Reference no: EM132875427

Question - The JL Company is preparing budgets for the quarter ending September 30.

Budgeted sales for the next five months are:

July 30,000 units

August 50,000 units

September 40,000 units

October 20,000 units

November 60,000 units

The selling price is P20 per unit.

The management at JL Company wants ending inventory to be equal to 10% of the following month's budgeted sales in units. On June 30, 3,000 units were on hand.

Six pounds of materials are required per unit of product. Management wants materials on hand at the end of each month equal to 20% of the following month's production. On June 30, 10,000 pounds of material are on hand. Material cost is P0.30 per pound. One-half of a month's purchases is paid for in the month of purchase; the other half is paid in the following month. The June 30 accounts payable balance is P20,000.

Each unit of product requires 0.10 hours (6 minutes) of direct labor. In exchange for the "no layoff" policy, workers agree to a wage rate of P5 per hour regardless of the hours worked (NO overtime pay).

Manufacturing overhead is applied to units of product on the basis of direct labor hours. The variable manufacturing overhead rate is P10 per direct labor hour. Fixed manufacturing overhead is P40,000 per month and includes P10,000 of noncash costs (primarily depreciation of plant assets).

The selling and administrative expenses budget is divided into variable and fixed components. The variable selling and administrative expenses are P0.40 per unit sold. Fixed selling and administrative expenses are P60,000 per month. The fixed selling and administrative expenses include P20,000 in costs - primarily depreciation - that are not cash outflows of the current month.

All sales are on account. JL's collection pattern is: 60% collected in the month of sale, 38% collected in the month following sale, 2% uncollectible. The June 30 accounts receivable balance of P40,000 will be collected in full.

The beginning cash balance for June 30 is P400,000. Dividend declared and paid are: P60,000, P75,000 and P80,000 for the month of July, August and September, respectively.

Required - Prepare the following:

1. Sales Budget

2. Production Budget

3. Direct Materials Budget and its Cash Disbursement Budget

4. Direct Labor Budget and its Cash Disbursement Budget

5. Factory Overhead Budget and its Cash Disbursement Budget

6. Ending Finished Goods Inventory Budget

7. Selling and Administrative Budget

8. Cash Collections Budget

9. Cash Budget