Question

Water Sport Inc. manufactures a small personal water tube used for children learning to swim. Management is now preparing detailed budgets for the third quarter, July through September, and has assembled the following information to assist: a. The Marketing Department has estimated sales as follows for the remainder of the year (number of water tubes): July August September 7,400 October 5,900 November 4,900 December 3,800 3,400 2,900 The selling price of the water tubes is $60. b. All sales are on account. Based on past experience, sales are expected to be collected in the following pattern: 50% in the month of sale 45% in the month following sale 5% uncollectible The beginning accounts receivable balance (excluding uncollectible amounts) on July 1 will be $164.500. c. The company maintains finished goods inventories equal to 20% of the following month's sales. The inventory of finished goods on July 1 will be 1.480 units. d. Each water tube requires 3 kilograms of synthetic polyisoprene rubber compound. To prevent shortages, the company would like the inventory of synthetic rubber compound on hand at the end of each month to be equal to 20% of the following month's production needs. The inventory of synthetic rubber compound on hand on July 1 will be 4.260 kilograms. e. The synthetic rubber compound costs $2.50 per kilogram. Water Sport pays for 70% of its purchases in the month of purchase; the remainder is paid for in the following month. The accounts payable balance for synthetic rubber compound purchases will be $14,100 on July 1.

Answer 1

Answer is given below

Sales Budget July 7,400 4,900 Budgeted Sales (units) Selling price per unit Total Budgeted Sales August September Quarter 5,900 18,200 $60 $60 $60 $354,000 $294,000 $1,092,000 $60 $444,000 Schedule of Expected Cash collections July August Accounts receivable, beginning balance $164,500 July Sales $222,000 $199,800 August Sales $177,000 September Sales Total Cash Collections $386,500 $376,800 September Quarter 164,500 421,800 $159,300 336,300 $147,000 147,000 $306,300 $1,069,600 4,900 Production Budget July Budgeted Sales (Units) 7,400 Add: Closing inventory - (20% of next month sales) 1,180 Total Needs 8,580 Less: Opening Inventory 1,480 Required Production (Units) 7,100 August September October 5,900 3,800 980 760 680 6,880 5,660 4,480 1,180 980 760 5,700 4,680 3,720 September Quarter 4,680 17,480 Direct Material purchase budget July Required Production 7,100 Material D236 needed per unit (kgs) Production need (kgs) 21,300 Add: Closing inventory 3,420 Total Needs 24,720 Less: Opening Inventory 4,260 Raw Material to be purchased 20,460 Purchase price per unit $2.50 Cost of Raw material to be purchased at $2.50 per kg August 5,700 3 17,100 2,808 19,908 3,420 16,488 $2.50 $41,220 14,040 2,232 16,272 2,808 13,464 $2.50 $33,660 52,440 2,232 54,672 4,260 50,412 $2.50 $126,030 Schedule of expected cash disbursements July August September Quarter Accounts payable, beginning balance $14,100 $14,100 July purchase $35,805 $15,345 $51,150 August purchase $28,854 $12,366 $41,220 September purchase $23,562 $23,562 Total Cash disbursements $49,905 $44,199 $35,928 $130,032