Question

Sharp Products is a manufacturing company. It uses absorption costing for budgeting. amount unit Budgeted sales: Q1 of 2019 26,000 cases Q2 30,000 cases Q3 28,000 cases 24 12,000 cases Unit selling price $23.00 dollars per unit All sales are on account (on credit). Collection pattern: Cash collected in the quarter of sale Cash collected in the quarter following sale 78% 22% Beginning FG inventory (in units) Desired ending FG inventory/next quarter's sales Desired ending FG inventory at year end 2,000 cases 30% 11,000 cases Beginning RM inventory (in units) Quantity of DM needed per unit DM cost per pound Desired ending RM inventory/next quarter's RM nee Desired ending RM inventory at year end 21,000 pounds 15.00 pounds $0.25 dollars 10% 23,000 pounds Cash payments to suppliers: paid in the quarter of purchase paid in the quarter following purchase 22% of the purchases 78% of the purchases DL hours per unit DL rate per hour 0.50 hours $15.00 dollars Manufacturing overhead Variable MOH Fixed MOH $5.00 per DLH $24,000 per quarter 37 Noncash MOH Depreciation $17,000 per quarter Introduction Key Est Budgets Ready Budgeted is

Answer 1

1. a.

Sales Budget
	Q1	Q2	Q3	Q4	Year
Budgeted Sales in Units	26,000	30,000	28,000	12,000	96,000
Unit Selling Price	$ 23	$ 23	$ 23	$ 23	$ 23
Budgeted Sales Revenue	598,000	$ 690,000	$ 644,000	$ 276,000	$ 2,208,000

1.b.

Schedule of Cash Collections
	Q1	Q2	Q3	Q4	Year
Collected in the quarter of sale	466,440	538,200	502,320	215,280	1,722,240
Collected in quarter following sale	130,000	131,560	151,800	141,680	555,040
Total cash collections	596,440	669,760	654,120	356,960	2,277,280

2.

Production Budget
	Q1	Q2	Q3	Q4	Year
Budgeted Sales in Units	26,000	30,000	28,000	12,000	96,000
Add: Desired Ending Inventory	9,000	8,400	3,600	11,000	11,000
Total Needed	35,000	38,400	31,600	23,000	107,000
Less: Beginning Inventory	2,000	9,000	8,400	3,600	2,000
Budgeted Production in Units	33,000	29,400	23,200	19,400	105,000

3. a.

Purchase of Raw Materials Budget
	Q1	Q2	Q3	Q4	Year
Materials needed in production ( pounds )	495,000	441,000	348,000	291,000	1,575,000
Add: Desired Ending Inventory	44,100	34,800	29,100	23,000	23,000
Total Needed	539,100	475,800	377,100	314,000	1,598,000
Less: Beginning Inventory	21,000	44,100	34,800	29,100	21,000
Required Purchases in Units	518,100	431,700	342,300	284,900	1,577,000
Cost per Pound	$ 0.25	$ 0.25	$ 0.25	$ 0.25	$ 0.25
Budgeted Cost of Purchases	$129,525	$107,925	$85,575	$71,225	$ 394,250

3.b.

Schedule of Cash Disbursements for Materials Purchases
	Q1	Q2	Q3	Q4	Year
Payments in the quarter of purchase	28,495.50	23,743.50	18,826.50	15,669.50	86,735
Payments in the quarter following purchase	68,000	101,029.50	84,181.50	66,748.50	319,959.50
Total Cash payments to suppliers	$ 96,495.50	$ 124,773	$ 103,008	$ 82,418	$ 406,694.50

4.

Cash Budget
	Q1	Q2	Q3	Q4	Year
Beginning cash balance	$ 92,000	163,144.50	313,131.50	536,843.50	$ 92,000
Add: Cash collections	596,440	669,760	654,120	356,960	2,277,280
Total Cash Available	688,440	832,904.50	967,251.50	893,803.50
Less: Cash Disbursements for
Merchandise Purchases	$ 96,495.50	$ 124,773	$ 103,008	$ 82,418	$ 406,694.50
Direct Labor	247,500	220,500	174,000	145,500	787,500
Variable MOH	82,500	73,500	58,000	48,500	262,500
Fixed MOH	24,000	24,000	24,000	24,000	96,000
Variable SA	20,800	24,000	22,400	9,600	76,800
Fixed SA	44,000	44,000	44,000	44,000	176,000
Equipment Purchases	5,000	4,000	0	26,000	35,000
Cash Dividends	5,000	5,000	5,000	5,000	20,000
Total Cash Disbursements	525,295.50	519,773	430,408	385,018	1,860,494.50
Ending Cash Balance	163,144.50	313,131.50	536,843.50	508,785.50

5.

Budgeted Income Statement For the year ended December 31, 2020
Budgeted Sales Revenue		$ 2,208,000
Less: Cost of Goods Sold
Beginning FG Inventory	18,300
Add: Cost of Goods Manufactured	1,607,750
Less: Ending Inventory	(137,807)	1,488,243
Gross profit		719,757
Selling and Administrative Expenses
Advertising Expense	20,000
Salaries Expense	108,000
Variable SA Expense	76,800
Information Technology Expense	32,000
Trade Association Dues	16,000
Depreciation Expense	16,000
Total Selling and Administration Expense		268,800
Net Income		$ 450,957