a. Prepare a sales budget for January, February, and March. Unit sales Jan. 25,000 Feb. 30,000 March 32,000 Selling price $ 18 $ 18 $ 18 $ Total 87,000 18 Total sales $ 450,000 $ 540,000 $ 576,000 $ 1,566,000 b. Prepare a production budget for January, February, and March. Note: Do not use a negative sign with your answers. Jan. Feb. March Total Unit sales 25,000 30,000 32,000 87,000 ΕΙ 7,500 8,000 8,750 8,750 Less Bl 0 7,500 8,000 0 Production 32,500 30,500 32,750 95,750 c. Prepare a purchases budget for January, February, and March. Note: Do not use negative signs with your answers. Production Jan. 32,500 Feb. 30,500 March Total 32,750 95,750 ΕΙ 6,100 6,400 x 13,600 x Less Bl 0 6,100 6,400 x 0 ☑ 0 Units 38,600 43,000 × 65,500 x Pounds per unit 2 2 ✓ Total lbs. 77,200 86,000 × 2 ✓ 79,100 × 191,500 x 2 ✓ 230,300 X Price per lb. $ 0.75 $ 0.75 $ Purchases $ 57,900 $ 64,500 × $ 0.75 $ 59,325 * $ 0.75 172,725 x d. Prepare a direct labor budget for January, February, and March. Production Jan. 32,500 Feb. 30,500 March Total 32,750 95,750 DL time per unit 0.5 ✓ 0.5 ✓ 0.5 ✓ 0.5 DLHS 15 × 15 × 15 × 15 X DL rate $ 16,250 x $ DL cost $ 243,750 228,750 15,250 x $ $ 16,375 × $ 47,875 x 245,625 718,125 e. Prepare an overhead budget for January, February, and March. Production Jan. 32,500 Feb. March Total 30,500 32,750 95,750 VOH unit rate $ 2 $ 2 2 ✔ $ 2 ☑ Total VOH $ 65,000 $ FOH cost 25,000 61,000 25,000 65,500 25,000 191,500 75,000 Total OH $ 90,000 266,500 $ 86,000 $ 90,500 $ f. Prepare a cash receipts schedule for sales and a cash payments schedule for material purchased. Cash Receipts Schedule Jan. $ Jan. 109,125 Feb. March Feb. 0 ✓ March 0 × $ 445,725 x 0 0 Total 109,125 x 0 × 445,725 X Total $ 109,125 $ 445,725 * $ 517,320 X 517,320 * $ 517,320 X 1,072,170 x Cash Payments Schedule Jan. Feb. March Total Jan. $ 34,740 $ 0 × $ Feb. 0 56,460 x March 0 Total $ 34,740 0 ✓ 56,460 * $ 0 ✔ $ 0 ☑ 57,795 x 34,750 x 56,460 x 57,795 x 57,795 * $ 148,995 x

a. Prepare a sales budget for January, February, and March. Unit sales Jan. 25,000 Feb. 30,000 March 32,000 Selling price $ 18 $ 18 $ 18 $ Total 87,000 18 Total sales $ 450,000 $ 540,000 $ 576,000 $ 1,566,000 b. Prepare a production budget for January, February, and March. Note: Do not use a negative sign with your answers. Jan. Feb. March Total Unit sales 25,000 30,000 32,000 87,000 ΕΙ 7,500 8,000 8,750 8,750 Less Bl 0 7,500 8,000 0 Production 32,500 30,500 32,750 95,750 c. Prepare a purchases budget for January, February, and March. Note: Do not use negative signs with your answers. Production Jan. 32,500 Feb. 30,500 March Total 32,750 95,750 ΕΙ 6,100 6,400 x 13,600 x Less Bl 0 6,100 6,400 x 0 ☑ 0 Units 38,600 43,000 × 65,500 x Pounds per unit 2 2 ✓ Total lbs. 77,200 86,000 × 2 ✓ 79,100 × 191,500 x 2 ✓ 230,300 X Price per lb. $ 0.75 $ 0.75 $ Purchases $ 57,900 $ 64,500 × $ 0.75 $ 59,325 * $ 0.75 172,725 x d. Prepare a direct labor budget for January, February, and March. Production Jan. 32,500 Feb. 30,500 March Total 32,750 95,750 DL time per unit 0.5 ✓ 0.5 ✓ 0.5 ✓ 0.5 DLHS 15 × 15 × 15 × 15 X DL rate $ 16,250 x $ DL cost $ 243,750 228,750 15,250 x $ $ 16,375 × $ 47,875 x 245,625 718,125 e. Prepare an overhead budget for January, February, and March. Production Jan. 32,500 Feb. March Total 30,500 32,750 95,750 VOH unit rate $ 2 $ 2 2 ✔ $ 2 ☑ Total VOH $ 65,000 $ FOH cost 25,000 61,000 25,000 65,500 25,000 191,500 75,000 Total OH $ 90,000 266,500 $ 86,000 $ 90,500 $ f. Prepare a cash receipts schedule for sales and a cash payments schedule for material purchased. Cash Receipts Schedule Jan. $ Jan. 109,125 Feb. March Feb. 0 ✓ March 0 × $ 445,725 x 0 0 Total 109,125 x 0 × 445,725 X Total $ 109,125 $ 445,725 * $ 517,320 X 517,320 * $ 517,320 X 1,072,170 x Cash Payments Schedule Jan. Feb. March Total Jan. $ 34,740 $ 0 × $ Feb. 0 56,460 x March 0 Total $ 34,740 0 ✓ 56,460 * $ 0 ✔ $ 0 ☑ 57,795 x 34,750 x 56,460 x 57,795 x 57,795 * $ 148,995 x

