Question

iguana, inc. Manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo. Which cost $2.00 per foot . Each frame takes approximately 30 minuets to build, and the labor rate averages $13 per hour. Iguana has the following inventory policies.

Ending finished goods inventory should be 40 percent of the next month's of sales

Ending raw materials inventory should be 30 percent of next month;s productions.

Expected unit sales (frames ) for the upcoming months follow:

March	310
April	320
May	370
June	470
July	445
August	495

Variable manufacturing overhead is incurred at a rate of $0.50 per unit produced. Annual fixed manufacturing overhead is estimated to be $4,800 ($400 per month) for expected production of 4,800 units for the year. Selling and administrative expenses are estimated at $500 per month plus $0.50 per unit sold.

Iguana. Inc. had $10,500 cash on hand on April 1st, Of its Sales , 80 percent is in Cash. Of 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 1st totaled $2,200. All other operating cost are paid during the month incurred. Monthly fixed manufacturing overhead includes $220 in depreciation. During April, Iguana plans to pay$3,700 for a piece of equipment.

1. Compute the budgeted Cash receipts for Iguana.

	April	May	June	2nd Quarter Total
Budgeted Cash Receipts

2. Compute the budgeted cash payments for Iguana.

	April	May	June	2nd Quarter Total
Budgeted Cash Payments				$

Answer 1

1) Budgeted Cash Receipts:
	April	May	June	2nd Quarter Total
Budgeted Sales in Units (a)	320	370	470	1,160
Budgeted Selling Price Per Unit (b)	$25	$25	$25	$25
Budgeted Sales Revenue (c = a*b)	$8,000	$9,250	$11,750	$29,000
Percentage share of Credit Sales (100% - 80%) (d)	20%	20%	20%	20%
Credit Sales (c * d)	$1,600	$1,850	$2,350	$5,800
Cash Collections from Credit Sales:	April	May	June	2nd Quarter Total
March Credit Sales (310 * $25 = $7,750*20/100 = $1,550*50/100)	$775			$775
April Credit Sales ($1,600*50/100); ($1,600*50/100)	$800	$800		$1,600
May Credit Sales ($1,850*50/100); ($1,850*50/100)		$925	$925	$1,850
June Credit Sales ($2,350*50/100)			$1,175	$1,175
Budgeted Cash Receipts	$1,575	$1,725	$2,100	$5,400

2)

Working notes:	March	April	May	June	2nd Quarter Total
Budgeted Sales in Units	310	320	370	470
Add: Desired Ending Inventory (320*40/100); (370*40/100); (470*40/100); (445*40/100)	128	148	188	178
Total Units Required	438	468	558	648
Less: Beginning Inventory (last month's ending inventory will be the beginning inventory in current month)	-	128	148	188
Units Required to Produce (a)		340	410	460	1,210
Raw material required in foot per unit (b)		4	4	4	4
Raw material required in foots (c = a*b)		1,360	1,640	1,840	4,840
Cost per Foot (d)		$2	$2	$2	$2
Cost of Raw Materials Required to Purchase (c * d)		$2,720	$3,280	$3,680	$9,680
Labor hours required per unit (e )		0.5	0.5	0.5	0.5
Labor hours required (f = a*e)		170	205	230	605
Cost per labor hour (g)		$13	$13	$13	$13
Labor Cost required (f*g)		$2,210	$2,665	$2,990	$7,865

Budgeted Cash payments:	April	May	June	2nd Quarter Total
March Purchases ($2,200*20/100)	$440			$440
April Purchases ($2,720*80/100); ($2,720*20/100)	$2,176	$544		$2,720
May Purchases ($3,280*80/100); ($3,280*20/100)		$2,624	$656	$3,280
June Purchases ($3,680*80/100)			$2,944	$2,944
Payments to Labor	$2,210	$2,665	$2,990	$7,865
Variable manufacturing Overhead (340*$0.50); (410*$0.50); (460*$0.50)	$170	$205	$230	$605
Fixed manufacturing overhead exlcuding depreciation ($4,800 - $220)	$4,580	$4,580	$4,580	$4,580
Selling and administrative expenses ($500 + [340*$0.50]); ($500 + [410*$0.50]); ($500 + [460*$0.50])	$670	$705	$730	$2,105
Purchase of Equipment	$3,700	-	-	$3,700
Budgeted Cash Payments	$13,946	$11,323	$12,130	$28,239