Shrek & Fiona Company, manufacturer of a single product, is preparing their annual budget for 2021:Requirements:1. Prepare a Sales Budget2. Determine production volume3. Estimate manufacturing costs and operating expensesa. Purchases (material) budgetb. Personnel budgetc. Overhead budgetd. Selling and administrative budget4. Determine cash flow and other financial effectsa. Cash collection scheduleb. Cash disbursement for purchases, factory overhead, and selling and administrative expensesc. Cash budget5. Formulate Projected Financial Statements (As of December 31, 2021)a. Budgeted Cost of Goods Manufacturedb. Budgeted Income Statementc. Budgeted Balance SheetThe following are the assumptions to be used:Shrek & Fiona CompanyStatement of Financial PositionAs of December 31, 2020Current AssetsCurrent LiabilitiesCash18,000Accounts Payable (N2)240,000Accounts Receivable (N1)1,192,000Taxes Payable13,200Less: Uncollectible accounts(22,400) 1,169,600Dividends PayableTotal Current Liabilities500,000753,200InventoriesRaw Materials (12,000 pounds)Finished Goods (4,000 units)30,000140,000170,0001,357,600 Stockholder's EquityTotal Current AssetsCommon Stock (100,000 shares)Retained EarningsTotal Stockholder's Equity500,000Non-current Assets360,400860,400Property, plant, and equipment320,000Less: Accumulated depreciation(64,000) 256,000Total Assets1,613,600Total Liabilities and SHE1,613,600P 200,000992,000P 1,192,000N1 2020 3rd quarter sales P2,500,0002020 4th quarter sales P3,100,000P 75,000N2 2020 3rd quarter purchases P300,0002020 4th quarter purchases P330,000165,000P 240,000 1. Estimated unit sales for the first quarter of 2021 is 40,000 units and expected to increase 10% quarterly. Sellingprice fluctuates as follows:QuarterUnit price2nd663rd624th621st64Assume that of each quarter's sales: 20% are cash sales while the remaining 80% are credit sales. Shrek & FionaCompany estimates that 60% of credit sales are collected in the quarter of sale with 2% discount, 30% in the quarterof following sale, 9% in the second quarter following sale and 1% are considered as uncollectible.2. Finished product requires 3 pounds of direct materials at P2.50 per pound. Finished good ending inventory isequal to 10% of the next quarter sales while raw materials ending inventory is equal to 10% of the next quarterproduction needs of materials. First quarter of 2022 sales is expected to be at 50,000 units while raw materialsending is at 13,500 pounds. (Units are rounded to the nearest ones.)3. Each quarter's purchase are paid 50% in that quarter with 5% purchase discount, 25% in the following quarterand the remainder in the second quarter following the purchase.4. Each finished goods requires 5 direct labor hours with an hourly rate of P4.00 payable on the end of eachmonth.5. For Factory overhead budget, use the following cost formula:Indirect laborPO.02 per direct labor worked (same payment scheme with direct labor)Indirect materialP2 per unit producedP48,000 annually, paid at the beginning of the yearInsuranceFactory rentP6,500 per monthP500 per quarter plus PO.50 per unit producedP300 per quarter plus PO. 30 per unit produced10% of the PPE cost, annuallyUtilitiesMaintenanceDepreciationAll overhead costs involve cash outlays are paid in the period which they are incurred, insurance cost. Worthy tonote, the company assumes that all indirect materials are used and paid in the month it was purchased.6. Selling and administrative expensesP65,000 annually, paid at the beginning of the year5% of total sales, paid quarterlyP100,000 per quarter (same payment scheme with direct labor)P5,000 per monthAdvertisingCommissionAdmin salariesOffice rent7. Income tax is 30%, paid on the first quarter of the following year.8. For cash budget, assume the following:a. The company desires to maintain P15,000 minimum cash balanceb. Dividend is declared every end of the 4th quarter of the year P15 per issued and outstanding share and paidevery 2nd quarter of the following yearc. At the end of the 2d quarter, the company plans to purchase P100,000 worth of equipment.d. Any excess cash at the end of the 1* quarter of the year is used to buy long term investments P10,000increments. 3% interest rate is credited to the company's bank account at the quarter's end based onoriginal cost of investmente. In case of deficit, the company borrow from the bank P10,000 increments, payable in one year, 10% interestrate is automatically debited to the company's bank account at the end of every quarter.

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Shrek & Fiona Company, manufacturer of a single product, is preparing their annual budget for 2021: Requirements: 1. Prepare a Sales Budget 2. Determine production volume 3. Estimate manufacturing costs and operating expenses a. Purchases (material) budget b. Personnel budget c. Overhead budget d. Selling and administrative budget 4. Determine cash flow and other financial effects a. Cash collection schedule b. Cash disbursement for purchases, factory overhead, and selling and administrative expenses c. Cash budget 5. Formulate Projected Financial Statements (As of December 31, 2021) a. Budgeted Cost of Goods Manufactured b. Budgeted Income Statement c. Budgeted Balance Sheet The following are the assumptions to be used: Shrek & Fiona Company Statement of Financial Position As of December 31, 2020 Current Assets Current Liabilities 18,000 Accounts Payable (N2) Taxes Payable Dividends Payable Total Current Liabilities Cash 240,000 Accounts Receivable (N1) Less: Uncollectible accounts 1,192,000 13,200 (22,400) 1,169,600 500,000 753,200 Inventories Raw Materials (12,000 pounds) Finished Goods (4,000 units) 30,000 170,000 1,357,600 Stockholder's Equity 140,000 Total Current Assets Common Stock (100,000 shares) Retained Earnings Total Stockholder's Equity 500,000 Non-current Assets 360,400 860,400 Property, plant, and equipment 320,000 Less: Accumulated depreciation (64,000) 256,000 Total Assets 1,613,600 Total Liabilities and SHE 1,613,600 P 200,000 992,000 P 1,192,000 N1 2020 3rd quarter sales P2,500,000 2020 4th quarter sales P3,100,000 P 75,000 165,000 P 240,000 N2 2020 3rd quarter purchases P300,000 2020 4th quarter purchases P330,000

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q