Reference no: EM133030855

Question - Communion Corp. plans to sell their juice glasses at $60 per unit. This product sells best during March. As a result, its peak sales occur in the first quarter of each year. Expected sales for the first four months of 2020 are:

Budgeted Sales units:

January 3,500 units

February 5,000 units

March 6,200 units

April 4,500 units

Total 19,200 units

In addition, expected sales in May are 5,000 units.

Communion Corp. expects that it will meet all future sale requirements by maintaining an ending inventory equal to 20% of next month's budgeted sales volume. The labour budget assumes that two hours of direct labour are necessary to produce each unit of finished goods and the hourly wage rate is $10.

Past experience shows that the company collects 60% of a month's sales in the month of sale and 40% is collected in the following month. Accounts receivable of $60,000 at the end of December 2019 and are expected to be collected in full in January 2020. Bad debts are negligible and can be ignored.

In completing parts (a) through (d) make sure to prepare proper budget schedules. For part (e), make sure to show your working.

a) From the data above, calculate budgeted sales in dollars.

b) Prepare a production budget (units) for the period (four months).

c) Prepare the direct labour budget expected to help Communion Corp. meet its production levels.

d) Prepare the Schedule of cash collections from sales, by month and in total.

e) From data above, if the company prepares a budgeted balance sheet as of April 30, compute the accounts receivable balance as of that date.