[The following information applies to the questions displayed below.] Iguana, In

Question

[The following information applies to the questions displayed below.]

Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each frame requires 4 linear feet of bamboo, which costs $3.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $15 per hour. Iguana has the following inventory policies:

Expected unit sales (frames) for the upcoming months follow:   

Variable manufacturing overhead is incurred at a rate of $0.50 per unit produced. Annual fixed manufacturing overhead is estimated to be $6,000 ($500 per month) for expected production of 3,000 units for the year. Selling and administrative expenses are estimated at $550 per month plus $0.50 per unit sold.

     Iguana, Inc., had $16,500 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the credit sales, 50 percent is collected during the month of the sale, and 50 percent is collected during the month following the sale.

     Of raw materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Raw materials purchases for March 1 totaled $5,000. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $310 in depreciation. During April, Iguana plans to pay $4,500 for a piece of equipment.

March 355 April 410 May 460 June 560 July 535 August 585 Required 1. Compute the budgeted cash receipts for lguana. (Do not round your intermediate calculations. Round final answers to 2 decimal places.) April May June 2nd Quarter Total Budgeted Cash Receipts 0.00 2. Compute the budgeted cash payments for lguana. (Do not round your intermediate calculations. Round final answers to 2 decimal places.) April May June 2nd Quarter Total Budgeted Cash Payments 0.00 3. Prepare the cash budget for Iguana. Assume the company can borrow in increments of $1,000 to maintain a $16,000 minimum cash balance. (Leave no cell blank enter "O" wherever required. Round your answers to 2 decimal places.) April May June 2nd Quarter Total Beginning Cash Balance Plus: Budgeted Cash Receipts Less: Budgeted Cash Payments Preliminary Cash Balance Cash Borrowed / Repaid Ending Cash Balance 0.00 0.00

Explanation / Answer

Solution:

Part 1 --- Budgeted Cash Receipts

Budgeted Cash Receipts

April

May

June

2nd Quarter Total

Budgeted Sales in Units

410

460

560

1430

Unit Selling Price

$30

$30

$30

$30

Budgeted Sales in dollars

$12,300

$13,800

$16,800

$42,900

Cash Sales (Total Sales x 80%) (A)

$9,840

$11,040

$13,440

$34,320

Credit Sales (Total Sales x 20%)

$2,460

$2,760

$3,360

$8,580

Collection from Credit Sales:

March Credit Sales

(355 units x $30*20%*50%) Collected in April

$1,065.00

April Credit Sales

$1,230.00

(2460/2)

$1,230.00

(2460/2)

May Credit Sales

$1,380.00

(2760/2)

$1,380.00

(2760/2)

June Credit Sale

$1,680.00

(3360/2)

Total Collection from Credit Sales (B)

$2,295.00

$2,610.00

$3,060.00

$7,965.00

Budgeted Cash Receipts (A+B)

$12,135.00

$13,650.00

$16,500.00

$42,285.00

Part 2 – Budgeted Cash Payment

Budgeted Cash Payments

April

May

June

2nd Quarter Total

Budgeted Cash Payment for Materials Purchases (Refer Note 1)

$5,329.60

$6,026.40

$6,530.40

$17,886

Cash Payment for Labor (Refer Note 2)

$3,225.00

$3,750.00

$4,125.00

$11,100

Payment for Variable Manufacturing Overhead (Refer note 3)

$215.00

$250.00

$275.00

$740

Fixed Manufacturing Overhead (excluding depreciation since depreciation is a non cash item and does not involve any cash outflow) ($500 - 310)

$190.00

$190.00

$190.00

$570

Selling and Administrative Expense (Refer Note 4)

$755.00

$780.00

$830.00

$2,365

Payment for Equipment

$4,500.00

$4,500

Total Budgeted Cash Payments

$14,214.60

$10,996.40

$11,950.40

$37,161

Note 1 – Schedule of Expected Cash Payment for Merchandise Purchases

Schedule of Cash Payment for Merchandise Purchases

April

May

June

June

August

Budgeted Sales Units (Frames)

410

460

560

535

585

Add: Ending Finished Goods Inventory (40% of next month's sales)

