units Fourth quarter: 10,400 units Unit sales are expected to increase 20%, and each unit is expected to sell for $5. Management prefers to maintain ending finished goods inventory equal to 15% of next quarter's sales. Assume finished goods inventory at the end of the fourth quarter budget period is estimated to be 2,000 units. Required: (1) Prepare a sales budget for Cathy's Cookies. (2) Prepare a production budget for Cathy's Cookies. (3) What can you interpret about Cathy's Cookies Sales Budget? Trends?

units Fourth quarter: 10,400 units Unit sales are expected to increase 20%, and each unit is expected to sell for $5. Management prefers to maintain ending finished goods inventory equal to 15% of next quarter's sales. Assume finished goods inventory at the end of the fourth quarter budget period is estimated to be 2,000 units. Required: (1) Prepare a sales budget for Cathy's Cookies. (2) Prepare a production budget for Cathy's Cookies. (3) What can you interpret about Cathy's Cookies Sales Budget? Trends?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter7: Budgeting

Section: Chapter Questions

Problem 3EB: Barnstormer sells airplane accessories for $20 each. It expects sales of 120,000 units in quarter 1...

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Cash budget The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month following the sale and the remainder the following month (second month following sale). Depreciation, insurance, and property tax expense represent 50,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in January, and the annual property taxes are paid in December. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of September 1 include cash of 40,000, marketable securities of 75,000, and accounts receivable of 300,000 (60,000 from July sales and 240,000 from August sales). Sales on account for July and August were 200,000 and 240,000, respectively. Current liabilities as of September 1 include 40,000 of accounts payable incurred in August for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of 55,000 will be made in October. Bridgeports regular quarterly dividend of 25,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of 50,000. Instructions Prepare a monthly cash budget and supporting schedules for September, October, and November. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?
Cash budget The controller of Mercury Shoes Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% are expected to be collected in the month following the sale and the remainder the following month (second month after sale). Depreciation, insurance, and property tax expense represent 12,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in February, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of June 1 include cash of 42,000, marketable securities of 25,000, and accounts receivable of 198,000 (150,000 from May sales and 48,000 from April sales). Sales on account in April and May were 120,000 and 150,000, respectively. Current liabilities as of June 1 include 13,000 of accounts payable incurred in May for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of 24,000 will be made in July. Mercury Shoes regular quarterly dividend of 15,000 is expected to be declared in July and paid in August. Management desires to maintain a minimum cash balance of 40,000. Instructions Prepare a monthly cash budget and supporting schedules for June, July, and August. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?
Preparing a Direct Materials Purchases Budget Patrick Inc. makes industrial solvents sold in 5-gallon drums. Planned production in units for the first 3 months of the coming year is: Each drum requires 5.5 gallons of chemicals and one plastic drum. Company policy requires that ending inventories of raw materials for each month be 15% of the next months production needs. That policy was met for the ending inventory of December in the prior year. The cost of one gallon of chemicals is 2.00. The cost of one drum is 1.60. (Note: Round all unit amounts to the nearest unit. Round all dollar amounts to the nearest dollar.) Required: 1. Calculate the ending inventory of chemicals in gallons for December of the prior year and for January and February. What is the beginning inventory of chemicals for January? 2. Prepare a direct materials purchases budget for chemicals for the months of January and February. 3. Calculate the ending inventory of drums for December of the prior year and for January and February. 4. Prepare a direct materials purchases budget for drums for the months of January and February.
A companys sales for the coming months are as follows: About 20 percent of sales are cash sales, and the remainder are credit sales. The company finds that typically 10 percent of a months credit sales are paid in the month of sale, 70 percent are paid the next month, and 15 percent are paid in the second month after sale. Expected cash receipts in July are budgeted at what amount? a. 114,520 b. 143,150 c. 145,720 d. 156,000
Cash Budget The controller of Feinberg Company is gathering data to prepare the cash budget for July. He plans to develop the budget from the following information: a. Of all sales, 40% are cash sales. b. Of credit sales, 45% are collected within the month of sale. Half of the credit sales collected within the month receive a 2% cash discount (for accounts paid within 10 days). Thirty percent of credit sales are collected in the following month; remaining credit sales are collected the month thereafter. There are virtually no bad debts. c. Sales for the second two quarters of the year follow. (Note: The first 3 months are actual sales, and the last 3 months are estimated sales.) d. The company sells all that it produces each month. The cost of raw materials equals 26% of each sales dollar. The company requires a monthly ending inventory of raw materials equal to the coming months production requirements. Of raw materials purchases, 50% is paid for in the month of purchase. The remaining 50% is paid for in the following month. e. Wages total 105,000 each month and are paid in the month incurred. f. Budgeted monthly operating expenses total 376,000, of which 45,000 is depreciation and 6,000 is expiration of prepaid insurance (the annual premium of 72,000 is paid on January 1). g. Dividends of 130,000, declared on June 30, will be paid on July 15. h. Old equipment will be sold for 25,200 on July 4. i. On July 13, new equipment will be purchased for 173,000. j. The company maintains a minimum cash balance of 20,000. k. The cash balance on July 1 is 27,000. Required: Prepare a cash budget for July. Give a supporting schedule that details the cash collections from sales.
