Question

           I.         Prepare a sales budget, by month and in total, for the third quarter. (Show your budget in both units and dollars.) Also prepare a schedule of expected cash collections, by month and in total, for the third quarter.

         II.         Prepare a production budget for each of the months July–October.

       III.         Prepare a direct materials budget, by month and in total, for the third quarter. 

       IV.         Prepare a schedule of expected cash disbursements for raw material, by month and in total, for the third quarter

         V.         Prepare a cash budget by month and in total for the third quarter

       VI.         Based on the budgets you have prepared above, what advice do you have for the management of Tech Toys?

Submission method: Each group to submit online only one copy of the answers. Submission is no later than 18^thApril 2021 at 6pm. 

 

 

Case scenario:

Tech Toys manufactures specific toys. The company is preparing detailed budgets for the third quarter and has assembled the following information to assist in the budget preparation: 

The Marketing Department has estimated sales as follows for the remainder of the year (in units): 

Months	Sales in units
July	39,500
August	73,700
September	56,350
October	24,450
November	15,480
December	16,225

The selling price of each toy is $17 per unit. All sales are on account. Based on past experience, sales are collected in the following pattern: 

35 percent in the month of sale

55 percent in the month following sale

5 percent uncollectible

Sales for June totaled $370,500

Cash balance on 30^th June is $8,000

The company maintains finished goods inventories equal to 24.5% of the following month's sales. This requirement will be met at the end of June.

Each toy requires 4.5 units of raw material that is sometimes hard to acquire. Therefore, the company requires that the ending inventory of the raw material to be equal to 55% of the following month's production needs. The inventory of raw material on hand at the beginning and end of the quarter will be: 

June 30: 34,800 units

Raw material costs $0.72 per unit. One-half of a month's purchases of raw material is paid for in the month of purchase; the remainder is paid for in the following month. The accounts payable on July 1 for purchases of raw material during June will be $76,000.

End of case scenario