, 40% in the month following, 8% in the second month following, and 2% uncollectible. Credit sales for May and June are expected to be P200,000 and P180,000, respectively. Purchases of merchandise, all on account, are paid 60% in the month of
CASE 1
The following are the information obtained from AMC Company:
July August September
Cash Sales P24,000 P32,000 P36,000
Credit Sales 220,000 300,000 240,000
Purchases 180,000 240,000 220,000
Operating Expenses 30,000 36,000 32,000
Interest Expense - 4,000 -
Credit sales are collected 50% in the month of sale, 40% in the month following, 8% in the second month
following, and 2% uncollectible. Credit sales for May and June are expected to be P200,000 and P180,000,
respectively. Purchases of merchandise, all on account, are paid 60% in the month of purchase and 40% in the
month following. Purchases for June are estimated at P160,000. Expenses include
monthly and are paid in the month incurred. The cash balance on June 30, 201A is P54,000.
Required: Prepare a
with schedules of cash receipts and cash payments
CASE 2
Sanchez Company, a wholesaler, budgeted the following sales for the indicated months of 201A.
Month Cash Sales Credit Sales
June P3,000,000 P400,000
July 3,200,000 420,000
August 3,400,000 440,000
All merchandise is marked up to sell at its invoice cost plus 25%. Merchandise inventory at the beginning of
each month is at 30% of that month’s projected cost of goods sold.
Required: Prepare a schedule of merchandise purchases for June and July 201A.
CASE 3
Novela, Inc. produces office supplies, including pencils. Pencils are bundled in packages; each package sells for
P20. The sales budget for the first four (4) months of the year follows for this product:
January February March April
Rolls in units 200,000 240,000 220,000 200,000
BM2021
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Company policy requires that ending inventories for each month be 10% of next month’s sales. However, due
to greater sales in December than anticipated, the ending inventory of pencils for that month is only 10,000
packages.
Required: Prepare a production budget for the first quarter of the year. Show the number of units that should
be produced each month and for the quarter in total.
CASE 4
Villegas Company produces various labels, including iron-on name labels, which are sold to parents of campbound children. The camps require campers to have their name on every article of clothing. Each roll consists
of 10 yards of paper strip with 500 copies of the child’s name. Each yard of paper strips costs P2.00. Manning
has budgeted production of the label rolls for the next four (4) months as follows:
March April May June
Rolls in units 12,000 18,000 30,000 20,000
Inventory policy requires that sufficient paper strips be in ending inventory to satisfy 25% of the following
month’s production needs. The inventory of paper strips at the beginning of March equals exactly the amount
needed to satisfy the inventory policy.
Required:
a. Prepare a direct material purchases budget for March, April, and May showing purchases in units and
pesos for each month and in total.
b. Each roll of labels produced requires on average 0.25 direct labor hours. The average cost of direct
labor is P20 per hour. Prepare a direct labor budget for March, April, and May, showing the hours
needed and the direct labor and the direct labor cost for each month and in total.
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