I have already completed A & B of the problem. Just can not seem to get past thi

Question

I have already completed A & B of the problem. Just can not seem to get past this point.

Production; purchases; cash budgets Corner Brook Furniture Co. makes bookstands and expects sales and collections for the first three months of 2014 to be as follows: February 5,200 anuary March Total Sales quantity (units) Revenue Collections 7,400 19,000 $128,000 $104,000 $148,000 $380,000 $116,200 81,300 $101,500 $299,000 6,400 The December 31, 2013, balance sheet revealed the following selected account balances: Cash, $18,320; Direct Material Inventory, $8,230; Finished Goods Inventory, $23,200; and Accounts Payable, $5,800. The Direct Material Inventory balance represents 1,580 pounds of scrap iron and 1,200 bookstand bases. The Finished Goods Inventory consists of 1,220 bookstands. Each bookstand requires two pounds of scrap iron, which costs $3 per pound. Bookstand bases are purchased from a local lumber mill at a cost of $2.50 per unit. Company management decided that, beginning in 2014, the ending balance of Direct Material Inventory should be 25 percent of the following month's production requirements and that the ending balance of Finished Goods Inventory should be 20 percent of the next month's sales. Sales for April and May are expected to be 8,000 bookstands per month The company normally pays for 75 percent of a month's purchases of direct material in the month of purchase (on which it takes a 1 percent cash discount). The remaining 25 percent is paid in full in the month following the month of purchase Direct labor is budgeted at $0.70 per bookstand produced and is paid in the month of production. Total cash manufacturing overhead is budgeted at $14,000 per month plus $1.30 per bookstand. Total cash selling and administrative costs equal $13,600 per month plus 10 percent of sales revenue. These costs are all paid in the month of incurrence. In addition, the company plans to pay executive bonuses of $35,000 in January 2014 and make an estimated quarterly tax payment of $5,000 in March 2014 Management requires a minimum cash balance of $10,000 at the end of each month. If the company borrows funds, it will do so only in $1,000 multiples at the beginning of a month at a 12 percent annual interest rate. Loans are to be repaid at the end of a month in multiples of $1,000. Interest is paid only when a repayment is made. Investments are made in $1,000 multiples at the end of a month, and the return on investment is 8 percent per year.

Explanation / Answer

January February March Apr May Sales unit 6400 5200 7400 8000 8000 Ending Inventory 1040 1480 1600 1600 0 Cost of goods available for sale Less : Opening Inventory 1220 1040 1480 1600 1600 Units to be produced 6220 5640 7520 8000 Scrap Iron required for production 12440 11280 15040 16000 Add: Ending Inventory 2820 3760 4000 Available for production 15260 15040 19040 Less; Beginning Inventory 1580 2820 3760 Scrap iron required to be purchased 13680 12220 15280 Price per pound 3 3 3 Purchase Value-A 41040 36660 45840 Base required for production 6220 5640 7520 8000 Add: Ending Inventory 1410 1880 2000 Available for production 7630 7520 9520 Less; Beginning Inventory 1200 1410 1880 Base required to be purchased 6430 6110 7640 Price per base 2.5 2.5 2.5 Purchase value-B 16075 15275 19100 Total Purchase of Direct Materials(A+B) 57115 51935 64940 Requirement Schdeule of cash payments January February March Total Total purchase 57115 51935 64940 173990 % in month 75% 75% 75% 42836.25 38951.25 48705 130492.5 Less : Discount 428.3625 389.5125 487.05 1304.925 Cash payment 42407.888 38561.74 48217.95 129187.6 January February March Total Total purchase 57115 51935 64940 173990 Pre-discount amount 42836.25 38951.25 48705 130492.5 Remainder 14278.75 12983.75 16235 43497.5 January February March Total Month of purchase December 5800 5800 January 42407.888 14278.75 56686.64 February 38561.74 12983.75 51545.49 March 48217.95 48217.95 Total 48207.888 52840.49 61201.7 162250.1

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