Question

[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 $2.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12.00 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 May June July August 275 250 300 400 375 425 Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.60 per unit sold. Iguana, Inc., had $10,800 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 $2,000. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $150 in depreciation. During April, Iguana plans to pay $3,000 for a piece of equipment

Answer 1

Requirement | Schedule for Budgeted Sales Revenue Particulars (1) Budgeted Sales Units (2) Sales Price (3) Budgeted Sales Revenue (1) * (2) April 250 25 6,250 May 300 25 7,500 June 400 25 10,000 2nd Quarter 950 25 23,750 2nd Quarter Requirement | Schedule for Budgeted Production Particulars (1) Budgeted Sales Units (2) Add : Ending Finished goods Inventory (3) Total (1) + (2) (4) Less : Beginning Finished goods Inventory (5) Budgeted Production (3) -(4) April 250 120 370 100 270 May 300 160 460 120 340 June 400 150 550 160 390 950 150 1,100 100 1,000 Requirement | Schedule for Budgeted Cost of Raw Materials Purchase Particulars April (1) Budgeted Production 270 (2) Raw Materials per unit 4 (3) Total material needed for production (1) * (2) 1,080 (4) Add : Ending Inventory of Raw Materials 408 (5) Total (3) + (4) 1,488 (6) Less : Beginning Inventory of Raw Materials 324 (7) Budgeted Raw Materials Purchases (5)-(6) 1,164 May 340 4 1,360 468 1,828 408 1,420 June 390 4 1,560 474 2,034 468 1,566 2nd Quarter 1,000 4 4,000 474 4,474 324 4,150 (8) Material Cost per unit (9) Budgeted cost of raw materials purchases (7) * (8) 2.00 2,328 2.00 2,840 2.00 3,132 2.00 8,300

June 2nd Quarter Requirement Direct Labor Cost Particulars No. of Units to be produced during the month Time taken for producing one unit (in hrs.) No. of hours used for the production Labour Cost per hour Payment for Direct Labour Cost April 270 0.50 135 12.00 1,620 May 340 0.50 170 12.00 2,040 390 0.50 195 12.00 2,340 1,000 0.50 500 12.00 6,000 Requirement Manufacturing Overhead Costs Particulars No. of Units to be produced during the month Variable manufacturing overhead cost per unit Payment for Variable manufacturing overhead Cost April 270 0.30 81 May 340 0.30 102 June 390 0.30 117 2nd Quarter 1,000 0.30 300 Fixed Manufacturing Costs ($ 600 per month) 600 600 600 1,800 Total Manufacturing Overheads Cost 681 702 717 2,100 Requirement Cost of goods sold Particulars No. of Units Sold Add : Costs of goods manufactured (See below table) Cost of goods sold April 250 16 4,025 May 300 16 4,830 June 400 16 6,440 2nd Quarter 950 16 15,295 2nd Requirement Cost of goods manufactured Particulars Direct Material Cost (4 Units @ $ 2.00 per unit) Direct Labour Cost (0.5 Hours @ $ 12.00 per hour) Manufacturing Overheads - Variable ($ 0.30 per unit) Fixed ($ 7,200 / 4,000 units) Total April 8.00 6.00 May 8.00 6.00 June 8.00 6.00 Quarter 8.00 6.00 0.30 1.80 16.10 0.30 1.80 16.10 0.30 1.80 16.10 0.30 1.80 16.10

Requirement Selling and Administrative Costs Particulars No. of Units Sold Variable selling expenses per unit Payment for variable selling and administrative Cost Fixed Selling and Administrative cost Payment for Selling and Administrative Costs April 250 0.60 150 650 800 May 300 0.60 180 June 400 0.60 240 650 890 2nd Quarter 950 0.50 475 1,950 2,425 650 830 2nd April 6,250 270 Particulars 1. Budgeted Sales Revenue 2. Budgeted Production in Units 3. Budgeted Cost of Raw Material Purchases 4. Budgeted Labour Cost 5. Budgeted Manufacturing Overhead 6. Budgeted Cost of goods sold 7. Total Budgeted Selling and Administration Expenses 2,328 1,620 681 4,025 800 May 7,500 340 2,840 2,040 702 4,830 830 June 10,000 390 3,132 2,340 717 6,440 890 Quarter 23,750 1,000 8,300 6,000 2,100 15,295 2,520 2nd Quarter Preparation of Budgeted Income Statement : Particulars Budgeted Sales Revenue Budgeted Cost of goods sold Budgeted Gross Margin Budgeted Selling and Adminstration Expenses Budgeted Net Operating Income April 6,250 4,025 2,225 800 1,425 May 7,500 4,830 2,670 830 1,840 June 10,000 6,440 3,560 890 2,670 23,750 15,295 8,455 2,520 5,935 Requirement 3 | Cash Budget Particulars Beginning Cash Balance Plus : Budgeted Cash Receipts Less : Budgeted Cash Payments Prelimimary Cash Balance Cash borrowed / repaid Ending Cash Balance April 10,800 6,313 8,213 8,899 2,000 10,899 May 10,899 7,375 6,160 12,115 (2,000) 10,115 June 10,115 9,750 6,871 12,994 2nd Quarter 10,800 23,438 21,244 12,994 12,994 12,994

Requirement 1 | Budgeted Cash Receipts Particulars Budgeted Sales 2nd April 6,250 6,250 May 7,500 7,500 June 10,000 10,000 Quarter 23,750 23,750 6,000 8,000 5,000 688 625 Cash Sales Credit Sales made in March received in the April Month Credit Sales made in April received in the April Month Credit Sales made in April received in the May Month Credit Sales made in May received in the May Month Credit Sales made in May received in the June Month Credit Sales made in June received in the June Month 625 19,000 688 625 625 750 750 1,000 23,438 750 750 1,000 9,750 6,313 7,375 Requirement 2 | Budgeted Cash Payments Particulars 1. Budgeted Purchases 2nd Quarter April 2,328 2,328 May 2,840 2,840 June 3,132 3,132 8,300 8,300 400 1,862 Payment for purchases made in March Month Payment for purchases made in April Month in April Payment for purchases made in April Month in May Payment for purchases made in May Month in May Payment for purchases made in May Month in June Payment for purchases made in June Month in June 466 2,272 2. Direct Labour Cost 3. Variable Manufacturing Overheads 4. Fixed Manufacturing Overheads 5. Variable Selling and Administrative Expenses 6. Fixed Selling and Administrative Expense 7. Purchase of Equipment Total Expected Cash Payments 2,262 1,620 81 450 150 650 3,000 8,213 2,738 2,040 102 450 180 650 568 2,506 3,074 2,340 117 450 240 650 400 1,862 466 2,272 568 2,506 8,074 6,000 300 1,350 570 1,950 3,000 21,244 6,160 6,871