Question

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: 350 400 450 March April May June July August 550 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 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 $4,000. 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

April 875.00 8000.00 May June Total 875.00 9000.00 11000.00 28000.00 1000.00 of of 2.000 2,000 1000.00 1000.00 1000.00 1.cash receipts March sales (350*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 1125.00 2,250 2,250 1125.00 1125.00 1125.00 of of 2,750 1375.00 1375.00 9875.00 11125.00 13500.00 34500.00 2.Budgeted cash payments Inventory Purchase *** direct labor cost manufacturing overhead selling expense Equipment Purchase Budgeted cash payment april may june Quarter 4328.00 4922.00 5342.00 14592.00 2940.00 3430.00 3780.00 10150.00 768.00 796.00 816.00 2380.00 1190.00 1220.00 1280.00 3690.00 2000.00 2000.00 11226.00 10368.00 11218.00 32812.00 O 3) cash budget Beginning Cash Balance Add: Cash Collection Less: Cash payments Preliminary Cash Balance Borrowing/(Repayment) Ending Cash Balance april may june Quarter 11900.00 11549.00 11306.000 11900.00 9875.00 11125.00 13500.00 34500.00 11226.00 10368.00 11218.00 32812.00 10549.00 12306.00 13588.00 13588.00 1000.00 - 1000.00 11549.00 11306.00 13588.00 13588.00 0 May June Total *** cash payment for material purchase March Purchase (4000%20%) April 800.00 800.00 April Purchase 3528.00 80.00% 20.00% of of 4,410 4,410 3528.00 882.00 882.00 May- Purchase 4040.00 80.00% 20.00% of of 5,050 5,050 4040.00 1010.00 1010.00 June - Purchase Purchase 80.00% of 5,415 4332.00 4332.00 4328.00| 4922.00 5342.00|14592.00 Total Cash payment

April 400 May 450 Quarter 1,400 Working Note : 1.sales budget Budgeted units sales x selling price per unit Total Budgeted Sales Cash ( 80%) Credit (20%) 25 25 June 550 25 13,750 11,000 2,750 10,000 8,000 2,000 11,250 9,000 2,250 35,000 28,000 7,000 July 525 230 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 400 180 580 160 420 May June 450 550 220 210 670 760 180_ 220 490 540 755 545 April 420 May 490 June 540 Quarter 1,450 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 | 1,680 588 2,268 504 1,764 2.50 4,410 1,960 648_ 2,608 588 2,020 2.50 5,050 2,160 654_ 2,814 648 2,166 2.50 5,415 5,800 654 6,454 504 5,950 2.50 14,875

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 420 T. 0.50 210 14 2,940 May 490 0.50 245 . 14 3,430 June 540 0.50 270 . 14 3,780 Quarter 1,450 0.50 725 . 14 10,150 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 L 420 490 540 1,450 0.40 0.40 0.40 0.40 168.00 196.00 216.00 580.00 900.00 900.00 900.00 2,700.00 1,068.00 1,096.00 1,116.00 3,280.00 - 300.00 - 300.00 - 300.00 - 900.00 768.00 796.00 816.00 2,380.00 may 450 0.60 7). selling expense budget Budgeted units sales x variable expense per unit vairable selling expense add : fixed expense total april 400 0.60 240 950 1,190 june 550 0.60 330 950 1,280 Quarter 1,400 0.60 840 2,850 3,690 270 950 1,220

May June *** cash payment for material purchase March Purchase (4000*20%) April 800.00 Total 800.00 April Purchase 80.00% 20.00% of 4,410 3528.00 of 4,410 3528.00 882.00 882.00 May- Purchase 4040.00 80.00% of 5,050 20.00% of 5,050 4040.00 1010.00 1010.00 June - Purchase 80.00% of 5,415 4332.00 4332.00 4328.00| 4922.00 5342.00 14592.00 Total Cash payment