Millet Corporation manufactures and sells stuff toys. She is busy with thethird and fourth quarters of 2021 at the moment. She asks your help to preparesome of these budgets:The sales budget in units is as follows:45,000 pieces70,000 piecesThird quarterFourth quarter It is decided that stuff toys inventories are to be 20,000 pieces at the endof the third quarter, and 5,000 pieces at the end of the fourth quarter. Theinventory at the start of the third quarter will consist of 8,000 stuff toys.Each stuff toy is packaged in a colorful cardboard box, and contains 2units of Material A and 5 units of Material B.The inventory of materials at the beginning of the third quarter will be:Boxes125,000 piecesMaterial A15,000 unitsMaterial B45,000 unitsThere are sufficient boxes on hand for both quarters; none will bepurchased during the two periods.Material A can be bought whenever needed and in any quantity desired.The starting inventory of 15,000 units is considered to be an ideal quantity.Material B must be purchased in quantities of 10,000 units, or multiplesof 10,000. It is desired that at the end of the third and fourth quarters, aminimum quantity of 30,000 units be on hand, or as close thereto as thestandard quantity will permit.REQUIRED:1. Prepare a production budget for the third and fourth quarters of 2021.2. Prepare a purchases budget for Material A and Material B for the third andfourth quarters of 2021.3. How manyboxes will be on hand at the end of the fourth quarter?

Budget: It is an estimated and effective way of the utilization of funds for the financial control…

It is decided that stuff toys inventories are to be 20,000 pieces at the end of the third quarter, and 5,000 pieces at the end of the fourth quarter. The inventory at the start of the third quarter will consist of 8,000 stuff toys. Each stuff toy is packaged in a colorful cardboard box, and contains 2 units of Material A and 5 units of Material B. The inventory of materials at the beginning of the third quarter will be: 125,000 pieces 15,000 units Вохes Material A Material B 45,000 units There are sufficient boxes on hand for both quarters; none will be purchased during the two periods. Material A can be bought whenever needed and in any quantity desired. The starting inventory of 15,000 units is considered to be an ideal quantity. Material B must be purchased in quantities of 10,000 units, or multiples of 10,000. It is desired that at the end of the third and fourth quarters, a minimum quantity of 30,000 units be on hand, or as close thereto as the standard quantity will permit. REQUIRED: 1. Prepare a production budget for the third and fourth quarters of 2021.

It is decided that stuff toys inventories are to be 20,000 pieces at the end of the third quarter, and 5,000 pieces at the end of the fourth quarter. The inventory at the start of the third quarter will consist of 8,000 stuff toys. Each stuff toy is packaged in a colorful cardboard box, and contains 2 units of Material A and 5 units of Material B. The inventory of materials at the beginning of the third quarter will be: 125,000 pieces 15,000 units Вохes Material A Material B 45,000 units There are sufficient boxes on hand for both quarters; none will be purchased during the two periods. Material A can be bought whenever needed and in any quantity desired. The starting inventory of 15,000 units is considered to be an ideal quantity. Material B must be purchased in quantities of 10,000 units, or multiples of 10,000. It is desired that at the end of the third and fourth quarters, a minimum quantity of 30,000 units be on hand, or as close thereto as the standard quantity will permit. REQUIRED: 1. Prepare a production budget for the third and fourth quarters of 2021.

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter7: The Master Budget And Flexible Budgeting

Section: Chapter Questions

Problem 1E: The sales department of Macro Manufacturing Co. has forecast sales for its single product to be...

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Lovely Wedding printing is budgeting sales of 32,000 units and already has 4,000 in beginning inventory. How many units must be produced to also meet the 6,000 units required in ending inventory?
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CASH BUDGETING Helen Bowers, owner of Helens Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2019 and 2020: Estimates regarding payments obtained from the credit department are as follows: collected within the month of sale, 10%; collected the month following the sale, 75%; collected the second month following the sale, 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials: General and administrative salaries are approximately 27,000 a month. Lease payments under long-term leases are 9,000 a month. Depreciation charges are 36,000 a month. Miscellaneous expenses are 2,700 a month. Income tax payments of 63,000 are due in September and December. A progress payment of 180,000 on a new design studio must be paid in October. Cash on hand on July 1 will be 132,000, and a minimum cash balance of 90,000 should be maintained throughout the cash budget period. a. Prepare a monthly cash budget for the last 6 months of 2019. b. Prepare monthly estimates of the required financing or excess fundsthat is, the amount of money Bowers will need to borrow or will have available to invest. c. Now suppose receipts from sales come in uniformly during the month (that is, cash receipts come in at the rate of 1/30 each day), but all outflows must be paid on the 5th. Will this affect the cash budget? That is, will the cash budget you prepared be valid under these assumptions? If not, what could be done to make a valid estimate of the peak financing requirements? No calculations are required, although if you prefer, you can use calculations to illustrate the effects. d. Bowers sales are seasonal, and her company produces on a seasonal basis, just ahead of sales. Without making any calculations, discuss how the companys current and debt ratios would vary during the year if all financial requirements were met with short-term bank loans. Could changes in these ratios affect the firms ability to obtain bank credit? Explain.
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Sunrise Poles manufactures hiking poles and is planning on producing 4,000 units in March and 3,700 in April. Each pole requires a half pound of material, which costs $1.20 per pound. The companys policy is to have enough material on hand to equal 10% of the next months production needs and to maintain a finished goods inventory equal to 25% of the next months production needs. What is the budgeted cost of purchases for March?
Norton Company, a manufacturer of infant furniture and carriages, is in the initial stages of preparing the annual budget for the coming year. Scott Ford has recently joined Nortons accounting staff and is interested in learning as much as possible about the companys budgeting process. During a recent lunch with Marge Atkins, sales manager, and Pete Granger, production manager, Ford initiated the following conversation. FORD: Since Im new around here and am going to be involved with the preparation of the annual budget, Id be interested in learning how the two of you estimate sales and production numbers. ATKINS: We start out very methodically by looking at recent history, discussing what we know about current accounts, potential customers, and the general state of consumer spending. Then, we add that usual dose of intuition to come up with the best forecast we can. GRANGER: I usually take the sales projections as the basis for my projections. Of course, we have to make an estimate of what this years closing inventories will be, which is sometimes difficult. FORD: Why does that present a problem? There must have been an estimate of closing inventories in the budget for the current year. GRANGER: Those numbers arent always reliable since Marge makes some adjustments to the sales numbers before passing them on to me. FORD: What kind of adjustments? ATKINS: Well, we dont want to fall short of the sales projections so we generally give ourselves a little breathing room by lowering the initial sales projection anywhere from 5 to 10 percent. GRANGER: So, you can see why this years budget is not a very reliable starting point. We always have to adjust the projected production rates as the year progresses, and of course, this changes the ending inventory estimates. By the way, we make similar adjustments to expenses by adding at least 10 percent to the estimates; I think everyone around here does the same thing. Required: 1. Marge Atkins and Pete Granger have described the use of budgetary slack. a. Explain why Atkins and Granger behave in this manner, and describe the benefits they expect to realize from the use of budgetary slack. b. Explain how the use of budgetary slack can adversely affect Atkins and Granger. 2. As a management accountant, Scott Ford believes that the behavior described by Marge Atkins and Pete Granger may be unethical and that he may have an obligation not to support this behavior. By citing the specific standards of competence, confidentiality, integrity, and/or credibility from the Statement of Ethical Professional Practice (in Chapter 1), explain why the use of budgetary slack may be unethical. (CMA adapted)
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