Question

223) Hennagir Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations Budgeted selling price per unit $76 Budgeted unit sales (all on credit) January 9,500 February 9.900 March 10,600 April 12,600 Raw materials requirement per unit of output Raw materials cost Direct labor requirement per unit of output Direct labor wage rate 3 pounds $5.00 per pound 2.2 direct labor-hours $18.00 per direct labor-hour Credit sales are collected: 40% in the month of the sale 60 in the following month Raw materials purchases are paid 30% in the month of purchase 70% in the following month The ending finished goods inventory should equal 10% of the following month's sales. The ending raw materials inventory should equal 40% of the following month's raw materials production needs Required: a What are the budgeted sales for February? b. What are the expected cash collections for February? c. What is the budgeted accounts receivable balance at the end of February? d. According to the production budget, how many units should be produced in February? e. If 32,400 pounds of raw materials are needed for production in March, how many pounds of raw materials should be purchased in February? f. What is the estimated cost of raw materiais purchases for February g. If the cost of raw material purchases in January is $145,680, then in February what are the total estimated cash disbursements for raw materials purchases? h. What is the estimated accounts payable balance at the end of February? i. What is the estimated raw materials inventory balance at the end of February? i. What is the total estimated direct labor cost for February assuming the direct labor workforce is adjusted to match the hours required to produce the forecasted number of units produced?

Answer 1

a)
Budgeted Sales for February = 9900 x $76	$                                     752,400.00
b)
Cash Collection for Feb = 60% of Jan. sales + 40% 0f Feb. sales
Cash Collection for Feb = 60% x (9500 x $76) + (40% x $752,400)	$                                     734,160.00
c)
Accounts receivable balance at the end of Feb = 60% of Feb sales = 60% x $752,400	$                                     451,440.00
d)
According to the production budget, how many units should be produced in Feburary?
Budgeted sales in units	9900
Add : desired ending inventory (10600 x 10%)	1060
Total needs	10960
Less beginning inventory (9900 x 10%)	-990
Required production	9,970.00
e)
Required production in units of finished goods	9,970.00
Units of raw materials needed per unit of finished goods	3.00
Units of raw materials needed to meet production	29,910.00
Add desired units of ending raw materials inventory (32400 x 40%)	12,960.00
Total raw material needs	42,870.00
Less : beginning raw materials inventory	(11,964.00)
Raw materials to be purchased (pounds) (29,910 x 40%)	30,906.00
f)
Units of raw materials to be purchased (a)	30,906.00
Unit cost of raw materials(b)	$5
Cost of raw materials to be purchased (a) × (b)	$                                     154,530.00
g)
Jan purchases: $145,680 x 30%	$                                       43,704.00
Feb purchases = $154,530 x 70%	$                                     108,171.00
Total cash disbursements	$                                     151,875.00
h)
Feb purchases (a)	$                                     154,530.00
Percent unpaid (b)	70%
Accounts payable (a) × (b)	$                                     108,171.00
i)
Ending raw materials inventory (pounds) (a)	12,960.00
Cost per pound (b)	$5
Raw material inventory balance (a) × (b)	$64,800
j)	Feb
Required productionin units	9,970.00
Direct labor hours per unit	2.2
Total direct labor-hours needed (a)	21,934.00
Direct labor cost per hour (b)	$                                              18.00
Total direct labor cost (a) × (b)	$                                     394,812.00