JanuaryFebruaryMarch Budgeted Sales: Budgeted Sales Units - Standard68,00072,00065,000 Budgeted Sales Units - Deluxe35,00036,00033,600 Budgeted Selling Price per Unit of Standard$50.00$50.00$50.00 Budgeted Selling Price per Unit of Deluxe$70.00$70.00$70.00 Budgeted Production Units:JanuaryFebruaryMarch Standard82,40085,00066,000 Deluxe42,20042,72038,500 Budgeted RM Purchases:JanuaryFebruaryMarch Budgeted Purchase of Material A (in pounds)431,200464,160379,500 Budgeted Purchase of Material B (in pounds)352,800381,600324,500 Budgeted Cost per Pound of Material A$2.50$2.50$2.50 Budgeted Cost per Pound of Material B$4.00$4.00$4.00 Budgeted Collection Plan for Sales: % of Sales Collected in the month of sale80%80%80% % of Sales Collected in the following month20%20%20% Budgeted Payment Plan for Purchases: % of purchases paid in the month of purchase70%70%70% % of Purchases paid in the following month30%30%30% Production Needs: Direct MaterialsJanuaryFebruaryMarch Pounds of Material A Required per Unit of Standard444 Pounds of Material B Required per Unit of Standard222 Pounds of Material A Required per Unit of Deluxe333 Pounds of Material B Required per Unit of Deluxe555 Direct LaborJanuaryFebruaryMarch DL hours required for each unit of Standard0.500.500.50 DL hours required for each unit of Deluxe0.800.800.80 Direct Labor rate per hour$15$15$15 Factory Overhead Variable Factory overhead cost - as a % of direct labor cost120%120%120% Fixed Factory overhead cost per month including depreciation expense$144,000$156,000$156,000 Depreciation expense portion of factory overhead costs$15,000$20,000$20,000 Other Expenditures:JanuaryFebruaryMarch Shipping Expense per unit of each product$1.60$1.60$1.60 Advertising Expenses$60,000$60,000$60,000 Sales Commission - % of sales4.20%4.20%4.20% Administrative Salaries$188,000$188,000$188,000 Utilities Expense$20,000$21,000$21,000 Income Tax Expense$210,000$240,000$200,000 Other Data:JanuaryFebruaryMarch Applicable interest rate per month2%2%2% Budgeted Machinery Purchases for Factory$3,000,000 Payment of Dividends $60,000 Minimum required cash balance$25,000$25,000$25,000 Account Balances as of Jan. 1st: Accounts receivable$1,350,000 Accounts payable$895,000 Cash$30,000 Financing: The numbers in cell highlighted in yellow must be determined & entered: Borrowing Interest Expense Repayment of the principal of the borrowed money A portion of each month’s sales is collected in the month of sale, and the rest is collected in the following month.Production requires two types of materials for each product – Material A and Material B.A portion of each month’s purchase of raw materials is paid in the month of purchase, and the rest is paid in the following month.All remaining manufacturing expenses (direct labor and factory overhead), and selling and administrative expenses are paid in cash during the month incurred.Company uses Variable Costing when preparing Income Statement (that is, entire fixed factory overhead cost is expensed during the month incurred).As reflected on the Excel sheet, specific cash dividends and capital expenditures are planned.Minimum required cash balance at the end of each month is $25,000.If necessary, the company will borrow cash from a bank. The borrowing will be in multiples ofThe company's policy and plan for the first three months of upcoming year is summarized on Excel file in the tab entitled “Budgeting”. Hope Company manufactures and sells two types of control devices – Standard and Deluxe.$1,000 and will bear interest at 2% per month. All borrowing will take place at the beginning of the month. A month’s interest will be paid in cash at the end of month. Any cash available will be used to pay off the outstanding debt in multiples of $1,000 at the end of each month. The amount of borrowing, interest, and payoff must be computed manually and entered in the data section in the space provided and highlighted in yellow.The accountant of company, after preparing sales budget, production budget, and RM purchases budget, has taken a vacation to go to Hawaii. You have been hired to prepare a Budgeted Income Statement and a Cash Budget for the company. These budgets are critically needed for planning and decision making.

