Question

The Master Budget 555 PROBLEMS Group A P9-54A Comprehensive budgeting problem (Le Damon Manufacturing is preparing its master budget for the first que budgeting problem (Learning Objectives 2 & 3) ing year. The following data pertanto s preparing its master budget for the first quarter of the upcom- u facturing's operations Current Assets as of December 31 (prior year): Cash.. $ 4,600 Accounts receivable, net $ 46,000 Inventory $ 15,600 Property, plant, and equipment, net $121,000 Accounts payable. $ 43,000 Capital stock...... $125,000 Retained earnings... $ 23,000 a. Actual sales in December were $71,000. Selling price per unit is projected to remain stable at $12 per unit throughout the budget period. Sales for the first five months of the upcoming year are budgeted to be as follows: CHAPTER 9 January ...... ........... $ 99,600 February .......... . $118,800 $115,200 April. $108,000 M ay....................... $103,200 b. Sales are 35% cash and 65% credit. All credit sales are collected in the month following the sale. Damon Manufacturing has a policy that states that each month's ending inventory of finished goods should be 10% of the following month's sales in units). d. Of each month's direct materials purchases, 20% are paid for in the month of our chase, while the remainder is paid for in the month following purchase. Three pounds of direct material is needed per unit at $2 per pound. Ending inventory of direct materials should be 20% of next month's production needs. Most of the labor at the manufacturing facility is indirect, but there is some direct Labor incurred. The direct labor hours per unit is 0.05. The direct labor rate per hour is 59 per hour. All direct labor is paid for in the month in which the work is performed The direct labor total cost for each of the upcoming three months is as follows: January ... $3,807 February .. .. .............. $4,442 $4,293 Monthly manufacturing overhead costs are $5,500 for factory rent, $2,900 for other fixed manufacturing expenses, and $1.10 per unit for variable manufacturing over head. No depreciation is included in these figures. All expenses are paid in the month in which they are incurred. Computer equipment for the administrative offices will be purchased in the upcoming quarter. In January, Damon Manufacturing will purchase equipment for $5,000 (cash), while February's cash expenditure will be $12,200 and March's cash expenditure will be $16,600 h. Operating expenses are budgeted to be $1.25 per unit sold plus faxed operating expenses of $1,800 per month. All operating expenses are paid in the month in which they are incurred. i. Depreciation on the building and equipment for the general and administrative offices is budgeted to be $4,800 for the entire quarter, which includes depreciation on new acquisitions

Answer 1

1	Cash Collection Budget
		January		February		March		Quarter
	Cash Sales@35% of total sales	$                                   34,860	=99600*35%	$             41,580	=118800*35%	$          40,320	=115200*35%	116,760	It is 35% of current month sale
	Credit Sales	$                                   46,150	=71000*65%	$             64,740	=99600*65%	$          77,220	=118800*65%	188,110	It is 65% of last month sale
	Total Cash Collection	$                                   81,010		$          106,320		$        117,540		304,870
2		January		February		March		Quarter		April
	Unit Sales	8,300	=99600/12	9900	=118800/12	9600	=115200/12	27,800		9,000
	Plus desired inventory at end	990	=9900*10%	960	=9600*10%	900	=9000*10%	900	(10% of next month sales unit)	860
	Total needs	9,290		10,860		10,500		28,700		9,860
	Less:Estimated inventory at beginning	830	8300*10%	990		960		830	Beginning inventory would be closing inventory of previous month	900
	Total units to be produced	8,460		9,870		9,540		27,870		8,960
3	Direct Material Budget
		January		February		March		Quarter		April
	Units to be produced (from Production Budget)	8,460		9,870		9,540		27,870		8,960
	Mutiply by:Quantity (pound) of DM needed per unit	3		3		3		3		3
	Quantity pounds needed for production	25,380		29,610		28,620		83,610		26,880
	Add:desired ending inventory of DM	5,922	=29610*20%	5,724	=28620*20%	5,376	=26880*20%	5,376	(20% of next month production need)
	Total Needs	31,302		35,334		33,996		88,986
	Less:Beginning raw material	5076	=25380*20%	5,922		5,724		5076
	Raw material to be purchased	26,226		29,412		28,272		83,910
	Mutilpy by:Cost per pound	$                                             2		$                       2		$                     2		$                     2
	Total cost of DM purchases	$                                   52,452		$             58,824		$          56,544		$        167,820