Denton Company manufactures three products (A, B, and C) from three raw materials (X, Y, and Z). The following table indicates the number of pounds of each material that is required to manufacture each type of product: Product Material X Material Y Material Z A 3 B 2 1 C 3 2 The company has a policy of maintaining an inventory of finished goods on all three products equal to 25% of the next month's budgeted sales. Unit costs of materials X, Y, and Z are respectively $4, $3, and $5. Denton Company has a policy of maintaining its raw material inventories at 50% of the next month's production needs. Listed below is the sales budget for the first quarter of the current year: Month Product A Product B Product C Jan. 12,000 10,000 9,000 11,000 Feb. 12,000 8,000 Mar. 11,000 10,000 10,000 Selling prices for products A, B, and C are $120, $140, and $150. Monthly sales for Denton are 25% on cash and the rest on account. Of those sold on account, Denton gives a 5% discount if the account is settled in the month of sale, and a 2% discount if the account is settled in the month following the sale. Expected collection pattern from customers on account are as follows: Month of sale 40% 1st month after the sale 30% 2nd month after the sale 20% 3rd month after the sale 5% Uncollectible 5% Denton has accelerated the collection of receivables in December of last year because it had a long-term obligation maturing on December 31 of the same year. Because of this, Denton has collected all but $200,000 of accounts, 60% of which were sold in November and 40% in December. Collection for these accounts are expected to follow the normal collection pattern of Denton. How many units of each product must Denton produce during January and February?
Denton Company manufactures three products (A, B, and C) from three raw materials (X, Y, and Z). The following table indicates the number of pounds of each material that is required to manufacture each type of product: Product Material X Material Y Material Z A 3 B 2 1 C 3 2 The company has a policy of maintaining an inventory of finished goods on all three products equal to 25% of the next month's budgeted sales. Unit costs of materials X, Y, and Z are respectively $4, $3, and $5. Denton Company has a policy of maintaining its raw material inventories at 50% of the next month's production needs. Listed below is the sales budget for the first quarter of the current year: Month Product A Product B Product C Jan. 12,000 10,000 9,000 11,000 Feb. 12,000 8,000 Mar. 11,000 10,000 10,000 Selling prices for products A, B, and C are $120, $140, and $150. Monthly sales for Denton are 25% on cash and the rest on account. Of those sold on account, Denton gives a 5% discount if the account is settled in the month of sale, and a 2% discount if the account is settled in the month following the sale. Expected collection pattern from customers on account are as follows: Month of sale 40% 1st month after the sale 30% 2nd month after the sale 20% 3rd month after the sale 5% Uncollectible 5% Denton has accelerated the collection of receivables in December of last year because it had a long-term obligation maturing on December 31 of the same year. Because of this, Denton has collected all but $200,000 of accounts, 60% of which were sold in November and 40% in December. Collection for these accounts are expected to follow the normal collection pattern of Denton. How many units of each product must Denton produce during January and February?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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:Denton Company manufactures three products (A, B, and C) from three raw materials (X, Y, and Z). The following table indicates the number of
pounds of each material that is required to manufacture each type of product:
Product
Material X
Material Y
Material Z
A
3
2
1
2
C
3
2
2
The company has a policy of maintaining an inventory of finished goods on all three products equal to 25% of the next month's budgeted sales.
Unit costs of materials X, Y, and Z are respectively $4, $3, and $5. Denton Company has a policy of maintaining its raw material inventories at
50% of the next month's production needs. Listed below is the sales budget for the first quarter of the current year:
Month
Product A
Product B
Product C
11,000
12,000
Jan.
10,000
12,000
Feb.
9,000
11,000
8,000
Mar.
10,000
10,000
Selling prices for products A, B, and C are $120, $140, and $150. Monthly sales for Denton are 25% on cash and the rest on account. Of those sold
on account, Denton gives a 5% discount if the account is settled in the month of sale, and a 2% discount if the account is settled in the month
following the sale. Expected collection pattern from customers on account are as follows:
Month of sale
40%
1st month after the sale 30%
2nd month after the sale
20%
3rd month after the sale 5%
Uncollectible
5%
Denton has accelerated the collection of receivables in December of last year because it had a long-term obligation maturing on December 31 of
the same year. Because of this, Denton has collected all but $200,000 of accounts, 60% of which were sold in November and 40% in December.
Collection for these accounts are expected to follow the normal collection pattern of Denton.
How many units of each product must Denton produce during January and February?
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