Barnstormer sells airplane accessories for $20 each. It expects sales of 120,000 units in quarter 1 and a 7% increase each subsequent quarter for the next 8 quarters. Prepare a sales budget by quarter for the first year.
Refer to Cornerstone Exercise 8.1, through Requirement 1. FlashKick requires ending inventory of product to equal 20 percent of the next months unit sales. Beginning inventory in January was 3,100 practice soccer balls and 400 match soccer balls. Required: 1. Construct a production budget for each of the two product lines for FlashKick Company for the first three months of the coming year. 2. What if FlashKick wanted a production budget for the two product lines for the month of April? What additional information would you need to prepare this budget? FlashKick Company manufactures and sells soccer balls for teams of children in elementary and high school. FlashKicks best-selling lines are the practice ball line (durable soccer balls for training and practice) and the match ball line (high-performance soccer balls used in games). In the first four months of next year, FlashKick expects to sell the following: Required: 1. Construct a sales budget for FlashKick for the first three months of the coming year. Show total sales for each product line by month and in total for the first quarter. 2. What if FlashKick added a third linetournament quality soccer balls that were expected to take 40 percent of the units sold of the match balls and would have a selling price of 45 each in January and February, and 48 each in March? Prepare a sales budget for Flash- Kick for the first three months of the coming year. Show total sales for each product line by month and in total for the first quarter.
Operating Budget, Comprehensive Analysis Allison Manufacturing produces a subassembly used in the production of jet aircraft engines. The assembly is sold to engine manufacturers and aircraft maintenance facilities. Projected sales in units for the coming 5 months follow: The following data pertain to production policies and manufacturing specifications followed by Allison Manufacturing: a. Finished goods inventory on January 1 is 32,000 units, each costing 166.06. The desired ending inventory for each month is 80% of the next months sales. b. The data on materials used are as follows: Inventory policy dictates that sufficient materials be on hand at the end of the month to produce 50% of the next months production needs. This is exactly the amount of material on hand on December 31 of the prior year. c. The direct labor used per unit of output is 3 hours. The average direct labor cost per hour is 14.25. d. Overhead each month is estimated using a flexible budget formula. (Note: Activity is measured in direct labor hours.) e. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.) f. The unit selling price of the subassembly is 205. g. All sales and purchases are for cash. The cash balance on January 1 equals 400,000. The firm requires a minimum ending balance of 50,000. If the firm develops a cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage. Any cash borrowed is repaid at the end of the quarter, as is the interest due (cash borrowed at the end of the quarter is repaid at the end of the following quarter). The interest rate is 12% per annum. No money is owed at the beginning of January. Required: 1. Prepare a monthly operating budget for the first quarter with the following schedules. (Note: Assume that there is no change in work-in-process inventories.) a. Sales budget b. Production budget c. Direct materials purchases budget d. Direct labor budget e. Overhead budget f. Selling and administrative expenses budget g. Ending finished goods inventory budget h. Cost of goods sold budget i. Budgeted income statement j. Cash budget 2. CONCEPTUAL CONNECTION Form a group with two or three other students. Locate a manufacturing plant in your community that has headquarters elsewhere. Interview the controller for the plant regarding the master budgeting process. Ask when the process starts each year, what schedules and budgets are prepared at the plant level, how the controller forecasts the amounts, and how those schedules and budgets fit in with the overall corporate budget. Is the budgetary process participative? Also, find out how budgets are used for performance analysis. Write a summary of the interview.
Relevant data from the Poster Companys operating budgets are: Additional data: Capital assets were sold in January for $10,000 and $4,500 in May. Dividends of $4,500 were paid in February. The beginning cash balance was $60,359 and a required minimum cash balance is $59,000. Use this information to prepare a cash budget for the first two quarters of the year
Preparing a Direct Labor Budget Tulum Inc. makes a Mexican chocolate mix. Planned production in units for the first 3 months of the coming year is: Each box of chocolate mix takes 0.4 direct labor hour. The average wage is 17 per hour. Required: Prepare a direct labor budget for the months of January, February, and March, as well as the total for the first quarter.
Preparing a Direct Materials Purchases Budget Tulum Inc. makes a Mexican chocolate mix sold in 4-pound boxes. Planned production in units for the first 3 months of the coming year is: Each box requires 4.2 pounds of chocolate mix and one box. Company policy requires that ending inventories of raw materials for each month be 10% of the next months production needs. That policy was met for the ending inventory of December in the prior year. The cost of 1 pound of chocolate mix is 1.50. The cost of one box is 0.10. (Note: Round all unit amounts to the nearest unit. Round all dollar amounts to the nearest dollar.) Required: 1. Calculate the ending inventory of chocolate mix in pounds for December of the prior year and for January and February. What is the beginning inventory of chocolate mix for January? 2. Prepare a direct materials purchases budget for chocolate mix for the months of January and February. 3. Calculate the ending inventory of boxes for December of the prior year and for January and February. 4. Prepare a direct materials purchases budget for boxes for the months of January and February.