Question

On 23 answered Points out of 100 P Flag Panther Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations: > The budgeted selling price per unit is $94. Budgeted unit sales for April May June, and July are 8,000,8,900,10,100, and 15200 units respectively. All sales are on credit Regarding credit sales, 40% are collected in the month of the sale and cox in the following month > The ending finished goods inventory equals 30% of the following month's sales. The ending raw materials inventory equals 40% of the following month's raw materials production needs. Each unit of finished goods requires 2 pounds of raw materials. The raw m cost $1.00 per pound > Regarding raw materials purchases, 10% are paid for in the month of purchase and 90% in the following month > The direct labor wage rate is $23.00 per hour. Each unit of finished goods requires 24 direct labor hours, Required: a What are the budgeted sales for May? b. What are the expected cash collections for May? c. What is the budgeted accounts receivable balance at the end of May!

Answer 1

a) Budgeted Sales for May:

Budgeted unit sales for May = 8,900 units

Budgeted selling price per unit = $94

Budgeted sales= Budgeted unit sales × budgeted selling price per unit = 8,900 × $94 = $836,600.

b) Expected Cash collections for May:

Regarding credit sales it is given that, 40% are collected in the month of sale. That means, 40% of May month budgeted sale is collected in the same month itself.

May month budgeted sale = $836,600

40% of May month budgeted sale = $836,600 × 40% = $334,640

Regarding credit sales it is given that, 60% are collected in the following month of sale. That means, 60% of April month budgeted sale is collected in May.

April month budgeted sale = Budgeted unit sales × budgeted selling price per unit = 8,000 × $94 = $752,000

60 %of April sale = $752,000 × 60% = $451,200

Expected cash collections in May = 40% of May sales + 60% of April Sales = $334,640 + $451,200 = $785,840

c) Budgeted Accounts Receivable balance at the end of May:

Regarding April Credit sales 40% are expected to receive in the month of April and 60% in the month of May. Hence, there may not be any Accounts Receivable from April Sale.

Regarding May credit sales 40% are expected to receive in the month of May and 60% in the next month, that is, June. Hence, at the end of May, the expected Accounts Receivable balance is 60% of May month budgeted sale.

May month budgeted sale = 8,900 × $94= 836,600

Expected Accounts Receivable Balance at the end of May = $836,600 × 60% = $501,960