Do It! Review 21-4 (Part Level Submission) Ash Creek Company is preparing its ma

ID: 2417366 • Letter: D

Question

Do It! Review 21-4 (Part Level Submission)

Ash Creek Company is preparing its master budget for 2014. Relevant data pertaining to its sales, production, and direct materials budgets are as follows.

Sales: Sales for the year are expected to total 2,000,000 units. Quarterly sales are 20%, 25%, 26%, and 29%, respectively. The sales price is expected to be $40 per unit for the first three quarters and $46 per unit beginning in the fourth quarter. Sales in the first quarter of 2015 are expected to be 13% higher than the budgeted sales for the first quarter of 2014.

Production: Management desires to maintain the ending finished goods inventories at 20% of the next quarter’s budgeted sales volume.

Direct materials: Each unit requires 2 pounds of raw materials at a cost of $10 per pound. Management desires to maintain raw materials inventories at 20% of the next quarter’s production requirements. Assume the production requirements for the first quarter of 2015 are 495,700 pounds.

Ash Creek budgets 0.3 hours of direct labor per unit, labor costs at $12.00 per hour, and manufacturing overhead at $17.00 per direct labor hour. Its budgeted selling and administrative expenses for 2014 are $6,510,000.

(a)

Do It! Review 21-5

Batista Company management wants to maintain a minimum monthly cash balance of $20,600. At the beginning of April, the cash balance is $21,940, expected cash receipts for April are $245,013, and cash disbursements are expected to be $256,383.

How much cash, if any, must be borrowed to maintain the desired minimum monthly balance?

Brief Exercise 21-9

Bruno Industries expects credit sales for January, February, and March to be $202,260, $269,390, and $318,710, respectively. It is expected that 75% of the sales will be collected in the month of sale, and 25% will be collected in the following month.

Compute cash collections from customers for each month. (Round answers to 0 decimal places, e.g. 1525.)

Collections from Customers

Credit Sales

January

February

March

Do It! Review 22-1

In Pargo Company’s flexible budget graph, the fixed cost line and the total budgeted cost line intersect the vertical axis at $92,139. The total budgeted cost line is $330,199 at an activity level of 59,515 direct labor hours.

Compute total budgeted costs at 70,799 direct labor hours.

Do It! Review 21-4 (Part Level Submission)

Explanation / Answer

Calculation of the budgeted total unit cost:

Raw Material Cost Per unit =2 Pounds * $10=

$ 20.00

Direct Labor Cost Per unit =0.3 hours * $12=

$ 3.60

Manufacturing Overhead Cost Per unit =0.3 hours * $17=

$ 5.10

Selling and administrative expenses per Unit = $6510000 / 2000000 Units

$ 3.26

Budgeted total unit cost =

$ 31.96

Calculation of Amount to be borrowed :

Beginning of April, the cash balance =

$ 21,940.00

Add: expected cash receipts for April

$ 245,013.00

Less: expected cash disbursements

$ (256,383.00)

Expected Net cash

$ 10,570.00

Minimum monthly cash balance to be Maintained

$ 20,600.00

Amount to be borrowed = 20600-10570 =

$ 10,030.00