Lane Products manufactures a popular kitchen utensil. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It opened negotiations with the local bank for a one-month loan of $56,000 starting March 1. The bank would charge interest at the rate of 0.5 percent per month and require the company to repay interest and principal on March 31. In considering the loan, the bank requested a projected income statement and cash budget for March. The following information is available: The company budgeted sales at 20,000 units per month in February, April, and May and at 17,000 units in March. The selling price is $68 per unit. The company offers a 2 percent discount for cash sales. The company's experience is that bad debts average 1 percent of credit sales. • The inventory of finished goods on February 1 was 3,200 units. The desired finished goods inventory at the end of each month equals 25 percent of sales anticipated for the following month. There is no work in process. The inventory of raw materials on February 1 was 2,680 pounds. At the end of each month, the raw materials inventory equals no less than 20 percent of production requirements for the following month. The company purchases materials in quantities of 290 pounds per shipment. . Selling expenses are 6 percent of gross sales. Administrative expenses, which include depreciation of $1,150 per month on office furniture and fixtures, total $73,200 per month. . The manufacturing budget for the utensil, based on normal production of 19,000 units per month, follows. Materials ( pound per utensil, 9,500 pounds, $30 per pound) Labor Variable overhead Fixed overhead (includes depreciation of $36,000) Total $ 285,000 128,000 68,000 128,000 $ 609,000 Required: a-1. Prepare schedules computing inventory budgets by months for production in units for February, March, and April. a-2. Prepare schedules computing inventory budgets by months for raw materials purchases in pounds for February and March. b. Prepare a projected income statement for March. Cost of goods sold should equal the variable manufacturing cost per unit times the number of units sold plus the total fixed manufacturing cost budgeted for the period. Assume that 40 percent of sales are cach sales.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter17: The Management Of Cash And Marketable Securities
Section: Chapter Questions
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• The manufacturing budget for the utensil, based on normal production of 19,000 units per month, follows.
Materials (pound per utensil, 9,500 pounds, $30 per pound)
Labor
$ 285,000
128,000
68,000
128,000
Variable overhead
Fixed overhead (includes depreciation of $36,000)
Total
$ 609,000
Required:
a-1. Prepare schedules computing inventory budgets by months for production in units for February, March, and April.
a-2. Prepare schedules computing inventory budgets by months for raw materials purchases in pounds for February and March.
b. Prepare a projected income statement for March. Cost of goods sold should equal the variable manufacturing cost per unit times
the number of units sold plus the total fixed manufacturing cost budgeted for the period. Assume that 40 percent of sales are cash
sales.
Complete this question by entering your answers in the tabs below.
Required A1 Required A2
Prepare schedules computing inventory budgets by months for production in units for
February, March, and April.
Total needs
Required B
Budgeted production - Units
Lane Products
Production Schedule Budget (Units)
For February, March, and April
February
0
0
March
0
0
April
0
0
Transcribed Image Text:• The manufacturing budget for the utensil, based on normal production of 19,000 units per month, follows. Materials (pound per utensil, 9,500 pounds, $30 per pound) Labor $ 285,000 128,000 68,000 128,000 Variable overhead Fixed overhead (includes depreciation of $36,000) Total $ 609,000 Required: a-1. Prepare schedules computing inventory budgets by months for production in units for February, March, and April. a-2. Prepare schedules computing inventory budgets by months for raw materials purchases in pounds for February and March. b. Prepare a projected income statement for March. Cost of goods sold should equal the variable manufacturing cost per unit times the number of units sold plus the total fixed manufacturing cost budgeted for the period. Assume that 40 percent of sales are cash sales. Complete this question by entering your answers in the tabs below. Required A1 Required A2 Prepare schedules computing inventory budgets by months for production in units for February, March, and April. Total needs Required B Budgeted production - Units Lane Products Production Schedule Budget (Units) For February, March, and April February 0 0 March 0 0 April 0 0
Lane Products manufactures a popular kitchen utensil. The company recently expanded, and the controller believes that it will need to
borrow cash to continue operations. It opened negotiations with the local bank for a one-month loan of $56,000 starting March 1. The
bank would charge interest at the rate of 0.5 percent per month and require the company to repay interest and principal on March 31.
In considering the loan, the bank requested a projected income statement and cash budget for March.
The following information is available:
.
The company budgeted sales at 20,000 units per month in February, April, and May and at 17,000 units in March. The selling price
is $68 per unit.
The company offers a 2 percent discount for cash sales. The company's experience is that bad debts average 1 percent of credit
sales.
The inventory of finished goods on February 1 was 3,200 units. The desired finished goods inventory at the end of each month
equals 25 percent of sales anticipated for the following month. There is no work in process.
The inventory of raw materials on February 1 was 2,680 pounds. At the end of each month, the raw materials inventory equals no
less than 20 percent of production requirements for the following month. The company purchases materials in quantities of 290
pounds per shipment.
Selling expenses are 6 percent of gross sales. Administrative expenses, which include depreciation of $1,150 per month on office
furniture and fixtures, total $73,200 per month.
The manufacturing budget for the utensil, based on normal production of 19,000 units per month, follows.
Materials ( pound per utensil, 9,500 pounds, $30 per pound)
Labor
Variable overhead
Fixed overhead (includes depreciation of $36,000)
Total
$ 285,000
128,000
68,000
128,000
$ 609,000
Required:
a-1. Prepare schedules computing inventory budgets by months for production in units for February, March, and April.
a-2. Prepare schedules computing inventory budgets by months for raw materials purchases in pounds for February and March.
b. Prepare a projected income statement for March. Cost of goods sold should equal the variable manufacturing cost per unit times
the number of units sold plus the total fixed manufacturing cost budgeted for the period. Assume that 40 percent of sales are cash
sales.
Transcribed Image Text:Lane Products manufactures a popular kitchen utensil. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It opened negotiations with the local bank for a one-month loan of $56,000 starting March 1. The bank would charge interest at the rate of 0.5 percent per month and require the company to repay interest and principal on March 31. In considering the loan, the bank requested a projected income statement and cash budget for March. The following information is available: . The company budgeted sales at 20,000 units per month in February, April, and May and at 17,000 units in March. The selling price is $68 per unit. The company offers a 2 percent discount for cash sales. The company's experience is that bad debts average 1 percent of credit sales. The inventory of finished goods on February 1 was 3,200 units. The desired finished goods inventory at the end of each month equals 25 percent of sales anticipated for the following month. There is no work in process. The inventory of raw materials on February 1 was 2,680 pounds. At the end of each month, the raw materials inventory equals no less than 20 percent of production requirements for the following month. The company purchases materials in quantities of 290 pounds per shipment. Selling expenses are 6 percent of gross sales. Administrative expenses, which include depreciation of $1,150 per month on office furniture and fixtures, total $73,200 per month. The manufacturing budget for the utensil, based on normal production of 19,000 units per month, follows. Materials ( pound per utensil, 9,500 pounds, $30 per pound) Labor Variable overhead Fixed overhead (includes depreciation of $36,000) Total $ 285,000 128,000 68,000 128,000 $ 609,000 Required: a-1. Prepare schedules computing inventory budgets by months for production in units for February, March, and April. a-2. Prepare schedules computing inventory budgets by months for raw materials purchases in pounds for February and March. b. Prepare a projected income statement for March. Cost of goods sold should equal the variable manufacturing cost per unit times the number of units sold plus the total fixed manufacturing cost budgeted for the period. Assume that 40 percent of sales are cash sales.
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