(Solved A++ Grade) Assignment 7b


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Question 1

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Purchases Budget in Units and Dollars

Budgeted sales of The Music Shop for the first six months of 2014 are as follows:

Month Unit Sales Month Unit Sales
January 130,000 April 215,000
February 160,000 May 180,000
March 200,000 June 240,000

 

Beginning inventory for 2014 is 30,000 units. The budgeted inventory at the end of a month is 40 percent of units to be sold the following month. Purchase price per unit is $5.

Prepare a purchases budget in units and dollars for each month, January through May.

The Music Shop
Purchases Budget
January – May, 2014
  January February March April May
Purchase units: Answer Answer Answer Answer Answer
Purchase dollars: $Answer $Answer $Answer $Answer $Answer

 

 

Question 2

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Cash Budget
Wilson’s Retail Company is planning a cash budget for the next three months. Estimated sales revenue is as follows:

Month Sales Revenue Month Sales Revenue
January $300,000 March $200,000
February 205,000 April 190,000

 

All sales are on credit; 60 percent is collected during the month of sale, and 40 percent is collected during the next month. Cost of goods sold is 70 percent of sales. Payments for merchandise sold are made in the month following the month of sale. Operating expenses total $44,000 per month and are paid during the month incurred. The cash balance on February 1 is estimated to be $40,000.

Prepare monthly cash budgets for February, March, and April.

Use negative signs only with beginning and ending cash balances, when appropriate. Do not use negative signs with disbursement answers.

Wilson’s Retail Company
Cash Budgets
February, March, and April
  February March April
Cash balance, beginning $Answer $Answer $Answer
Total Cash receipts Answer Answer Answer
Cash available Answer Answer Answer
Total disbursements Answer Answer Answer
Cash balance, ending $Answer $Answer $Answer

 

 

Question 3

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Production and Purchases Budgets in Units
At the end of business on June 30, 2009, the Wooly Rug Company had 100,000 square yards of rugs and 400,000 pounds of raw materials on hand. Budgeted sales for the third quarter of 2009 are:

Month Sales
July 220,000 sq. yards
August 160,000 sq. yards
September 150,000 sq. yards
October 160,000 sq. yards

 

The Wooly Rug Company wants to have sufficient square yards of finished product on hand at the end of each month to meet 40 percent of the following month’s budgeted sales and sufficient pounds of raw materials to meet 30 percent of the following month’s production requirements. Five pounds of raw materials are required to produce one square yard of carpeting.

Prepare a production budget for the months of July, August, and September and a purchases budget in units for the months of July and August.

Wooly Rug Company
Production Budget
For the Months of July, August, & September, 2009
  July August September
Budgeted production – sq. yards Answer Answer Answer

 

Wooly Rug Company
Purchases Budget
For the Months of July & August, 2009
  July August
Purchases in pounds Answer Answer

 

 

Question 4

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Cash Receipts
The sales budget for Perrier Inc. is forecasted as follows:

Month Sales Revenue
May $140,000
June 140,000
July 180,000
August 120,000

 

To prepare a cash budget, the company must determine the budgeted cash collections from sales. Historically, the following trend has been established regarding cash collection of sales:

  • 60 percent in the month of sale.
  • 20 percent in the month following sale.
  • 15 percent in the second month following sale.
  • 5 percent uncollectible.

The company gives a 1 percent cash discount for payments made by customers during the month of sale. The accounts receivable balance on April 30 is $25,000, of which $6,000 represents uncollected March sales and $19,000 represents uncollected April sales. Prepare a schedule of budgeted cash collections from sales for May, June, and July. Include a three-month summary of estimated cash collections.

Perrier, Inc.
Schedule of Budgeted Cash Collections
Quarterly by Months
  May June July Total
Total Cash receipts: $Answer $Answer $Answer $Answer

 

 

Question 5

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Cash Disbursements
Assume that Waycross Manufacturing manages its cash flow from its home office. Waycross controls cash disbursements by category and month. In setting its budget for the next six months, beginning in July, it used the following managerial guidelines:

Category Guidelines
Purchases Pay half in current and half in following month.
Payroll Pay 90 percent in current month and 10 percent in following month.
Loan Payments Pay total amount due each month.

