241
222) Botz Corporation makes one product and it provided the following information to help
prepare the master budget for the next four months of operations:
> The budgeted selling price per unit is $94. Budgeted unit sales for April, May, June, and July
are 8,200, 10,600, 10,100, and 15,200 units, respectively. All sales are on credit.
> Regarding credit sales, 40% are collected in the month of the sale and 60% in the following
month.
> The ending finished goods inventory equals 30% of the following month’s sales.
> The ending raw materials inventory equals 40% of the following month’s raw materials
production needs. Each unit of finished goods requires 2 pounds of raw materials. The raw
materials cost $1.00 per pound.
> Regarding raw materials purchases, 10% are paid for in the month of purchase and 90% in the
following month.
> The direct labor wage rate is $23.00 per hour. Each unit of finished goods requires 2.4 direct
labor-hours.
Required:
a. What are the budgeted sales for May?
b. What are the expected cash collections for May?
c. What is the budgeted accounts receivable balance at the end of May?
d. According to the production budget, how many units should be produced in May?
e. If 23,260 pounds of raw materials are needed for production in June, how many pounds of raw
materials should be purchased in May?
f. What is the estimated cost of raw materials purchases for May?
g. If the cost of raw material purchases in April is $19,064, then in May what are the total
estimated cash disbursements for raw materials purchases?
h. What is the estimated accounts payable balance at the end of May?
i. What is the estimated raw materials inventory balance at the end of May?
j. What is the total estimated direct labor cost for May assuming the direct labor workforce is
adjusted to match the hours required to produce the forecasted number of units produced?
k. For simplicity, we will assume that there is no fixed manufacturing overhead and that the
variable manufacturing overhead is $11.00 per direct labor-hour. What is the estimated unit
product cost?
l. What is the estimated finished goods inventory balance at the end of May?
244
223) Hennagir Corporation makes one product and has provided the following information to
help prepare the master budget for the next four months of operations:
Budgeted selling price per unit
$76
Budgeted unit sales (all on credit):
January
9,500
February
9,900
March
10,600
April
12,600
Raw materials requirement per unit of output
3
pounds
Raw materials cost
$5.00
per pound
Direct labor requirement per unit of output
2.2
direct labor-hours
Direct labor wage rate
$18.00
per direct labor-hour
Credit sales are collected:
40% in the month of the sale
60% in the following month
Raw materials purchases are paid:
30% in the month of purchase
70% in the following month
The ending finished goods inventory should equal 10% of the following month’s sales. The
ending raw materials inventory should equal 40% of the following month’s raw materials
production needs.
Required:
a. What are the budgeted sales for February?
b. What are the expected cash collections for February?
c. What is the budgeted accounts receivable balance at the end of February?
d. According to the production budget, how many units should be produced in February?
e. If 32,400 pounds of raw materials are needed for production in March, how many pounds of
raw materials should be purchased in February?
f. What is the estimated cost of raw materials purchases for February?
g. If the cost of raw material purchases in January is $145,680, then in February what are the
total estimated cash disbursements for raw materials purchases?
h. What is the estimated accounts payable balance at the end of February?
i. What is the estimated raw materials inventory balance at the end of February?
j. What is the total estimated direct labor cost for February assuming the direct labor workforce
is adjusted to match the hours required to produce the forecasted number of units produced?
247
224) Weller Industrial Gas Corporation supplies acetylene and other compressed gases to
industry. Data regarding the store’s operations follow:
• Sales are budgeted at $330,000 for November, $300,000 for December, and $320,000 for
January.
• Collections are expected to be 85% in the month of sale and 15% in the month following the
sale.
• The cost of goods sold is 60% of sales.
• The company desires an ending merchandise inventory equal to 80% of the cost of goods
sold in the following month.
• Payment for merchandise is made in the month following the purchase.
• Other monthly expenses to be paid in cash are $21,200.
• Monthly depreciation is $21,000.
• Ignore taxes.
Balance Sheet
October 31
Assets
Cash
$
22,000
Accounts receivable
83,000
Merchandise inventory
158,400
Property, plant and equipment (net of $594,000 accumulated
depreciation)
1,004,000
Total assets
$
1,267,400
Liabilities and Stockholders’ Equity
Accounts payable
$
196,000
Common stock
620,000
Retained earnings
451,400
Total liabilities and stockholders’ equity
$
1,267,400
–
Required:
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
c. Prepare Cash Budgets for November and December.
d. Prepare Budgeted Income Statements for November and December.
e. Prepare a Budgeted Balance Sheet for the end of December.
225) Brinso Supply Corporation manufactures and sells cotton gauze. Expected sales of gauze
(in boxes) for upcoming months are as follows:
June
38,000
July
32,000
August
40,000
September
33,000
October
36,000
November
37,000
December
39,000
–
Management likes to maintain a finished goods inventory equal to 10% of the next month’s
estimated sales.
Required:
Prepare the company’s production budget for the third quarter of this year (the months of July,
August and September). Include a column for each month and a total column for the entire
quarter.
Expected sales
40,000
33,000
(10% next month’s sales)
Total needs
43,300
36,600
(10% of current month’s sales)
Units to be produced
39,300
33,300
–
226) A sales budget is given below for one of the products manufactured by the Key Co.:
January
21,000
units
February
36,000
units
March
61,000
units
April
41,000
units
May
31,000
units
June
25,000
units
–
The inventory of finished goods at the end of each month should equal 20% of the next month’s
sales. However, on December 31 the finished goods inventory totaled only 4,000 units. Each unit
of product requires three specialized electrical switches. Since the production of these
specialized switches by Key’s suppliers is sometimes irregular, the company has a policy of
maintaining an ending inventory at the end of each month equal to 30% of the next month’s
production needs. This requirement had been met on January 1 of the current year.
Required:
a. Prepare a budget showing the required production each month for January, February, March,
and April.
b. Prepare a budget showing the quantity of switches to be purchased each month for January,
February, and March.
Budgeted sales (units)
36,000
61,000
(20% of next month’s sales)
12,200
Total needs
48,200
69,200
(20% of current month’s sales)
12,200
Required production in units
41,000
57,000
–