Required A. Prepare the following operating budget for Lavish Towel for the month of May.1. Sales budget 4. DL budget 2. Production budget 5. MOH budget 3. DM purchases budget 6. SG&A budget B. Prepare the budgeted COGS schedule and income statement for May. Assume there is no beginning orending WIP inventory in May. Lavish uses the FIFO method inventory valuation C. Explain how the pieces from this budgeted income statement would affect Lavish's Cash budget, as well as its budgeted balance sheet for May. P6.3 (LO 1, 2, 3), AP Excel Lavish Towel Company had completely stocked out of its cotton yarn for makingtowels in April (last month). So, management is starting over, trying to build up an inventory of yarn whileensuring there is enough yarn on hand for the production group to catch up with orders. Phyllis is responsiblefor putting all operating budgets together to estimate operating income for May. Here is the information she has.МayJuneJulyBudgeted sales in unit6,0006,2005,800Additional information:Budgeted selling price$6 per unitTarget ending FG Inventory15% of next month's salesBeginning FG Inventory300 units, at a total cost of $1,170 (based on prior period costs)Target ending DM Inventory20% of next month's production needsBeginning DM Inventory25 yards per unit at a cost of $0.04 per yard0.1 DL hours per unit at a cost of $15 per hourBudgeted DM usage and costBudgeted DL usage and costBudgeted Variable-MOH costs$0.50 per unitBudgeted Fixed-MOH costs$6,000 total (including $500 of depreciation)Budgeted Variable SG&A costs$0.40 per unit soldBudgeted Fixed SG&A costs$7,000 total (including $800 of depreciation)

The budgeting is the technique for estimation of future sales & expenses. The budgets are…

Answered: P6.3 (LO 1, 2, 3), AP Excel Lavish…

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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A. Prepare the following operating budget for Lavish Towel for the month of May.
1. Sales budget		4. DL budget
2. Production budget		5. MOH budget
3. DM purchases budget		6. SG&A budget

B. Prepare the budgeted COGS schedule and income statement for May. Assume there is no beginning orending WIP inventory in May. Lavish uses the FIFO method inventory valuation

C. Explain how the pieces from this budgeted income statement would affect Lavish's Cash budget, as well as its budgeted balance sheet for May.

P6.3 (LO 1, 2, 3), AP Excel Lavish Towel Company had completely stocked out of its cotton yarn for making
towels in April (last month). So, management is starting over, trying to build up an inventory of yarn while
ensuring there is enough yarn on hand for the production group to catch up with orders. Phyllis is responsible
for putting all operating budgets together to estimate operating income for May. Here is the information she has.
Мay
June
July
Budgeted sales in unit
6,000
6,200
5,800
Additional information:
Budgeted selling price
$6 per unit
Target ending FG Inventory
15% of next month's sales
Beginning FG Inventory
300 units, at a total cost of $1,170 (based on prior period costs)
Target ending DM Inventory
20% of next month's production needs
Beginning DM Inventory
25 yards per unit at a cost of $0.04 per yard
0.1 DL hours per unit at a cost of $15 per hour
Budgeted DM usage and cost
Budgeted DL usage and cost
Budgeted Variable-MOH costs
$0.50 per unit
Budgeted Fixed-MOH costs
$6,000 total (including $500 of depreciation)
Budgeted Variable SG&A costs
$0.40 per unit sold
Budgeted Fixed SG&A costs
$7,000 total (including $800 of depreciation)

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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