Soprano Co. is in the process of preparing the second quarter budget for 2010, a

Question

Soprano Co. is in the process of preparing the second quarter budget for 2010, and the following data have been assembled:

The company sells a single product at a selling price of $45 per unit. The estimated sales volume for the next six months is as follows:

All sales are on account. The company's collection experience has been that 44% of a month's sales are collected in the month of sale, 53% are collected in the month following the sale, and 3% are uncollectible. It is expected that the net realizable value of accounts receivable (i.e., accounts receivable less allowance for uncollectible accounts) will be $145,485 on March 31, 2010.

Management's policy is to maintain ending finished goods inventory each month at a level equal to 54% of the next month's budgeted sales. The finished goods inventory on March 31, 2010, is expected to be 3,942 units.

To make one unit of finished product, 4 pounds of materials are required. Management's policy is to have enough materials on hand at the end of each month to equal 44% of the next month's estimated usage. The raw materials inventory is expected to be 15,794 pounds on March 31, 2010.

The cost per pound of raw material is $6.00, and 71% of all purchases are paid for in the month of purchase; the remainder is paid in the following month. The accounts payable balance for raw material purchases is expected to be $53,783 on March 31, 2010.

Prepare a production budget in units, by month and in total, for the second quarter of 2010. (Amounts to be deducted should be indicated with minus sign.)

Prepare a materials purchases budget in pounds, by month and in total, for the second quarter of 2010. (Round your answer to the nearest whole number. Amounts to be deducted should be indicated with minus sign.)

Soprano Co. is in the process of preparing the second quarter budget for 2010, and the following data have been assembled:

Explanation / Answer

C ) Prepare a production budget in units, by month and in total, April May June Total Beginning Inventory of finished good 3942 5616 4374 3942 Unit to be produced 8974 9158 8640 26772 Goods available for sale 12916 14774 13014 30714 Desired Ending inventory of finished good 5616 4374 4914 4860 Quantity of good sold 7300 10400 8100 25800 d) Prepare a materials purchases budget in pounds, by month and in total, April May June Total Beginning Inventory of Raw Material 15794 16118 15206 15794 Purchase of raw material 36220 35720 32423 104364 Raw Material available for use 52014 51838.4 47630 120158 Desired Ending inventory of Raw material 16118 15206 13070 13070 Quantity of raw material to be used in production 35896 36632 34560 107088

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