Question

XYZ Corporation is preparing a master budget for 2018. Sales for the year are expected to total 1,000,000 units. Quarterly sales in units are 20%,25%,30%, and 25% respectively. The sales price is expected to be $50 per unit for the first 3 quarters and $55 per unit beginning in the fourth quarter. Sales in the first quarter of 2018 are expected to be 10% higher than the budgeted sales volume for the first quarter of 2017. Cash collections from sales are 60% in the quarter of sale, 30% in the following quarter and 8% in the second quarter after sale. For production purposes management desires to maintain ending finished goods inventories at 25% of the next quarters budgeted sales volume. Beginning finished goods on Jan 1 2018 are 60,000 units. For production purposes two pounds of raw material are required for each finished product. Management targets ending inventory of materials equal to 20% of next period’s production needs of finished goods Beginning materials inventory on January 1, 2018 was 10,000 pounds. Prepare A.cash inflows schedule for the third quarter 2018 B.materials purchase budget in pounds for the first quarter 2018

Answer 1

SALES BUDGET
			Q1	Q2	Q3	Q4	Year
Budgeted Sales units			200,000	250,000	300,000	250,000	1,000,000
Selling price per unit			50	50	50	55
Total Sales			10,000,000	12,500,000	15,000,000	13,750,000	51,250,000
Cash collecion in Q-3
Collections of Q1 sales			800000
Collection of Q2 sales			3750000
Collections of Q3 sales			9000000
Total cash collections of Q3			13550000
PRODUCTION BUDGET
			Q1	Q2	Q3	Q4
Budgeted Sales Units			200,000	250,000	300,000	250,000
Add: Desired Ending Finished inventory			62,500	75,000	62,500
Total Needs			262,500	325,000	362,500
Less: Beginning Finished Inventory			60,000	62,500	75,000
Required Production in units			202,500	262,500	287,500
RAW MATERIAL PURCHASE BUDGET
			Q1	Q2
Budgeted Production units			202,500	262500
Raw material per unit			2	2
Total Requirement			405,000	525000
Add: Desired Ending Inventory			105,000
Total needs			510,000
Less: Beginning Inventory			10,000
Purchase Units			500,000