Quarterly cash payments budget, Financial Accounting

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Emily Jackson, RSC Designs management accountant, is in charge of preparing the master budget for 2013.  She has gathered the following information:

1. Annual profit for the 2012/2013 financial year is expected to be the sum of  each group members RMIT student number.  The split (anticipated sales mix)  between SML Sculptures and LGE Sculptures is for every 3 LGE sculptures sold 2 SML Sculptures will be sold.  Forty percent (40%) of the total sales (of each product) will occur in the first 6 months of the financial year and the remaining sixty percent (60%) will occur in the remaining six months. 

Expected sales for the final quarter of 2012 are expected to be 15,000 units of the SML Sculptures and 23,000 of the LGE Sculptures.

2. RSC Designs' sales history indicates that 40 percent of all sales are on credit, with the remainder of the sales being on a cash basis.  The company's collection experience shows that 60 percent of the credit sales are collected during the quarter in which the sale is made, while the remaining 40 percent is collected in the following quarter.  (For simplicity, assume the company is able to collect 100 percent of its accounts receivable.)

3. The SML sculpture has a selling price of $45 per unit, and the LGE sculpture has a selling price of $75 per unit.  These prices are expected to hold constant throughout the 2012/2013 financial year.  

4. The production manager attempts to end each quarter with enough finished - goods inventory in each product line to cover 20 percent of the following  quarter's sales.  Moreover, an attempt is made to end each quarter with 20 percent of the glass sheets needed for the following quarter's production.  As the metal strips are purchased locally the company buys them on a just-in-time
basis, and as a result the inventory is negligible.

5. All direct material purchases are made on credit, with 80 percent of each quarter's credit purchases being paid in cash during the same quarter as the purchase.  The remaining 20 percent is paid in the next quarter.

6. Indirect materials are purchased on a cash basis as needed.  Work-in-process is negligible.


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