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Comprehensive budgets
Shredder Manufacturing has the following projected unit sales (at $18 per unit) for four months of operations:

Month	Unit Sales
January	25,000
February	30,000
March	32,000
April	35,000

Twenty-five percent of the customers are expected to pay in the month of sale and take a 3 percent discount; 70 percent of the customers are expected to pay in the month following sale. The remaining 5 percent will never pay.
It takes two pounds of raw material (costing $0.75 per pound) to produce a unit of product. In January, no raw material is in beginning inventories, but management wants to end each month with enough material for 20 percent of the next month’s production. (April’s production is assumed to be 34,000 units.) Shredder Manufacturing pays for 60 percent of its material purchases in the month of purchase and 40 percent in the following month.
Each unit of product requires 0.5 hours of labor time. Labor is paid $15 per hour and is paid in the same month as worked. Overhead is estimated to be $2 per unit plus $25,000 per month (including depreciation of $12,000). Overhead costs are paid as incurred.
Shredder will begin January with no Work in Process or Finished Goods Inventory. Inventory policy for these two accounts is set at zero ending WIP and 25 percent of the following month’s sales for FG.

a. Prepare a sales budget for January, February, and March.
Unit sales
Jan.
25,000
Feb.
30,000
March
32,000
Selling price $
18
$
18 $
18 $
Total
87,000
18
Total sales $
450,000
$
540,000
$ 576,000 $ 1,566,000
b. Prepare a production budget for January, February, and March.
Note: Do not use a negative sign with your answers.
Jan.
Feb.
March
Total
Unit sales
25,000
30,000
32,000
87,000
ΕΙ
7,500
8,000
8,750
8,750
Less Bl
0
7,500
8,000
0
Production
32,500
30,500
32,750
95,750
c. Prepare a purchases budget for January, February, and March.
Note: Do not use negative signs with your answers.
Production
Jan.
32,500
Feb.
30,500
March
Total
32,750
95,750
ΕΙ
6,100
6,400 x
13,600 x
Less Bl
0
6,100
6,400 x
0 ☑
0
Units
38,600
43,000 ×
65,500 x
Pounds per unit
2
2 ✓
Total lbs.
77,200
86,000 ×
2 ✓
79,100 ×
191,500 x
2 ✓
230,300 X
Price per lb.
$
0.75
$
0.75 $
Purchases
$
57,900
$
64,500 × $
0.75 $
59,325 * $
0.75
172,725 x

d. Prepare a direct labor budget for January, February, and March.
Production
Jan.
32,500
Feb.
30,500
March
Total
32,750
95,750
DL time per unit
0.5 ✓
0.5 ✓
0.5 ✓
0.5
DLHS
15 ×
15 ×
15 ×
15 X
DL rate
$
16,250 x $
DL cost
$
243,750
228,750
15,250 x $
$
16,375 × $
47,875 x
245,625
718,125
e. Prepare an overhead budget for January, February, and March.
Production
Jan.
32,500
Feb.
March
Total
30,500
32,750
95,750
VOH unit rate $
2 $
2
2 ✔ $
2 ☑
Total VOH
$
65,000
$
FOH cost
25,000
61,000
25,000
65,500
25,000
191,500
75,000
Total OH
$
90,000
266,500
$ 86,000 $ 90,500 $
f. Prepare a cash receipts schedule for sales and a cash payments schedule for material purchased.
Cash Receipts Schedule
Jan.
$
Jan.
109,125
Feb.
March
Feb.
0 ✓
March
0 × $
445,725 x
0
0
Total
109,125 x
0 ×
445,725 X
Total $
109,125 $
445,725 * $
517,320 X
517,320 * $
517,320 X
1,072,170 x
Cash Payments Schedule
Jan.
Feb.
March
Total
Jan. $
34,740
$
0 × $
Feb.
0
56,460 x
March
0
Total $
34,740
0 ✓
56,460 * $
0 ✔ $
0 ☑
57,795 x
34,750 x
56,460 x
57,795 x
57,795 * $
148,995 x

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