A Cash Budget depicts the cash receipts and cash payments for the period. It helps the company to project its cash position as on particular date. Cash collections are inflows that are monies collected from customers and other incomes earned and cash payments are outflows that are monies paid to suppliers and other expenses incurred.A budgeted income statement is a proforma financial statement that represents the budgeted financial performance of the company. The expenses incurred and income earned during a particular period is depicted and the value of Net Income earned, or Net Loss incurred for the period is computed.Working Notes for Cash BudgetBudgeted Income StatementFormula:Cash Budget

Answered: Hope Company manufactures and sells two…

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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	January	February	March
Budgeted Sales:
Budgeted Sales Units - Standard	68,000	72,000	65,000
Budgeted Sales Units - Deluxe	35,000	36,000	33,600

Budgeted Selling Price per Unit of Standard	$50.00	$50.00	$50.00
Budgeted Selling Price per Unit of Deluxe	$70.00	$70.00	$70.00

Budgeted Production Units:	January	February	March
Standard	82,400	85,000	66,000
Deluxe	42,200	42,720	38,500

Budgeted RM Purchases:	January	February	March
Budgeted Purchase of Material A (in pounds)	431,200	464,160	379,500
Budgeted Purchase of Material B (in pounds)	352,800	381,600	324,500

Budgeted Cost per Pound of Material A	$2.50	$2.50	$2.50
Budgeted Cost per Pound of Material B	$4.00	$4.00	$4.00

Budgeted Collection Plan for Sales:
% of Sales Collected in the month of sale	80%	80%	80%
% of Sales Collected in the following month	20%	20%	20%

Budgeted Payment Plan for Purchases:
% of purchases paid in the month of purchase	70%	70%	70%
% of Purchases paid in the following month	30%	30%	30%

Production Needs:
Direct Materials	January	February	March
Pounds of Material A Required per Unit of Standard	4	4	4
Pounds of Material B Required per Unit of Standard	2	2	2

Pounds of Material A Required per Unit of Deluxe	3	3	3
Pounds of Material B Required per Unit of Deluxe	5	5	5

Direct Labor	January	February	March
DL hours required for each unit of Standard	0.50	0.50	0.50
DL hours required for each unit of Deluxe	0.80	0.80	0.80
Direct Labor rate per hour	$15	$15	$15

Factory Overhead
Variable Factory overhead cost - as a % of direct labor cost	120%	120%	120%
Fixed Factory overhead cost per month including depreciation expense	$144,000	$156,000	$156,000
Depreciation expense portion of factory overhead costs	$15,000	$20,000	$20,000

Other Expenditures:	January	February	March
Shipping Expense per unit of each product	$1.60	$1.60	$1.60
Advertising Expenses	$60,000	$60,000	$60,000
Sales Commission - % of sales	4.20%	4.20%	4.20%
Administrative Salaries	$188,000	$188,000	$188,000
Utilities Expense	$20,000	$21,000	$21,000
Income Tax Expense	$210,000	$240,000	$200,000

Other Data:	January	February	March
Applicable interest rate per month	2%	2%	2%
Budgeted Machinery Purchases for Factory	$3,000,000
Payment of Dividends			$60,000
Minimum required cash balance	$25,000	$25,000	$25,000

Account Balances as of Jan. 1st:
Accounts receivable	$1,350,000
Accounts payable	$895,000
Cash	$30,000

Financing:
The numbers in cell highlighted in yellow must be determined & entered:
Borrowing
Interest Expense
Repayment of the principal of the borrowed money

A portion of each month’s sales is collected in the month of sale, and the rest is collected in the following month.
Production requires two types of materials for each product – Material A and Material B.
A portion of each month’s purchase of raw materials is paid in the month of purchase, and the rest is paid in the following month.
All remaining manufacturing expenses (direct labor and factory overhead), and selling and administrative expenses are paid in cash during the month incurred.
Company uses Variable Costing when preparing Income Statement (that is, entire fixed factory overhead cost is expensed during the month incurred).
As reflected on the Excel sheet, specific cash dividends and capital expenditures are planned.
Minimum required cash balance at the end of each month is $25,000.
If necessary, the company will borrow cash from a bank. The borrowing will be in multiples of
The company's policy and plan for the first three months of upcoming year is summarized on Excel file in the tab entitled “Budgeting”.

Hope Company manufactures and sells two types of control devices – Standard and Deluxe.

$1,000 and will bear interest at 2% per month. All borrowing will take place at the beginning of the month. A month’s interest will be paid in cash at the end of month. Any cash available will be used to pay off the outstanding debt in multiples of $1,000 at the end of each month. The amount of borrowing, interest, and payoff must be computed manually and entered in the data section in the space provided and highlighted in yellow.

The accountant of company, after preparing sales budget, production budget, and RM purchases budget, has taken a vacation to go to Hawaii. You have been hired to prepare a Budgeted Income Statement and a Cash Budget for the company. These budgets are critically needed for planning and decision making.

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