Question

3. Prena 1. Prepare a schedule of cash collections for January, February, and March, and for the quarter in total. 2. Prepare a production budget. (Hint: Unit sales - Sales in dollars / Selling price per unit.) Prepare a direct materials budget. 4. Prepare a cash payments budget for the direct material purchases from Requirement 3. 5. Prepare a cash payments budget for direct labor. 6. Prepare a cash payments budget for manufacturing overhead costs. 7. Prepare a cash payments budget for operating expenses. 8. Prepare a combined cash budget. 9. Calculate the budgeted manufacturing cost per unit (assume that fixed manufacturing overhead is budgeted to be $0.70 per unit for the year). 10. Prepare a budgeted income statement for the quarter ending March 31. (Hint: Cost of goods sold = Budgeted cost of manufacturing one unit x Number of units sold.)

Answer 1

1			Cash collections budget
					Month
					Jan	Feb	Mar	Quarter
	Cash sales				34860	41580	40320	116760
	(Current month sales*35%)				(99600*35%)	(118800*35%)	(115200*35%)
	Credit sales				46150	64740	77220	188110
	(Previous month sales*65%)				(71000*65%)	(99600*65%)	(118800*65%)
	Total cash collections				81010	106320	117540	304870
2			Production budget
					Month
					Jan	Feb	Mar	Quarter
	Unit sales			(Note:1)	8300	9900	9600	27800
	Plus:Desired ending inventory				990	960	900	2850
	(Following months sales*10%)				(9900*10%)	(9600*10%)	(9000*10%)
	Total needed				9290	10860	10500	30650
	Less: Beginning inventory				830	990	960	2780
	(Ending inventory of previous month)				(8300*10%)
	Units to produce				8460	9870	9540	27870
	Note:1
					Jan	Feb	Mar	Apr
	Sales in $			a	99600	118800	115200	108000
	Selling price per unit			b	12	12	12	12
	Unit sales			a/b	8300	9900	9600	9000
3			Direct materials budget
					Month
					Jan	Feb	Mar	Quarter	April
	Units to be produced				8460	9870	9540	27870	9000
	Multiply by:Quantity (pounds) of DM needed per unit				3	3	3		3
	Quantity (pounds) needed for production				25380	29610	28620	83610	27000
	Plus: Desired ending inventory of DM				5922	5724	5400	17046
	(Next month production needs*20%)				(29610*20%)	(28620*20%)	(27000*20%)
	Total quantity (pounds) needed				31302	35334	34020	100656
	Less: Beginning inventory of DM				5076	5922	5724	16722
	(Ending inventory of previous month)				(25380*20%)
	Quantity (pounds) to purchase				26226	29412	28296	83934
	Multiply by:Cost per pound				2	2	2
	Total cost of DM purchases				26224	29410	28294	83928
4			Cash payments for direct materials budget
					Month
					Jan	Feb	Mar	Quarter
	20% of current month DM purchases				5245	5882	5659	16786
					(26224*20%)	(29410*20%)	(28294*20%)
	80% of last month's DM purchases				43000	20979	23528	87507
					Accounts payable	(26224*80%)	(29410*80%)
	Total cash payments				48245	26861	29187	104293
5			Cash payments for direct labor budget
					Month
					Jan	Feb	Mar	Quarter
	Total cost of direct labor				3807	4442	4293	12542