Lane Products manufactures a popular kitchen utensil. The company recently expanded, and the controller believes that it will need toborrow cash to continue operations. It opened negotiations with the local bank for a one-month loan of $44,000 starting March 1. Thebank 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 inventory of finished goods on February 1 was 2,600 units. The desired finished goods inventory at the end of each monthequals 25 percent of sales anticipated for the following month. There is no work in process.The inventory of raw materials on February 1 was 2,380 pounds. At the end of each month, the raw materials inventory equals noless than 20 percent of production requirements for the following month. The company purchases materials in quantities of 260pounds per shipment.Selling expenses are 6 percent of gross sales. Administrative expenses, which include depreciation of $850 per month on officefurniture and fixtures, total $69,600 per month.The manufacturing budget for the utensil, based on normal production of 13,000 units per month, follows.●The company budgeted sales at 14,000 units per month in February, April, and May and at 11,000 units in March. The selling priceis $62 per unit.The company offers a 2 percent discount for cash sales. The company's experience is that bad debts average 1 percent of creditsales.●Materials (pound per utensil, 6,500 pounds, $30 per pound)LaborVariable overheadFixed overhead (includes depreciation of $24,000)Total$ 195,000122,00062,000122,000$ 501,000Required: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 timesthe number of units sold plus the total fixed manufacturing cost budgeted for the period. Assume that 40 percent of sales are cashsales. 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 timesthe number of units sold plus the total fixed manufacturing cost budgeted for the period. Assume that 40 percent of sales are cashsales.Complete this question by entering your answers in the tabs below.Required A1 Required A2 Required BPrepare schedules computing inventory budgets by months for production in units for February, March, and April.Total needsBudgeted production - UnitsLane ProductsProduction Schedule Budget (Units)For February, March, and April< Required A1February00MarchRequired A200April00

Production and material budgeting entails planning and allocating resources for manufacturing…

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

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

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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As a newly hired management accountant, you have been asked to prepare a profit plan for the company for which you work. As part of this task, you've been asked to do some what-if analyses. Following is the budgeted Information regarding the coming year: Selling price per unit Variable cost per unit Fixed costs (per year) Required: $ 100.00 60.00 1,113,040 1. What is the breakeven volume, in units and dollars, for the coming year? 2. Assume that the goal of the company is to earn a pretax (operating) profit of $316,000 for the coming year. How many units would the company have to sell to achieve this goal? 3. Assume that of the $60 variable cost per unit the labor-cost component is $27. Current negotiations with the employees of the company indicate some uncertainty regarding the labor cost component of the variable cost figure presented above. What is the effect on the breakeven point in units if selling price and fixed costs are as planned, but the labor cost for the coming year is…
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