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The following information applies to the questions displayed below! Iguana, Inc., manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $2.50 per foot Each frame takes approximately 30 minutes to build, and the labor rate averages $14 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 April May June July August 315 330 380 480 455 505 Variable manufacturing overhead is incurred at a rate of $0.60 per unit produced. Annual fixed manufacturing overhead is estimated to be $7.200 ($600 per month) for expected production of 3.000 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.50 per unit sold. Iguana, Inc., had $11,000 cash on hand on April 1. Of its sales, 80 percent is in cash Of the credit soles, 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 $3,000. All other operating costs are paid during the month Jocurred. Monthly fixed manufacturing overhead includes $230 in depreciation. During April. Iguana plans to pay $2,000 for a piece of equipment

Answer 1

Part 1: 2nd Qtr april june 12,000 may 1 Budgeted sales revenue 2 budgeted production in units 3 budgted cost of raw material 4 budgeted direct labor cost 5budgeted manufacturing overhead 6 budgted cost of goods sold 7 Total Budgeted selling and adm in istrative budget 8,250 9,500 29,750 470 350 420 1,240 4,715 3,710 4,350 12,775 2,450 2,940 3,290 8,680 810 852 882 2,544 6,600 7,600 9,600 23,800 815 840 890 2,545 Part 2: IGUANA, INC. Budgeted Income Statement April May June Quarter For the Quarter Ending June 8250.00 9500.00 12000.00 29750.00 6600.00 7600.00 9600.00 23800.00 Budgeted sales revenue Budgeted cost of goods sold 1650.00 1900.00 2400.00 815.00 840.00 5950.00 Budgeted Gross Margin Budgeted Selling and Administrative Expenses 890.00 2545.00 Budgeted Net Operating Income 835.00 1060.00 1510.00 3405.00

Part 3: 1cash receipts Total April May June March sales (315*25*20%*50%) 787.50 787.50 7600.009600.00 23800.00 cash sales 6600.00 April Sales 50.00% of 1,650 825.00 825.00 50.00% of 825.00 1,650 825.00 May- Sales 50.00% of 1,900 950.00 950.00 950.00 950.00 50.00% of 1,900 June -Sales 1200.00 1200.00 of 50.00% 2,400 Budge ted cash receipts 9375.00 11750.00 29337.50 8212.50 2.Budge ted cash payments Inventory Purchase direct labor cost april 3568.00 4222.00 4642.00 12432.00 june Quarter may 8680.00 2450.00 2940.00 3290.00 580.00 815.00 2000.00 manufacturing overhead 622.00 652.00 1854.00 840.00 2545.00 selling expense 890.00 2000.00 Equipment Purchase 0 0 Budgeted cash payme nt 9413.00 8624.00 9474.00 27511.00 3) cash budget april 11000.00 10799.50 10550.50 11000.00 8212.50 9375.00 11750.00 29337.50 june Quarter may Beginning Cash Balance Add: Cash Collection 9413.00 8624.00 9474.00 27511.00 Less: Cash payments 9799.50 11550.50 12826.50 12826.50 Preliminary Cash Balance Borrowing/(Repayment) 1000.00-1000.00 0 0 10799.50 10550.50 12826.50 12826.50 Ending Cash Balance

Working Note 1.sales budget Budgeted units sales April May June Quarter 480 1,190 330 380 x selling price per unit 25 25 25 25 8,250 9,500 12,000 6,600 7,600 1,650 1,900 Total Budgeted Sal es Cash (80%) Credit (20%) 29,750 9,600 23,800 2,400 5,950 2) Production budget July April May June Budgeted units sales 330 380 480 455 202 152 192 182 Add: Desired En ding Inventory ( 40% of next month unit sale) Total Needs 662 657 482 572 Less: BeginningInventory 132 152 192 182 Required production in units 420 350 470 475 3).direct material budget required production in units of fini shed goods June April May Quarter 350 420 470 1,240 4. x units of raw material needed per unit of finished goods units of raw material needed to meet production 4 4 1,880 1,400 1,680 4,960 Add: Desired Ending Inventory ( 30% of next month production need) 570 504 564 570 1,904 2,244 Total Needs 2,450 5,530 Less: BeginningInventory Required Inventory Purchase x cost per unit cost of raw mate rial to be purchased 420 504 564 420 1,484 1,740 1,886 5,110 2.50 2.50 2.50 2.50 3,710 4,350 4,715 12,775

4).direct labor budget Аpril May June Quarter required production in units of finished goods 1,240 350 420 470 x hours require perunit (30/60) 0.50 0.50 0.50 0.50 total hours required 175 210 235 620 x cost per hour direct labor cost 14 14 14 14 3,290 2,450 2,940 8,680 5.budgeted manufacturing overhe ad April May June Quarter required production in units of finished goods 350 420 470 1,240 x variable cost per unit 0.60 0.60 0.60 0.60 allocated variab le overhead 210.00 252.00 282.00 744.00 600.00 1,800.00 fixed overhead 600.00 600.00 Total budgeted manufacturing overhead 810.00 852.00 882.00 2,544.00 230.00230.00-230.00 Less:depreciation 690.00 652.00 1,854.00 cash paid for manufacturing overhead 622.00 580.00 7). selling expense budget april june Quarter may Budgeted units sales x vari able expen se per unit vairable selling expense 330 380 480 1,190 0.50 0.50 0.50 0.50 165 190 240 595 add fixed expe nse 650 650 650 1,950 : total 2,545 815 840 890 6.cost of goods sold May April June Quarter unit sold 330 380 480 1,190 x unit cost** 20.00 20.00 20.00 20.00 cost of goods sold 7,600 23,800 6,600 9,600 *calculation of unit cost direct material (4*2.5) 10.00 direct labor (0.5*14) 7.00 variable manufacturing overhead 0.60 fixed manufacturing overhead (7200/3000) 2.40 unit cost 20.00

**cash payment for material purchase April May Total June March Purchase (3000*20%) 600.00 600.00 April Purchase of 2968.00 80.00% 3,710 2968.00 of 20.00% 3,710 742.00 742.00 May- Purchase of 80.00% 4,350 3480.00 3480.00 870.00870.00 20.00% of 4,350 June Purchase 3772.00 3772.00 80.00% of 4,715 Total Cash payment 3568.00 4222.00 4642.00 12432.00