662.00	790.00	1,972.00			R= 20% of P of previous month.
Direct Material Payment		3,168.00	3,822.00	4,242.00	11,232.00			W=Q+R

Budgeted Direct Labor cost	April	May	June	2nd Qtr. Total
Production Budget	310.00	380.00	430.00		See X
Labor Hour required per unit	0.50	0.50	0.50		Z
Total Labor Hour required	155.00	190.00	215.00		AA= X*Z
Labor Rate per Hour	14.00	14.00	14.00		AB
Budgeted Direct Labor cost	2,170.00	2,660.00	3,010.00	7,840.00	AC=AA*AB
Budgeted manufacturing overhead	April	May	June	2nd Qtr. Total
Production Budget	310.00	380.00	430.00		See J
Variable manufacturing overhead per unit	0.20	0.20	0.20		S
Variable manufacturing overhead Budget	62.00	76.00	86.00	224.00	T=J*S
Fixed manufacturing overhead Budget	750.00	750.00	750.00	2,250.00	E
Budgeted manufacturing overhead	812.00	826.00	836.00	2,474.00	F=T+E
Total Selling & admin expenses Budget	April	May	June	2nd Qtr. Total
Budgeted Sales units	290.00	340.00	440.00		See A
Variable Selling & admin expenses per unit	0.50	0.50	0.50		U
Variable Selling & admin expenses Budget	145.00	170.00	220.00	535.00	V=A*U
Fixed Selling & admin expenses Budget	800.00	800.00	800.00	2,400.00	R
Total Selling & admin expenses Budget	945.00	970.00	1,020.00	2,935.00	S=V+R

Answer 2
Budget cash payments	April	May	June	2nd Qtr. Total
Direct Material	3,168.00	3,822.00	4,242.00	11,232.00
Direct Labor	2,170.00	2,660.00	3,010.00	7,840.00
Manufacturing Overhead (excl. depreciation)	622.00	636.00	646.00	1,904.00
Selling & admin expenses	945.00	970.00	1,020.00	2,935.00
Payment for equipment	3,400.00	-	-	3,400.00
Budget cash payments	10,305.00	8,088.00	8,918.00	27,311.00	W
Answer 3
Cash budget	April	May	June	2nd Qtr. Total
Beginning Cash Balance	11,800.00	11,210.00	12,172.00
Plus: Budgeted cash receipts	8,715.00	10,050.00	12,900.00	31,665.00	See H
Less: Budget cash payments	10,305.00	8,088.00	8,918.00	27,311.00	See W
Preliminary cash balance	10,210.00	13,172.00	16,154.00
Cash borrowed/ (repaid)	1,000.00	(1,000.00)	-	-
Ending cash balance	11,210.00	12,172.00	16,154.00