 

Predicted activity for selected months follow:

Category May June July August
Purchases $30,000 $48,000 $52,000 $54,000
Payroll 100,000 130,000 140,000 100,000
Purchases 10,000 10,000 12,000 12,000

 

Prepare a schedule showing cash disbursements by account for July and August.

Waycross Manufacturing
Schedule of Cash Disbursements
For the Months of July and August
  July August
Accounts payable $Answer $Answer
Payroll Answer Answer
Loan payments Answer Answer
Total $Answer $Answer

 

 

Question 6

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Cash Budget
The Peoria Supply Company sells for $30 one product that it purchases for $20. Budgeted sales in total dollars for next year are $720,000. The sales information needed for preparing the July budget follows:

Month Sales Revenue
May $30,000
June 44,000
July 49,000
August 50,000

 

Account balances at July 1 include these:

Cash $20,000
Merchandise inventory 15,000
Accounts receivable (sales) 24,000
Accounts payable (purchases) 13,000

 

The company pays for one-half of its purchases in the month of purchase and the remainder in the following month. End-of-month inventory must be 50 percent of the budgeted sales in units for the next month. A 2 percent cash discount on sales is allowed if payment is made during the month of sale. Experience indicates that 50 percent of the billings will be collected during the month of sale, 40 percent in the following month, 6 percent in the second following month, and 4 percent will be uncollectible. Total budgeted selling and administrative expenses (excluding bad debts) for the fiscal year are estimated at $174,000, of which one-half is fixed expense (inclusive of a $20,000 annual depreciation charge). Fixed expenses are incurred evenly during the year. The other selling and administrative expenses vary with sales. Expenses are paid during the month incurred. (Round your answers to the nearest whole number.)

(a) Prepare a schedule of estimated cash collections for July.

Peoria Supply Company
Schedule of Cash Collections
For the Month of July
Current month’s sales $Answer
Previous month’s sales $Answer
Two months’ prior sales $Answer
Total cash collections $Answer

 

(b) Prepare a schedule of estimated July cash payments for purchases.

Peoria Supply Company
Schedule of Cash Payments for Purchases
For the Month of July
Current month’s purchases $Answer
Beginning accounts payable Answer
Total cash payments $Answer

 

(c) Prepare schedules of July selling and administrative expenses, separately identifying those requiring cash disbursements.

Peoria Supply Company
Schedule of Selling and Administrative Expenses and Cash Disbursements
For the Month of July
  Total Cash
Selling and administrative expenses:
Fixed $Answer
Cash payment $Answer
Variable Answer Answer
Total expenses and cash disbursements $Answer $Answer

 

(d) Prepare a cash budget in summary form for July.

Peoria Supply Company
Cash Budget
For the Month of July
Cash receipts $Answer
Cash disbursements:
Merchandise $Answer
Selling and administrative Answer Answer
Excess receipts (disbursements) $Answer

 

Question 7

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Product and Department Budgets
Using Activity-Based Approach
The following data are from the general records of the Loading Department of Bowman Freight Company for November.

  • Cleaning incoming trucks, 20 minutes.
  • Obtaining and reviewing shipping documents for loading truck and instructing loaders, 30 minutes.
  • Loading truck, 1 hour and 30 minutes.
  • Cleaning shipping dock and storage area after each loading, 10 minutes.
  • Employees perform both cleaning and loading tasks and are currently averaging $20 per hour in wages and benefits.
  • The supervisor spends 10 percent of her time overseeing the cleaning activities; 60 percent overseeing various loading activities; and the remainder of her time making general plans and managing the department. Her current salary is $3,000 per month.
  • Other overhead of the department amounts to $10,000 per month, 20 percent for cleaning and 80 percent for loading.

Prepare an activities budget for cleaning and loading in the Loading Department for November, assuming 20 working days and the loading of an average of 14 trucks per day. (Round your answers to two decimal places.)