184

224

214

234

Total Needs

594

684

774

769

Less: Beginning Finished Goods Inventory (ending inventory of last month)

164

184

224

214

Budgeted Production in Units

430

500

550

555

Required Raw material per frame (linear feet)

4

4

4

4

Total Required Raw Material for Production (Linear feet)

1720

2000

2200

2220

Add: Desired Ending Raw Material Inventory (30% of next month's production need)

600

660

666

Less: Estimated Beginning Raw material inventory (ending inventory of last month)

516

600

660

Total Budgeted Purchases Raw Material (linearfeet)

1804

2060

2206

Cost per foot

$3.00

$3.00

$3.00

Total Budgeted Purchases in dollars

$5,412

$6,180

$6,618

Cash Payment Schedule for Merchandise Purchases:

April

May

June

2nd Quarter Total

March Purchases ($5,000*20% paid in april)

$1,000.00

April Purchases

$4,329.60

$1,082.40

May Purchases

$4,944.00

$1,236.00

June Purchases

$5,294.40

Total Cash Payment for Purchases

$5,329.60

$6,026.40

$6,530.40

$17,886

Note 2—Cash Payment for Direct labor

Budgeted Direct Labor Cost

April

May

June

2nd Quarter Total

Budgeted Production Units (Frames) (Refer Note 1)

430

500

550

Required Labor Hour per frame

0.50

0.50

0.50

Total Required Labor Hours

215.00

250.00

275.00

Labor Rate per hour

$15.00

$15.00

$15.00

Labor Cost Budget

$3,225.00

$3,750.00

$4,125.00

$11,100

Note 3

Variable Manufacturing Overhead

April

May

June

2nd Quarter Total

Budgeted Production Units (Frames) (Refer Note 1)

430.00

500.00

550.00

Variable Manufacturing Expense per unit produced

$0.50

$0.50

$0.50

Total Budgeted Variable Manufacturing Overhead

215.00

250.00

275.00

$740

Note 4 --- Selling and Administrative Expense

April

May

June

2nd Quarter Total

Units Sold

410.00

460.00

560.00

Variable Selling & Admin Expenses per unit sold

$0.50

$0.50

$0.50

Total Variable S&A Expense

$205.00

$230.00

$280.00

Add: Fixed S&A Exp

$550

$550

$550

Total S&A Exp

$755

$780

$830

$2,365

Part 3 ---- Cash Budget

Cash Budget

April

May

June

2nd Quarter Total

Beginning Cash Balance

$16,500.00

$16,420.40

$17,074.00

$16,500.00

Plus: Budgeted Cash Receipt

(Refer Part 1)

$12,135.00

$13,650.00

$16,500.00

$42,285.00

Less: Budgeted Cash Payments

(Refer Part 2)

$14,214.60

$10,996.40

$11,950.40

$37,161.40

Preliminary Cash Balance

$14,420.40

$19,074.00

$21,623.60

$21,623.60

Cash Borrowed / Repaid

$2,000.00

-$2,000.00

$0.00

$0.00

Ending Cash Balance

$16,420.40

$17,074.00

$21,623.60

$21,623.60

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Budgeted Cash Receipts

April

May

June

2nd Quarter Total

Budgeted Sales in Units

410

460

560

1430

Unit Selling Price

$30

$30

$30

$30

Budgeted Sales in dollars

$12,300

$13,800

$16,800

$42,900

Cash Sales (Total Sales x 80%) (A)

$9,840

$11,040

$13,440

$34,320

Credit Sales (Total Sales x 20%)

$2,460

$2,760

$3,360

$8,580

Collection from Credit Sales:

March Credit Sales

(355 units x $30*20%*50%) Collected in April

$1,065.00

April Credit Sales

$1,230.00

(2460/2)

$1,230.00

(2460/2)

May Credit Sales

$1,380.00

(2760/2)

$1,380.00

(2760/2)

June Credit Sale

$1,680.00

(3360/2)

Total Collection from Credit Sales (B)

$2,295.00

$2,610.00

$3,060.00

$7,965.00

Budgeted Cash Receipts (A+B)

$12,135.00

$13,650.00

$16,500.00

$42,285.00

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