Reference no: EM133056625
Question 1 - Pottery Manufacturing Limited has projected sales and production in units for the second quarter of the coming year as follows:
|
|
October
|
November
|
December
|
|
Sales
|
50,000
|
40,000
|
60,000
|
|
Production
|
60,000
|
50,000
|
50,000
|
Cash-related production costs are budgeted at $5 per unit produced.
Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to $100,000 per month, paid in the month incurred. The accounts payable balance on September 30 totals $190,000, which will be paid in October.
All units are sold on account (as credit sales) for $14 each. There are no cash sales. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on October 1 totalled $500,000 ($90,000 from August's sales and the remainder from September).
Required -
a. Prepare a schedule for each month showing budgeted cash disbursements for the Pottery Manufacturing Limited.
b. Prepare a schedule for each month showing budgeted cash receipts for the Pottery Manufacturing Limited.
Question 2 - A sales budget is given below for one of the products manufactured by the Quick Production Limited:
July 25,000 units
August 40,000 units
September 65,000 units
October 45,000 units
November 35,000 units
December 30,000 units
The inventory of finished goods at the end of each month must equal 20% of the next month's sales. However, on June 30 the finished goods inventory totalled only 4,000 units.
Each unit of product requires three pounds of specialized material. Since the production of this specialized material by Quick's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs. This requirement had been met on July 1 of the current year.
Required - Prepare a budget showing the quantity of material to be purchased each month for July, August and September and in total for the quarter.