Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and t
ID: 2400418 • Letter: B
Question
Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It began negotiating for a one-month bank loan of $500,000 starting May 1. The bank would charge interest at the rate of 1.00 percent per month and require the company to repay interest and principal on May 31. In considering the loan, the bank requested a projected income statement and cash budget for May.
The following information is available:
Required:
a. Prepare schedules computing inventory budgets by months for
1. Production in units for April, May, and June. (Do not round intermediate calculations.)
2. Raw materials purchases in pounds for April and May. (Do not round intermediate calculations.)
b. Prepare a projected income statement for May. Cost of goods sold should equal the variable manufacturing cost per unit times the number of units sold plus the total fixed manufacturing cost budgeted for the period. When calculating net sales assume cash discounts of 1 percent and bad debt expense of 0.50 percent. (Do not round intermediate calculations.)
Materials (0.25 pound per tile, 125,000 pounds, $4 per pound) $ 500,000 Labor 400,000 Variable overhead 220,000 Fixed overhead (includes depreciation of $190,000) 420,000 Total $ 1,540,000
Explanation / Answer
SOLUTION
A1. Schedule of Inventory Production-
*Estimated ending inventory= 20% of next months sales.
A2. Raw materials purchase budget-
B. Income statement-
Particulars April May June Budgeted sales 550,000 450,000 550,000 Add: Estimated ending inventory 90,000 110,000 110,000 Inventory required 640,000 560,000 660,000 Less: Beginning inventory (110,000) (90,000) (110,000) Units to be produced 530,000 470,000 550,000Related Questions
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