1. Sales forecast: January: 5,100 units; February: 6,900 units; March: 7,300 uni
ID: 2473979 • Letter: 1
Question
1. Sales forecast: January: 5,100 units; February: 6,900 units; March: 7,300 units; April: 7,500 units. The unit sales price is $49. All sales are on credit and collections are 30% in the month of sale and 70% the following month. Accounts receivable as of December 31, 2015 is $18,000 and this amount is expected to be collected in January 2016. 2. End of month inventory must equal 30% of next month’s sales. The inventory at the end of December 2015 was 1,530 units. 3. The following are the expected costs for direct materials, direct labor and manufacturing overhead: DM DL Overhead January $12/unit $15/unit $7,500 + $2.60 per unit produced February $12/unit $15/unit $7,500 + $2.60 per unit produced March $12/unit $15/unit $7,500 + $2.60 per unit produced A. Direct materials are paid 40% in the month incurred and 60% in the following month. Account payable for materials as of December 31, 2015 is $5,100; this amount will be paid in January 2016. B. Direct labor is paid in the month incurred. C. Overhead costs are paid in the month incurred. Fixed overhead includes depreciation of $5,500 per month. 4. Selling costs are sales commissions: $2.10 per unit sold; shipping costs: $0.50 per unit sold. Administrative costs per month are: salaries: $15,000; rent: $2,000; depreciation: $1,900. All costs are paid in month incurred. 5. The company plans to buy equipment costing $19,000 in January and to pay dividends of $35,000 in March 6. The cash balance as of December 31, 2015 is $25,000. The company requires a minimum cash balance of $2,000. The company has a revolving credit with US Bank to borrow in increments of $1,000 at the beginning of each month at interest of 12% annual rate. The company may borrow any amount at the beginning of any month and repays its loans, or any parts of its loans, at the end of any month. Interest payments are due on any principle at the time it is repaid (the amount repaid does not have to be in increments of $1,000). For simplicity, assume that interest is not compounded. As of December 31, 2015 the company has no outstanding loans. Required: Based on the information given, prepare the following budget for each month of the first quarter of 2016 and the quarter totals: Cash Budget.
Explanation / Answer
Budgets are prepared as under:
1. Sales Budget XYZ Co. Sales Budget For the quarter ended March 31, 2016 Month Particulars January February March Total Sale Units (a) 5,100 6,900 7,300 19,300 *Price per unit (b) $49 $49 $49 $49 Total Sales $2,49,900 $3,38,100 $3,57,700 9,45,700 XYZ Co. Schedule of expected Cash collections For the quarter ended March 31, 2016 Month Particulars January February March Total Beginning Accounts Receivable (a) 18,000 18,000 January 74,970 1,74,930 2,49,900 February 1,01,430 2,36,670 2,08,740 March 1,07,310 3,43,980 Total collections 92,970 2,76,360 3,43,980 3,69,330 2. Production Budget XYZ Co. Production Budget For the quarter ended March 31, 2016 Month Particulars January February March Total Sale Units (a) 5,100 6,900 7,300 19,300 Planned ending units (b) 2,070 2,190 2,250 6,510 Beginning units (c ) 1,530 2,070 2,190 5,790 Planned production units (d)= (a+b-c) 5,640 7,020 7,360 20,020 3. Raw material Budget XYZ Co. Raw Material Purchase Budget For the quarter ended March 31, 2016 Month Particulars January February March Total Planned production units (a) 5,640 7,020 7,360 20,020 Cost per unit $12 $12 $12 $12 BudgetedDM purchases $67,680 $84,240 $88,320 $2,40,240 XYZ Co. Schedule of expected Cash payments For the quarter ended March 31, 2016 Month Particulars January February March Total Beginning Accounts Payable (a) $5,100 $5,100 January $27,072 $40,608 $67,680 February $33,696 $50,544 $84,240 March $35,328 $35,328 Total payments (a+b+c+d) $32,172 $74,304 $85,872 $1,92,348 4. Direct labour Budget XYZ Co. Direct Labour Budget For the quarter ended March 31, 2016 Month Particulars January February March Total Planned production units (a) 5,640 7,020 7,360 20,020 Cost per unit 15 15 15 15 Budgeted Direct labour Cost $84,600 $1,05,300 $1,10,400 $3,00,300 5. Factory Overhead Budget XYZ Co. Factory Overhead Budget For the quarter ended March 31, 2016 Month Particulars January February March Total Units 5,640 7,020 7,360 20,020 Variable overhead Cost per unit 2.6 2.6 2.6 2.6 Total Variable overhead 14,664.0 18,252.0 19,136.0 52,052.0 Fixed factory overhead 7,500 7,500 7,500 22,500 Depreciation 5,500 5,500 5,500 16,500 Total cash fixed overhead 2,000 2,000 2,000 6,000 XYZ Co. Cash Budget For the quarter ended March 31, 2016 Month Particulars January February March Total Beginning Cash balance 25,000 2,274 2,428 25,000 Add: Budgeted Cash receipts $92,970 $2,76,360 $3,43,980 7,13,310 cash available for use $1,17,970 $2,78,634 $3,46,408 7,38,310 Less: cash Disbursements Direct Material $32,172 $74,304 $85,872 1,92,348 Direct Labour $84,600 $1,05,300 $1,10,400 $3,00,300 Variable overhead $14,664 $18,252 $19,136 $52,052 Fixed overhead $2,000 $2,000 $2,000 $6,000 Sales commission $10,710 $14,490 $15,330 $40,530 Shipping Cost 2550 3450 3650 9650 Salaries 15,000 15,000 15,000 45,000 Rent 2,000 2,000 2,000 6,000 Equipment purchase 19,000 19,000 Dividend 35,000 35,000 Total disbusrement 1,82,696 2,34,796 2,88,388 7,05,880 Cash surplus/Deficit -64,726 43,838 58,020 32,430 Financing Borrowing 67,000 67,000 Repayment 41,000 26,000 67,000 Interest 410 520 930 Net cash from Financing 67,000 41,410 -26,520 67,930 Budgeted ending cash balance 2,274 2,428 31,500 31,500Related Questions
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