Question

[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 $3.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $13 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 285 270 320 420 May June July August 395 445 Variable manufacturing overhead is incurred at a rate of $0.50 per unit produced. Annual fixed manufacturing overhead is estimated to be $8,400 ($700 per month) for expected production of 4,200 units for the year. Selling and administrative expenses are estimated at $750 per month plus $0.50 per unit sold. Iguana, Inc., had $11,000 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 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 $3,000. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $170 in depreciation. During April, Iguana plans to pay $3,200 for a piece of equipment.

Answer 1

Que 1:
Calculation of budgeted cash receipts:
Particulars	March	April	May	June	July	August	Total
Expected sales in units	285	270	320	420	395	445	1010
Sales price per. Unit	30	30	30	30	30	30	90
Expected sales in Value	8550	8100	9600	12600	11850	13350	30300
80% out of total sales is cash sales-A	6840	6480	7680	10080	9480	10680	24240
20% out of total sales is Credit sales	1710	1620	1920	2520	2370	2670	6060
50% of credit sales amount will be collected in the month of sale-B	855	810	960	1260	1185	1335	3030
50% of credit sales amount will be collected in the following month of sale-C	0	855	810	960	1260	1185	2625
Budgeted cash receipts(A+B+C)		8145	9450	12300			29895

Que 2:
Calculation of budgeted cash payments:
Particulars	March	April	May	June	July	August	Total
Expected sales in units	285	270	320	420	395	445	1010
Ending Finished goods inventory should be 40% of next months	108	128	168	158	178	404	454
Total production-A	393	398	488	578	573	849	1464
Raw material required for production for the month	1572	1572	1572	1572	1572	1572	4716
Ending Raw material should be 30% of the next month's production	477.6	585.6	693.6	687.6	534	0	1966.8
Total raw material required for production	2049.6	2157.6	2265.6	2259.6	2106	1572	6682.8
Paid for raw material-80% in the same month-1	1639.68	1726.08	1812.48	1807.68	1684.8	1257.6	5346.24
Paid for raw material-20% in the same month-2	0	409.92	431.52	453.12	451.92	421.2	1294.56
Labour charges per frame(Each frames take 30 minutes to build, Labour per hour-$13 so per. Frame-6.5)-C	6.5	6.5	6.5	6.5	6.5	6.5	19.5
Labour charges- A*C-3	2554.5	2587	3172	3757	3724.5	5518.5	9516
Variable manufacturing OH-D	0.5	0.5	0.5	0.5	0.5	0.5	1.5
Total variable OH-A*D-4	196.5	199	244	289	286.5	424.5	732
Fixed OH(700-170 non cash expenses-depreciation)-5	530	530	530	530	530	530	1590
Selling Expenses-6	750	750	750	750	750	750	2250
Admin. Expenses (.5 of units sold)(sales units*.5)-7	142.5	135	160	210	197.5	222.5	505
Paid to a piece of equipment-8	0	3200	0	0	0	0	3200
Total budgeted cash payments(1+2+3+4+5+6+7+8)		9537	7100	7796.8			24433.8

Que 3:
Cash budget:
Particulars	April	May	June	Total
Beginning cash balance	11000	9608	11958	32566
Plus:Budgeted cash receipts	8145	9450	12300	29895
Less:Budgeted cash payments	9537	7100	7796.8	24433.8
Preliminary cash balance	0	0	0	0
Cash borrowed/repaid	0	0	0	0
Ending cash balance	9608	11958	16461.2	38027.2