Question

[The following information applies to the questions displayed below] Iguana, Inc, manufactures bamboo picture frames that sell for $30 each. Each frame requires 4 linear feet of bamboo, which costs $3.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12 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 305 310 360 April May June 460 July August 435 485 Variable manufacturing overhead is incurred at a rate of $0.40 per unit produced Annual fixed manufacturing overhead is estimated to be $7200 ($600 per month) for expected production of 4,500 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.50 per unit sold. Iguana, Inc., had $13,600 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 $3,600 All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $210 in depreciation. During April, Iguana plans to pay $3,600 for a piece of equipment.

Answer 1

Part 1: | 1 | Budgeted sales revenue 2 budgeted production in units 3 budged cost of raw material 4 budgeted direct labor cost 5 budgeted manufacturing overhead 6 budgted cost of goods sold 7 Total Budgeted selling and administrative budget april 9,300 330 4,914 1,980 732 6,820 805 may june 10,800 13,800 400 450 5,8106,321 2,400 2,700 760 780 7,920 10,120 830 880 2nd Qtr 33,900 1,180 17,045 7,080 2,272 24,860 2,515 April May June Quarter Part 2: IGUANA, INC. Budgeted Income Statement For the Quarter Ending June Budgeted sales revenue Budgeted cost of goods sold 9300.00 10800.00 13800.00 33900.00 6820.00 7920.00 10120.00 24860.00 Budgeted Gross Margin Budgeted Selling and Administrative Expenses 2480.00 805.00 2880.00 830.00 3680.00 880.00 9040.00 2515.00 Budgeted Net Operating Income 1675.00 2050.00 2800.00 6525.00

Part 3: 1.cash receipts March sales (305*30*20%*50%) cash sales April Sales April May June Total 915.00 915.00 7440.00 8640.00 11040.00 27120.00 930.00 50.00% 50.00% of of 1,860 1,860 930.00 930.00 930.00 May- Sales 1080.00 50.00% 50.00% of of 2,160 2,160 1080.00 1080.00 1080.00 June - Sales 50.00% of 2,760 1380.00 1380.00 10650.00 13500.00 33435.00 Budgeted cash receipts 9285.00 2.Budgeted cash payments Inventory Purchase *** direct labor cost manufacturing overhead selling expense Equipment Purchase Budgeted cash payment april may june Quarter 4651.20 5630.80 6218.80 16500.80 1980.00 2400.00 2700.00 7080.00 522.00 550.00 570.00 1642.00 805.00 830.00 880.00 2515.00 3600.00 0 3600.00 11558.20 9410.80 10368.80 31337.80 3) cash budget Beginning Cash Balance Add: Cash Collection Less: Cash payments Preliminary Cash Balance Borrowing/ (Repayment) Ending Cash Balance april may june Quarter 13600.00 12326.80 12566.00 13600.00 9285.00 10650.00 13500.00 33435.00 11558.20 9410.80 10368.80 31337.80 11326.80 13566.00 15697.20 15697.20 1000.00 -1000.00 12326.80 12566.00 15697.20 15697.20

Quarter 1,130 Working Note: 1.sales budget Budgeted units sales x selling price per unit Total Budgeted Sales Cash ( 80%) Credit (20%) 30 30 April May 310 360 30 9,300 10,800 7,440 8,640 1,860 2,160 June 460 30 13,800 11,040 2,760 33,900 27,120 6,780 June 460 July 435 194 174 2) Production budget Budgeted units sales Add: Desired Ending Inventory ( 40% of next month unit sale) Total Needs Less: Beginning Inventory Required production in units April May 310 360 144 184 454 544 144 330 400 629 124 634 184 450 174 455 April May 330 400 June 450 Quarter 1,180 4 4,720 4 546 3).direct material budget required production in units of finished goods x units of raw material needed per unit of finished goods units of raw material needed to meet production Add: Desired Ending Inventory ( 30% of next month production need) Total Needs Less: Beginning Inventory Required Inventory Purchase x cost per unit cost of raw material to be purchased 5,266 | 1,320 480 1,800 396 1,404 3.50 4,914 1,600 1,800 5 40__ 2,140 2,346 480 540 1,660 1,806 3.50 3.50 5,810 6,321 396 4,870 3.50 17,045

4). direct labor budget April May June Quarter required production in units of finished goods | 330 400 450 1,180 x hours require per unit (30/60) | 0.50 0.50 0.50 0.50 total hours required 165 200 225 590 x cost per hour 12. 12. 12. 12 direct labor cost 1,980 2,400 2,700 7,080 5.budgeted manufacturing overhead required production in units of finished goods x variable cost per unit allocated variable overhead fixed overhead Total budgeted manufacturing overhead Less: depreciation cash paid for manufacturing overhead April May June Quarter 330 400 450 1,180 0.40 0.40 0.40 0.40 132.00 160.00 180.00 472.00 600.00 600.00 600.00 1,800.00 732.00 760.00 780.00 2,272.00 - 210.00 -210.00 - 210.00 - 630.00 522.00 550.00 570.00 1,642.00 7).selling expense budget Budgeted units sales x variable expense per unit vairable selling expense add : fixed expense total april may june Quarter 310 360 460 1,130 0.50 0.50 0.50 0.50 180 230 565 650. 650. 650. 1,950 805 830 880 2,515 155 6.cost of goods sold unit sold x unit cost** cost of goods sold April 310 22.00 6,820 May 360 22.00 7,920 June 460 22.00 10,120 Quarter 1,130 22.00 24,860 **calculation of unit cost direct material (4*3.5) direct labor (0.5*12) variable manufacturing overhead fixed manufacturing overhead (7200/4500) unit cost 14.00 6.00 0.40 1.60 22.00

May June Total *** cash payment for material purchase March Purchase (3600*20%) April 720.00 720.00 April Purchase 3931.20 80.00% 20.00% of of 4,914 4,914 3931.20 982.80 982.80 May- Purchase 4648.00 80.00% 20.00% of of 5,810 5,810 4648.00 1162.00 1162.00 June - Purchase 80.00% of 6,321 5056.80 5056.80 6218.8016500.80 Total Cash payment 4651.20 5630.80