Question

Big John, Inc, makes one product and it provided the following information to help prepare the master budget A. The budgeted selling price per unit is $60. Budgeted unit sales for April May June, and July are 9,500, 10,000, 10,500, and 11,000 units respectively. All sales are on credit B. 50% of credit sales are collected in the month of the sale and 50% in the following month C. The ending finished goods inventory equals 20% of the following month's unit sales D. The ending raw materials inventory equals 10% of the following month's raw materials production needs. Each unit of finished goods requires 4 pounds of raw materials. The raw materials cost $2.50 per pound. E. 60% of raw materials purchases are paid for in the month of purchase and 40% in the following month F. The direct labor wage rate is $12.50 per hour. Each unit of finished goods requires 2 direct labor hours G. The variable selling and administrative expense per unit sold is $2.00. The fixed selling and administrative expense per month is $75,000 Required Figure your solutions below and record your final answer in the space provided 1. What are the budgeted sales for May? 2. What are the expected cash collections for May? 3. What is the accounts receivable balance at the end of May? 4. According to the production budget, how many units should be produced in May? _5. If 42.400 pounds of raw materials are needed to meet production in June, how many pounds of raw materials should be purchased in May? 6. What is the estimated cost of raw materials for May? 7. In May, what are the total estimated cash disbursements for raw materials purchased? Assume the cost of raw material purchases in the previous month is 596,000

Answer 1

Big John Solution 1) Budgeted Sales for May - 10000 units x $60 = $ 6,00,000 Solution 2) Expected may Collections Of Previous month 9500 x $60 x 50% Of Current Month 10000 x $60 x 50% Total Expected collections in May $ $ $ 2,85,000 3,00,000 5,85,000 Solution 3) Account receivable Bal at end of May: = 10000 x $60 x 50% $ 3,00,000 Solution 4) Units to be Produced Units sold add: Ending Inventory (10500 x 20%) Less: Beginning Inventory (10000 x 20%) Total Units to be produced in May 10000 2100 -2000 10100 Solution 5) Raw Material req for May (10100 x 4) add: Ending inventory (42400 x 10%) Less: Beginning inventory (40400 x 10%) Raw Material required 40400 pounds 4240 -4040 40600 pounds Solution 6) Raw Material required to purchased Cost per pound $ Estimated cost of Raw material in May $ 40600 pounds 2.50 1,01,500 Solution 7) Expected may Disburement Of Previous month $96000 x 40% Of Current Month $101500 x 60% Total Expected disbursement in May $ $ $ 38,400 60,900 99,300

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