Watson uses four units of direct material

Reference no: EM13320529

The balance sheet of Watson Company as of December 31, 20X1, follows.

WATSON COMPANY
Balance Sheet
December 31, 12X1
Assets
Cash		$4,595
Accounts receivable		10,000
Finished goods (575 units x $7.00)		4,025
Direct materials (2,760 units x $0.50)		1,380
Plant & equipment	$50,000
Less: Accumulated depreciation	10,000	40,000
Total assets		$60,000
Liabilities & Stockholders' Equity
Accounts payable to suppliers		$14,000
Common stock	$25,000
Retained earnings	21,000	46,000
Total liabilities &. stockholders' equity		$60,000

The following information has been extracted from the firm's accounting records:

1. All sales are made on account at $20 per unit. Sixty percent of the sales are collected in the month of sale; the remaining 40% are collected in the following month. Forecasted sales for the first five months of 20X2 are: January, 1,500 units,- February, 1,600 units; March, 1,800 units; April, 2,000 units; May, 2,100 units.

2. Management wants to maintain the finished goods inventory at 30% of the following month's sales.

3. Watson uses four units of direct material in each finished unit. The direct material price has been stable and is expected to remain so over the next six months. Management wants to maintain the ending direct materials inventory at 60% of the following month's production needs.

4. Seventy percent of all purchases are paid in the month of purchase; the remaining 30% are paid in the subsequent month.

5. Watson's product requires 30 minutes of direct labor time. Each hour of direct labor costs $7.

Instructions:

a. Rounding computations to the nearest dollar, prepare the following for January through March:

1) Sales budget

2) Schedule of cash collections

3) Production budget

4) Direct material purchases budget

5) Schedule of cash disbursements for material purchases
6) Direct labor budget

b. Determine the balances in the following accounts as of March 31:

1) Accounts Receivable

2) Direct Materials

3) Accounts Payable

Reference no: EM13320529

Questions Cloud

Received semiannual interest : Accrued $576 interest on Elkin City bonds. Dec. 31 Accrued $620 interest on Morgan Co. bonds. 2013 Mar. 1 Received semiannual interest on the Elkin City bonds. June 1 Received semiannual interest on the Morgan Co. bonds.

At what frequency will it vibrate : A violin string vibrates at 264 Hz when unfingered. At what frequency will it vibrate if it is fingered one fourth of the way down from the end

How will you develop its presentation to appropriate market : In Career Focus: A Personal Job Search Guide, Martucci Lamarre (2006) suggests that if we want to realize our job dreams, we need to think about ourselves as products to be marketed.

What is the spring constant of this elastic cord : An elastic cord is 63.9 cm long when a weight of 71.1 N hangs from it but is 88.9 cm long when a weight of 184 N hangs from it. What is the "spring" constant k of this elastic cord

Watson uses four units of direct material : Watson uses four units of direct material in each finished unit. The direct material price has been stable and is expected to remain so over the next six months.

What is the density of the piece of metal : A irregular piece of metal has a dry mass of 5.7 kg. Once it is submerged it has an apparent mass of 2.4 kg. What is the density of the piece of metal

What is the lift created by each one : A Two balloons of identical volume (radius 11.5 m) are filled with gas. The first with helium, the second with hydrogen (H2) gas. What is the lift created by each one

Create historical and comparative research methods : A variety of research types have combined to create historical and comparative research methods

What is the direction of the external magnetic field : the plane of a flat, circular loop of wire is vertical. An external B-field is directed perpendicular to the plane of the loop. What is the direction of the external magnetic field

User Account

All Pages