Question

Required information (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 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 350 400 450 550 525 575 Variable manufacturing overhead is incurred at a rate of $0.40 per unit produced. Annual fixed manufacturing overhead is estimated to be $10,800 ($900 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $950 per month plus $0.60 per unit sold. Iguana, Inc., had $11,900 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 $4,000. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $300 in depreciation. During April, Iguana plans to pay $2,000 for a piece of equipment.

Answer 1

Description		March	April	May	June	July	August
Sale-Quantity	a	350	400	450	550	525	575
Sale revenue @ 25 per unit		$               8,750	$      10,000	$        11,250	$        13,750	$      13,125	$     14,375
Cash Sale-80%	A	$               7,000	$         8,000	$          9,000	$        11,000	$      10,500	$     11,500
Credit Sale-20%		$               1,750	$         2,000	$          2,250	$          2,750	$         2,625	$        2,875
Credit sale collection- same month-50%	B	$                  875	$         1,000	$          1,125	$          1,375	$         1,313	$        1,438
Credit sale collection- next month-50%	C		$            875	$          1,000	$          1,125	$         1,375
Monthly sale collection- Cash sale + Credit sale collection same month + Credit sale collection next month	D=A+B+C	$               7,875	$         9,875	$        11,125	$        13,500	$      13,188	$     12,938
Finished Stock
Opening Stock-Quanitity	b		160	180	220	210	230
Closing Stock -40% of following month sale	c=a*40%	160	180	220	210	230	-
Required Units= (Sale+Closing stock)	a+c	510	580	670	760	755	575
less openign stock		-	160	180	220	210	230
Production during the month	d=a+c-b	510	420	490	540	545	345
Raw material Bamboo required for production @ 4 Feet	e=d*4	2,040	1,680	1,960	2,160	2,180	1,380
Opening Stock-Quanitity	g		504	588	648	654	414
Closing Stock -30% of following month production	f=e*30%	504	588	648	654	414	-
Raw Material Purchase	h=e+f-g		1,764	2,020	2,166	1,940	966
Raw Material Purchase cost @ 2.5 per feet	h*2.5	$               2,500	$         4,410	$          5,050	$          5,415	$         4,850	$        2,415
Raw material payment- Same month-80%		$               2,000	$         3,528	$          4,040	$          4,332	$         3,880	$        1,932
Raw material payment- Next month- 20%			$            500	$             882	$          1,010	$         1,083	$           970
Total Payment		$               2,000	$        4,028	$          4,922	$          5,342	$        4,963	$       2,902
Labour hours @ 0.5 hours per unit production	i=d*0.5	255	210	245	270	273	173
Labour cost @ 14 per hour	i*14	$               3,570	$         2,940	$          3,430	$          3,780	$         3,815	$        2,415
Variable overhead @ 0.4 per unit produced	j=d*0.4	$                  204	$            168	$             196	$             216	$            218	$           138
Fixed overhead		$                  900	$            900	$             900	$             900	$            900	$           900
Selling overheads
Fixed charges		$                  650	$            650	$             650	$             650	$            650	$           650
Depreciation		$                  300	$            300	$             300	$             300	$            300	$           300
Variable	a*0.6	$                  210	$            240	$             270	$             330	$            315	$           345
Budgetd cash payments	E= AP payment + Labor cost + Overheads-Depreciation	$               7,534	$         8,926	$        10,368	$        11,218	$      10,861	$        7,350
Opening cash			$      11,900	$        11,849	$        11,606
Budgeted Receipts	D		$         9,875	$        11,125	$        13,500
Budgeted Cash payments			$       (8,926)	$      (10,368)	$      (11,218)
Equipment			$       (2,000)
Preliminary cash balance			$      10,849	$        12,606	$        13,888
Borrow/(paid back)			$         1,000	$        (1,000)	$                 -
Closing cash balance			$      11,849	$        11,606	$        13,888