Craney Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations: • The budgeted selling price per unit is $94. Budgeted unit sales for January, February, March, and April are 8,850, 10,050, 15,450, and 16,050 units, respectively. All sales are on credit. • Regarding credit sales, 20% are collected in the month of the sale and 80% in the following month. • The ending finished goods inventory equals 40% of the following month's sales. • The ending raw materials inventory equals 40% of the following month's raw materials production needs. Each unit of finished goods requires 8 pounds of raw materials. The raw materials cost $2.4 per pound. • Regarding raw materials purchases, 30% are paid for in the month of purchase and 70% in the following month. • The direct labor wage rate is $22.5 per hour. Each unit of finished goods requires 3.4 direct labor-hours. Required: a. What are the budgeted sales for February? b. What are the expected cash collections for February? c. According to the production budget, how many units should be produced in February? d. If 69700 pounds of raw materials are needed for production in March, how many pounds of raw materials should be purchased in
Craney Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations: • The budgeted selling price per unit is $94. Budgeted unit sales for January, February, March, and April are 8,850, 10,050, 15,450, and 16,050 units, respectively. All sales are on credit. • Regarding credit sales, 20% are collected in the month of the sale and 80% in the following month. • The ending finished goods inventory equals 40% of the following month's sales. • The ending raw materials inventory equals 40% of the following month's raw materials production needs. Each unit of finished goods requires 8 pounds of raw materials. The raw materials cost $2.4 per pound. • Regarding raw materials purchases, 30% are paid for in the month of purchase and 70% in the following month. • The direct labor wage rate is $22.5 per hour. Each unit of finished goods requires 3.4 direct labor-hours. Required: a. What are the budgeted sales for February? b. What are the expected cash collections for February? c. According to the production budget, how many units should be produced in February? d. If 69700 pounds of raw materials are needed for production in March, how many pounds of raw materials should be purchased in
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Transcribed Image Text:Craney Corporation makes one product and it provided the following information to help prepare the master budget for the next four
months of operations:
• The budgeted selling price per unit is $94. Budgeted unit sales for January, February, March, and April are 8,850, 10,050, 15,450,
and 16,050 units, respectively. All sales are on credit.
Regarding credit sales, 20% are collected in the month of the sale and 80% in the following month.
●
• The ending finished goods inventory equals 40% of the following month's sales.
• The ending raw materials inventory equals 40% of the following month's raw materials production needs. Each unit of finished
goods requires 8 pounds of raw materials. The raw materials cost $2.4 per pound.
Regarding raw materials purchases, 30% are paid for in the month of purchase and 70% in the following month.
• The direct labor wage rate is $22.5 per hour. Each unit of finished goods requires 3.4 direct labor-hours.
Required:
a. What are the budgeted sales for February?
b. What are the expected cash collections for February?
c. According to the production budget, how many units should be produced in February?
d. If 69,700 pounds of raw materials are needed for production in March, how many pounds of raw materials should be purchased in
February?
e. What is the estimated cost of raw materials purchases for February?
f. If the cost of raw material purchases in January is $44,710, then in February what are the estimated cash disbursements for raw
materials purchases?
g. What is the total estimated direct labor cost for February assuming the direct labor workforce is adjusted to match the hours
required to produce the forecasted number of units produced?
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