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I need help on this.  It's lengthy and I don't know where to start. The sales department of Donovan Manufacturing, Inc. has completed the following sales forecast for the months of January through March 20X1 for its only two products: 50,000 units of J to be sold at $90 each and 30,000 units of K to be sold at $70 each.   The desired unit inventories at March 31, 20X1, are 10% of the next quarter's unit sales forecast, which are 60,000 units of J and 30,000 units of K.  The January 1, 20X1, unit inventories were 5,000 units of J and 2,000 units of K.Each unit of J requires 3 pounds of material A and 2 pounds of material B for its manufacture; K requires 2 pounds of A and 4 pounds of B.  The purchase cost of A is $9 per pound and the purchase cost of B is $5 per pound.  Materials A and B on hand at January 1, 20X1, were 19,000 pounds of A and 7,000 pounds of B.  Desired inventories at March 31, 20X1, are 14,000 pounds of A and 8,000 pounds of B.Each unit of J requires 0.5 hours of direct labor in the factory; each unit of K requires 1.0 hour of direct labor.  The average hourly rate for direct labor is $12 per hour.  Estimated manufacturing overhead cost is $6 per direct labor hour plus $90,0000 per month.  Selling and administrative expenses are estimated to be 10% of sales revenue plus $180,000 per month.Cash sales for the first quarter are estimated to be $300,000 per month.  It is forecast that 30% of the credit sales for the quarter ended March 31, 20X1, will occur in January, 30% in February, and 40% in March.  Of credit sales (December through March), 40% will be collected as cash in the month of sale and 55% will be collected in the following month.  The remainder will be uncollectible.  Cash collected in January 20X1 from December 20X0 sales will be $1,050,000.The January 1, 20X1, cash balance was $70,000.  The minimum acceptable cash balance at the end of each month is $60,000.  Short-term borrowings (6-month term) are made in muliples of $10,000.  Interest is charged at the rate of 1% per month on short-term borrowings.  The first interest payment is made the month following the borrowing.  Cash disbursements (excluding interest on short-term borrowings) are estimated as follows: JanuaryFebruaryMarchManufacturing costs$1,500,000$1,300,000$1,400,000Selling and admin expenses$390,000$410,000$400,000Interest expense$90,000$90,000$90,000Income tax payment00$210,000    Capital expenditures$124,000$110,000$50,000    Cash dividends$300,00000 Required:a) Prepare the sales budget for the quarter ended March 31, 20X1.b) Prepare the production budget for the quarter ended March 31, 20X1.c) Prepare the direct materials budget for the quarter ended March 31, 20X1.d) Prepare the direct labor budget for the quarter ended March 31, 20X1.e) Prepare the manufacturing overhead budget for the quarter ended March 31, 20X1.f) Prepare the selling and adminstrative expense budget for the quarter ended March 31, 20X1.g) Prepare a schedule of cash collected from customers for the quarter ended March 31, 20X1.h.) Prepare the cash budget for the quarter ended March 31, 20X1. My note: If you can only help with a few at a time, I understand.  Start with a)

Question

I need help on this.  It's lengthy and I don't know where to start.

 

The sales department of Donovan Manufacturing, Inc. has completed the following sales forecast for the months of January through March 20X1 for its only two products: 50,000 units of J to be sold at $90 each and 30,000 units of K to be sold at $70 each.   The desired unit inventories at March 31, 20X1, are 10% of the next quarter's unit sales forecast, which are 60,000 units of J and 30,000 units of K.  The January 1, 20X1, unit inventories were 5,000 units of J and 2,000 units of K.

Each unit of J requires 3 pounds of material A and 2 pounds of material B for its manufacture; K requires 2 pounds of A and 4 pounds of B.  The purchase cost of A is $9 per pound and the purchase cost of B is $5 per pound.  Materials A and B on hand at January 1, 20X1, were 19,000 pounds of A and 7,000 pounds of B.  Desired inventories at March 31, 20X1, are 14,000 pounds of A and 8,000 pounds of B.

