Windy City Corp. manufactures component parts for wind turbines. The controller

Question

Windy City Corp. manufactures component parts for wind turbines. The controller is building a master budget for the first quarter of the upcoming calendar year. Selected information from the accounting records is presented next:

a. Accounts Receivable as of January 1 are $59,250. Selling price per unit is projected to remain stable at $14 per unit throughout the budget period. Sales for the first five months of the upcoming year are budgeted to be as follows:

January

$99,400

February

$119,900

March

$111,200

April

$107,000

May

$104,700

b. Sales are 25% cash and 75% credit. All credit sales are collected in the month following the sale.

c. Windy City has a policy that states that each month’s ending inventory of finished goods should be 10% of the following month’s sales (in units).

d. Three pounds of direct material is needed per unit at $2.90 per pound. Ending inventory of direct materials should be 20% of next month’s production needs.

e. Monthly manufacturing overhead costs are $5,510 for factory rent, $2,900 for other fixed manufacturing costs, and $1.10 per unit produced for variable manufacturing overhead. All costs are paid in the month in which they are incurred.

Required:

1. What are the budgeted total cash collections for the 1st quarter?

2. What is the budgeted production for the quarter in terms of number of units?

3. What is the budgeted direct materials cost for the quarter?

4. What is the budgeted manufacturing overhead for the quarter?

January

$99,400

February

$119,900

March

$111,200

April

$107,000

May

$104,700

Explanation / Answer

Solution 1:

Solution 2:

Solution 3:

Solution 4:

Windy City Corp. - Computation of Budgeted cash collection for 1st quarter Particulars January Feburary March Total Budgeted Sales $99,400.00 $119,900.00 $111,200.00 $330,500.00 Cash Sales (25%) $24,850.00 $29,975.00 $27,800.00 $82,625.00 Credit Sales (75%) $74,550.00 $89,925.00 $83,400.00 $247,875.00 Collection of cash against credit sale (months following the sales) $59,250.00 $74,550.00 $89,925.00 $223,725.00 Total Budgeted Cash Collection in 1st quarter (Cash Sales + Cash collection against credit sales) $84,100.00 $104,525.00 $117,725.00 $306,350.00

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