Reference no: EM132845317

Question - Woodward Benches Limited manufactures just one product: Park benches made exclusively from cedar lumber. The company prepares complete monthly Budgets at the beginning of each year. The company year-end is December 31st 2020. For the month of January 2021 the company has budgeted $100,000 in Sales Revenue (1,000 Benches to be sold for $100 each). It takes 20 linear feet of 1x8 cedar to manufacture 1 bench. It is expected that 1x8 cedar will cost $5.00 per linear ft in January of 2021. There were 180 benches in Finished Goods Inventory on hand at December 31st. There was 600 linear ft of cedar in Direct Materials Inventory at December 31st 2020.

i) If the Company wishes to always have 250 benches in Finished Goods Inventory at the end of each month in 2021, how many units of production will they budget to manufacture in their January 2021 Production Budget?

ii) If the Company wishes to always have 500 linear ft of cedar in Direct Materials Inventory at the end of each month in 2021, how much cedar will they have to purchase (in dollars) in January 2021?

iii) Assuming there are no Cash, Accounts Receivable or Accounts Payable balances at December 31st 2020, what will be the net cash balance at January 31st if 60% of January sales are made on credit and remaining customers paid in cash in the same month AND 80% of Direct Material purchases in January are made on credit and will not be paid for until the following month. Remainder was paid for in cash in January 2021

iv) What is the Budgeted profit on the Income Statement if the standard cost of a unit of Inventory is $40 in 2021 and the only other Company expenses in the month of January 2021 total $35,000?

v) Explain how Standard Costs and the Master Budget are related.