Each unit of J requires 0.5 hours of direct labor in the factory; each unit of K requires 1.0 hour of direct labor.  The average hourly rate for direct labor is $12 per hour.  Estimated manufacturing overhead cost is $6 per direct labor hour plus $90,0000 per month.  Selling and administrative expenses are estimated to be 10% of sales revenue plus $180,000 per month.

Cash sales for the first quarter are estimated to be $300,000 per month.  It is forecast that 30% of the credit sales for the quarter ended March 31, 20X1, will occur in January, 30% in February, and 40% in March.  Of credit sales (December through March), 40% will be collected as cash in the month of sale and 55% will be collected in the following month.  The remainder will be uncollectible.  Cash collected in January 20X1 from December 20X0 sales will be $1,050,000.

The January 1, 20X1, cash balance was $70,000.  The minimum acceptable cash balance at the end of each month is $60,000.  Short-term borrowings (6-month term) are made in muliples of $10,000.  Interest is charged at the rate of 1% per month on short-term borrowings.  The first interest payment is made the month following the borrowing.  Cash disbursements (excluding interest on short-term borrowings) are estimated as follows:

  January February March
Manufacturing costs $1,500,000 $1,300,000 $1,400,000
Selling and admin expenses $390,000 $410,000 $400,000
Interest expense $90,000 $90,000 $90,000
Income tax payment 0 0 $210,000
       
Capital expenditures $124,000 $110,000 $50,000
       
Cash dividends $300,000 0 0

 

Required:

a) Prepare the sales budget for the quarter ended March 31, 20X1.

b) Prepare the production budget for the quarter ended March 31, 20X1.

c) Prepare the direct materials budget for the quarter ended March 31, 20X1.

d) Prepare the direct labor budget for the quarter ended March 31, 20X1.

e) Prepare the manufacturing overhead budget for the quarter ended March 31, 20X1.

f) Prepare the selling and adminstrative expense budget for the quarter ended March 31, 20X1.

g) Prepare a schedule of cash collected from customers for the quarter ended March 31, 20X1.

h.) Prepare the cash budget for the quarter ended March 31, 20X1.

 

My note: If you can only help with a few at a time, I understand.  Start with a)

check_circleAnswer
Step 1

Hey, since there are multiple sub-parts posted, we will answer first three sub-parts. If you want any specific sub-part to be answered then please submit that sub-part only or specify the sub-part number in your message. Thank you.

Step 2

Prepare the sales budget for the quarter ended March 31, 20X1:

 

Donovan Manufacturing, Inc.
Sales budget
For the quarter ended March 31, 20X1
Product J Product K Total
30,000
S70.00
$4,500,000 S2,100,000| S6,600,000
Budgeted Sales (in units)
50,000
Selling price per unit
$90.00
Sales Revenue
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Donovan Manufacturing, Inc. Sales budget For the quarter ended March 31, 20X1 Product J Product K Total 30,000 S70.00 $4,500,000 S2,100,000| S6,600,000 Budgeted Sales (in units) 50,000 Selling price per unit $90.00 Sales Revenue

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Step 3

Prepare the production budget for the quarter ended...

Donovan Manufacturing, Inc
Production budget
For the quarter ended March 31, 20X1
Product J Product K
50,000
6000
56,000
(5000)
51,000|
Budgeted Sales (in units)
Add: Desired Ending Inventory March 31
30,000
3000
33,000
(2000)
31,000
Total Units needed
Less: Expected Beginning Inventory January 1
Production Requirements
help_outline

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Donovan Manufacturing, Inc Production budget For the quarter ended March 31, 20X1 Product J Product K 50,000 6000 56,000 (5000) 51,000| Budgeted Sales (in units) Add: Desired Ending Inventory March 31 30,000 3000 33,000 (2000) 31,000 Total Units needed Less: Expected Beginning Inventory January 1 Production Requirements

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