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E14.16.
(continued)
Manufacturing overhead:
b.
The relevant cost would exclude the fixed manufacturing overhead, which is incurred
whether or not the extra pads are made.
P14.17.
July
August
September
Sales forecast …………………………………
$250,000
$220,000
$310,000
Cost of sales @ 54% …………………………
135,000
118,800
167,400
Purchases budget:
Beginning inventory …………………………
$410,000
$356,400
Purchases………………………………………
? .
? .
P14.18.
a.
Sales – Cost of goods sold = Gross profit, or
Cost of goods sold = Sales * (1 - gross profit ratio)
P14.18.
(continued)
b.
Purchases budget for May:
Jewelry
Watches
Beginning inventory (200% of current month’s CGS)
$ 99,200
$ 75,000
Add: Purchases………………………………………
? = 27,200
? = 26,250
P14.19.
a.
September
October
Sales forecast …………………….………………………
$42,000
$54,000
Purchases budget…………………………………………
37,800
44,000
Operating expense budget ……….………………………
10,500
12,800
Beginning cash ……..……………………………………
$40,000
b.
PrimeTime Sportswear's management should try to accelerate the collection of
accounts receivable, slow down the payment of accounts payable and accrued
P14.20.
a.
October
November
December
Sales forecast ……………………………
$54,000
$68,000
$59,000
Purchases budget…………………………
44,000
48,900
33,100
Cash receipts:
August 31 accounts receivable …..………
15,000
0
September sales …….……………………
21,000
18,900
Cash disbursements:
September purchases …………….………
$ 9,450
$ 0
October purchases ……..…………………
33,000
11,000
November purchases …..…………………
0
36,675
b.
December
January
February
Sales forecast …………………….………
$59,000
$59,000
$59,000
Purchases budget…………………………
33,100
33,100
33,100
Operating expense budget …………..……
16,100
16,100
16,100
P14.20.
(continued)
Cash disbursements:
December
January
February
November purchases ………..……………
$ 12,225
$ 0
$ 0
December purchases …..…………………
24,825
8,275
0
January purchases ……..…………………
0
24,825
8,275
February purchases …..…..………………
0
0
24,825
By reviewing the summarized cash budget results shown below for the six-month budget
period from September-February, it becomes clear that PrimeTime Sportswear must
obtain a seasonal bank loan during September to help finance the additional cost of
building up inventory levels to meet peak sales. Perhaps PrimeTime should apply for an
open line of credit. Obviously, it would not be possible to actually have a negative
balance in the cash account (as suggested by the budget results).
Sept.
Oct.
Nov.
Dec.
Jan.
Feb.
Beginning cash …………
$40,000
$ (225)
$(18,900)
$(34,600)
$(29,000)
$(18,100)
Total cash receipts ……..
20,000
36,000
45,900
58,300
60,100
56,050
P14.21.
Answer (and one possible numbered sequence of solving the problem):
April
May
June
Total
P14.21.
(continued)
April
May
June
Total
Less disbursements:
Purchase of inventory …………
3. 50
60
48
18. 158
Operating expenses
30
7. 40
16. 24
19. 94
Capital additions
34
8
15. 2
44
Solution approach:
1. $94 - $26 = $68
2. $94 + 20 (deficiency of cash available) = $114
4. Minimum month-end balance
5. $30 + 20 (deficiency of cash available) = $50
7. $108 - $60 - $8 = $40
8. $108 + $30 (excess of cash available) = $138
10. Ending cash balance from May is carried forward to beginning cash balance of
June = $30
12. Ending cash balance for the third quarter is the ending cash balance for June = $33
14. Total dividends = $8, and no dividends were paid in April and May
16. $82 - $48 - $2 - $8 = $24
17. $338 - $26 = $312
21. Borrowings from April
P14.22.
a.
SEATECH, INC.
Cash Budget
For the months of April, May, and June, 2016
April
May
June
For cost of goods sold/operating expenses incurred in:
March ………………………………………
$ 22,600
$
$
April…………………………………………
78,400
19,600
May …………………………………………
95,200
23,800
June …………………………………………
106,400
The monthly cash budgets would appear as follows (revisions shown in bold):
April
May
June
Beginning cash balance………………………
$ 14,000
$ 10,000
$ 10,000
Cash Receipts:
From cash sales made in current month ……
42,000
51,000
57,000
P14.22.
(continued)
April
May
June
Cash Disbursements:
For cost of goods sold/operating expenses incurred in:
March ………………………………………
$ 22,600
$
$
P14.23.
a.
April
May
June
Total
Expected sales in units
7,000
10,000
8,000
25,000
b.
Cash collections from:
April
May
June
Total
March sales
$132,000a
$132,000
April sales
112,000
$154,000
266,000
P14.23.
(continued)
April
May
June
Total
c.
Beginning inventory of
finished goods ……………
3,500
5,000
4,000
3,500
Units to be produced…………
8,500
9,000
8,500
26,000
Goods available for sale …….
12,000
14,000
12,500
29,500
d.
April
May
June
Total
Beginning inventory of
raw materials …………………
10,200
10,800
10,200
10,200
Purchases of raw materials ……
26,100
26,400
24,300
76,800
Raw materials available for use.
36,300
37,200
34,500
87,000
Desired ending inventory of
raw materials (40% of next
month’s estimated usage)b ……
(10,800)
(10,200)
(9,000)c
(9,000)
Goods available for sale…………………………………………………
12,000
Desired ending inventory of finished goods (50% of August’s sales) …
(3,000)
Quantity of goods sold …………………………………………………
9,000
7,500 * 3 pounds * 40% = 9,000
(d) “Units to be produced” each month (see answer to part c) * 3 pounds per unit.
P14.23.
(continued)
e.
Cash payments for:
April
May
June
Total
March purchases …………….
$ 26,280e
$ 26,280
April purchases ………………
125,280
$ 31,320
156,600
P14.24.
a.
October
November
December
Total
Expected sales in units ………
12,000
14,000
20,000
46,000
b.
Cash collections from:
October
November
December
Total
September sales………………
$499,200a
$ 499,200
October sales…………………
230,400
$460,800
691,200
c.
October
November
December
Total
Beginning inventory of
finished goods………………
4,800
5,600
8,000
4,800
Units to be produced…………
12,800
16,400
15,600
44,800
