Problem #1 Tandy, Inc. is in the business of manufacturing men’s and women’s lea
ID: 2548349 • Letter: P
Question
Problem #1
Tandy, Inc. is in the business of manufacturing men’s and women’s leather computer bags. On January 1, 2019 they started their new fiscal year. The following is their trial balance as of December 31, 2018:
Account Dr Cr
Cash $ 43,200
Accounts Receivable $ 9,000
Raw Materials Inventory (1) $ 20,240
Work in Process Inv. (2) $ 0
Finished Goods Inv. (3) $ 8,100
Land $ 225,000
Equipment $ 310,000
Vehicles $ 84,200
Accumulated Depreciation $ 55,100
Long-term Investments $ 78,500
Accounts Payable $ 14,700
Wages Payable $ 8,470
Mortgage Payable (4) $ 214,500
Common Stock (5) $ 25,000
APIC $ 125,000
Retained Earnings $ 335,470
Totals $ 778,240 $ 778,240
Includes 2,860 feet of leather at $4 per foot, 5,000 feet of nylon lining at $1.25 per foot, and 510 golden buckles at $5 per buckle
No bags are currently in process at the beginning of January
Includes 150 completed bags (manufacturing overhead has been applied)
Monthly payments (interest and principle) are $ 2,500
$0.10 par value, 300,000 share authorized and 250,000 share outstanding
For the coming year, you have been put in charge of creating the operational budget schedules and the cash budget. Below is information for the first three months of the fiscal year.
Sales Forecasts
For this coming year, you have raised your sales price to $125 per bag. Based on sales contracts you have signed with your major corporate customers, you anticipate the following sales for the first three months of 2019:
January 250 bags
February 225 bags
March 190 bags
According to the terms of the sales contracts you require each customer to pay 80% of the sales price in the month of sale and 20% in the month following. In December 2018, Tandy had $30,000 in total sales.
The production process
Each bag produced requires 4 feet of leather, 9 feet of nylon, 3 gold buckles, and 3.5 hours of direct labor. Currently you are paying your assembly workers $17 / hour. In order to meet the following month’s demand, Tandy desires to keep 45% of the next month’s sales in Finished Goods Inventory. Tandy is forecasting sales in April, 2019 of 285 bags. Additionally, they also keep 30% of next month’s production needs in raw materials inventory. Tandy anticipates production of 255 units in April, 2019. Tandy has signed contracts with their suppliers to purchase leather at $4 a foot and buckles at $5 per buckle for the following year. Their policy is to pay for 75% of raw materials at the time of purchase and the remaining 25% in the following month.
Required
Please prepare the sales and production budgets for January – March of 2010.
Explanation / Answer
Tandy, Inc.
Sales Budget
Production Budget
Working
1. Sales budget is a schedule which reflect sales units, sales price and total sales for a specified period.
2. Production budget is a schedule which reflect that how much production of units required for a specified period to meet sales and finished inventory requirement.
3. begining unit of finished goods for jan 2019 is ending units for dec 2019 which was provided as 150 bags in trial balance.
4. Ending finished goods inventory should be 45 % of sales in next month, so they will be as follows -
January = 225 x 45% = 101.25 = 101units
Feb. = 190 x 45% = 85.5 = 86 units
March = 285 x 45% = 128 units
units are rounded in full figures because of nature of goods.
so this is the answer to the problem that required to prepare sales budget and production budget for Jan to March 2019.
Jan Feb March Quarter Sales Units (Bags) 250 225 190 665 (X) Price Per Unit @125 per Bag 125 125 125 Total Sales ($) 31250 28125 23750 83125Related Questions
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