Jacobs Incorporated manufactures a product with a selling price of $50 per unit.
ID: 2452130 • Letter: J
Question
Jacobs Incorporated manufactures a product with a selling price of $50 per unit. Units and monthly cost data follow:
Jacobs pays all bills in the month incurred. All sales are on account with 50 percent collected the month of sale and the balance collected the following month. There are no sales discounts or bad debts. Jacobs desires to maintain an ending finished goods inventory equal to 20 percent of the following month's sales and a raw materials inventory equal to 10 percent of the following month's production. January 1, 2014, inventories are in line with these policies. Actual unit sales for December and budgeted unit sales for January, February, and March of 2014 are as follows:
Additional information:
The January 1 beginning cash is projected as $5,000.
For the purpose of operational budgeting, units in the January 1 inventory of finished goods are valued at variable manufacturing cost.
Each unit of finished product requires one unit of raw materials.
Jacobs intends to pay a cash dividend of $10,000 in January.
NOTE: For the entire problem - do not use any negative signs with your answers unless appropriate for net income(loss) or ending balance.
(e) A budgeted contribution income statement for January.
(f) Prepare a cash budget for January assuming management plans to increase the January end raw materials inventory to 100 percent of February's production needs.
(g) Actions management might consider to resolve the problem indicated in the revised cash budget in part (f) include:
Delaying the cash dividend.
If possible, pay for fifty percent of each month's purchases in during the month and pay for the other fifty percent in the following month, an average of fifteen to sixteen days after receipt.
Obtain a line of credit with a financial institution.
All of the above.
Variable: Selling and administrative $ 4 per unit sold Direct materials $ 10 per unit manufactured Direct labor $ 10 per unit manufactured Variable manufacturing overhead $ 5 per unit manufactured Fixed: Selling and administrative $ 15,000 per month Manufacturing (including depreciation of $ 10,000) 30,000 per monthExplanation / Answer
g) Management might consider to reduce the purchase of rawmaterial in order to maintain 100% of next month demand. also dividend can be delayed.
acobs Incorporated Budgeted Contribution Income Statement For the Month of January 2014 Sales 250,000 Less variable costs: Cost of goods sold 125,000 Selling and administrative 20,000 145,000 Contribution 105,000 Less fixed costs: Manufacturing overhead 30,000 Selling and administrative 15,000 45,000 Net income 60,000 NOTE 1 Cost of goods sold Direct Material 10 Direct Labor 10 Variable manufacturing overhead 5 Cost of goods sold per unit 25Related Questions
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