Make the budgeted operating and financial data for months

Assignment Help Managerial Accounting

Reference no: EM132786158

Question - Bi Love Kita Company is in the process of preparing its operating budgets for 2013. The company produces and sells only one product "Habibi." The following data are taken from its statement of assumptions.

a. Sales and Collections. The product is currently sold at a unit price of P150. The following estimates are developed by the Market Research Department as probable sales in January 2013.

Unit sales Probability

40,000 30%

50,000 50%

60,000 20%

Sales in succeeding months are expected to increase by 10% from each month thereafter, except for the month of April which is expected to increase by 20% from the immediately preceding month.

80% of sales are to be made on credit with terms of 2/10, n/40. Billings are made on the date of sales and collections are made as follows.

40% in the month of sales with 55% paying within the discount period

50% in the first month after sale

5% in the second month after sale

5% uncollectibles

The accounts receivable balance on December 31, 2012 is P4,000,000 with 75% of it is coming from the December 2012 sales.

b. Production. The finished goods inventory at the end of each month is set at 80% of the next month's sales.

c. Materials. A unit of product Habibi needs 4 lbs of material X costing P5 per pound. Materials inventory at the end of each month is estimated to be 20% of the next month's needs plus 20,000 lbs. Payments to materials suppliers are 60% in the month of purchase and 40% in the following month of purchases. The accounts payable balance on December 31, 2012 is P600,000.

d. Labor. It takes 2 hours to produce a unit of product Habibi. On the average production workers are paid at a rate of P40 per hour. Payroll costs amounting to 20% of the total payroll cost per month are estimated to be paid next month.

e. Factory Overhead. The standard variable factory overhead rate is P5 per hour. Total budgeted fixed overhead is set at P6,000,000 to be incurred evenly during the year. The company's normal capacity is 50,000 units per month.

Required - Make the budgeted operating and financial data for the months of January, February, and March 2013.

a. Sales in units, Net sales in pesos, allowance for doubtful accounts and discounts

b. Collections from customers

c. Production g. Factory Overhead

d. Materials Purchases in units and in pesos h. Total Production Costs

e. Payments to materials suppliers

f. Direct Labor

Reference no: EM132786158

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