Bowman Freight
Loading Department Activity-Based Budget
For the Month of November
Activities:
Cleaning:
Trucks Answer hours
Docks Answer hours
Total cleaning time Answer hours
Loading:
Instructions Answer hours
Loading trucks Answer hours
Total loading time Answer hours
Budget:
Cleaning:
Labor $Answer
Overhead Answer
Supervision Answer $Answer
Loading:
Labor Answer
Overhead Answer
Supervision Answer Answer
Total $Answer

 

Question 8

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Developing a Master Budget
for a Manufacturing Organization
Jacobs Incorporated manufactures a product with a selling price of $50 per unit. Units and monthly cost data follow:

Variable:
Selling and administrative $5 per unit sold
Direct materials 10 per unit manufactured
Direct labor 10 per unit manufactured
Variable manufacturing overhead 5 per unit manufactured
Fixed:
Selling and administrative $20,000 per month
Manufacturing (including depreciation of $10,000) 30,000 per month

 

Jacobs pays all bills in the month incurred. All sales are on account with 50 percent collected the month of sale and the balance collected the following month. There are no sales discounts or bad debts. Jacobs desires to maintain an ending finished goods inventory equal to 20 percent of the following month’s sales and a raw materials inventory equal to 10 percent of the following month’s production. January 1, 2011, inventories are in line with these policies. Actual unit sales for December and budgeted unit sales for January, February, and March of 2011 are as follows:

JACOBS INCORPORATED
Sales Budget
For the Months of January, February, and March 2011
Month December January February March
Sales – Units 5,750 3,000 10,000 7,000
Sales – Dollars $287,500 $150,000 $500,000 $350,000

 

Additional information:

  • The January 1 beginning cash is projected as $7,000.
  • For the purpose of operational budgeting, units in the January 1 inventory of finished goods are valued at variable manufacturing cost.
  • Each unit of finished product requires one unit of raw materials.
  • Jacobs intends to pay a cash dividend of $6,000 in January.

NOTE: For the entire problem – do not use any negative signs with your answers unless appropriate for net income(loss) or ending balance.

(a) A production budget for January and February.

JACOBS INCORPORATED
Production Budget
For the Months of January and February 2011
  January February March
Requirements for current sales Answer Answer Answer
Desired ending inventory Answer Answer
Total requirements Answer Answer
Less beginning inventory Answer Answer
Production requirements Answer Answer

 

(b) A purchases budget in units for January.

JACOBS INCORPORATED
Purchases Budget
For the Month of January 2011
  January February
Current requirements (units) Answer Answer
Desired ending inventory Answer
Total requirements Answer
Less beginning inventory Answer
Purchases (units) Answer
Purchases (dollars at $10 each) $Answer

 

(c) A manufacturing cost budget for January.

JACOBS INCORPORATED
Manufacturing Cost Budget
For the Month of January 2011
Variable costs
Direct materials $Answer
Direct labor Answer
Variable manufacturing overhead Answer
Total variable costs Answer
Fixed manufacturing overhead Answer
Total manufacturing overhead $Answer

 

(d) A cash budget for January.

JACOBS INCORPORATED
Cash Budget
For the Month of January 2011
Beginning balance $Answer
Receipts:
December sales $Answer
January sales Answer Answer
Total cash available Answer
Disbursements:
Purchases Answer
Direct labor Answer
Variable manufacturing overhead Answer
Fixed manufacturing overhead (exclude depreciation) Answer
Variable selling and administrative Answer
Fixed selling and administrative Answer
Dividend Answer Answer
Ending Balance $Answer

 

(e) A budgeted contribution income statement for January.

JACOBS INCORPORATED
Budgeted Contribution Income Statement
For the Month of January 2011
Sales $Answer
Less variable costs:
Cost of goods sold $Answer
Selling and administrative Answer Answer
Contribution Answer
Less fixed costs:
Manufacturing overhead Answer
Selling and administrative Answer Answer
Net income $Answer

 

(f) Prepare a cash budget for January assuming management plans to increase the January end raw materials inventory to 100 percent of February’s production needs.

JACOBS INCORPORATED
Cash Budget with Additional Purchases of Raw Materials
For the Month of January 2011
Beginning balance $Answer
Receipts:
December sales $Answer
January sales Answer Answer
Total cash available Answer
Disbursements:
Purchases Answer
Direct labor Answer
Variable manufacturing overhead Answer
Fixed manufacturing overhead (exclude depreciation) Answer
Variable selling and administrative Answer
Fixed selling and administrative Answer
Dividend Answer Answer
Ending Balance $Answer

 

(g) Actions management might consider to resolve the problem indicated in the revised cash budget in part (f) include:

Delaying the cash dividend.

If possible, pay for fifty percent of each month’s purchases in during the month and pay for the other fifty percent in the following month, an average of fifteen to sixteen days after receipt.

Obtain a line of credit with a financial institution.

All of the above.

 

 

 

 

 

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