SB Problem PA8-1 to PA8-3 The following information applies to the questions dis
ID: 2565166 • Letter: S
Question
SB Problem PA8-1 to PA8-3 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 $11 per hour. Iguana has the following inventory policies: Ending finished goods inventory should be 40 percent of next month's sales. Ending raw materials inventory should be 30 percent of next month's production. Expected unit sales (frames) for the upcoming months follow 300 300 350 450 425 475 March agwril June July August Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $9,600 ($800 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $850 per month plus $0.60 per unit sold Iguana, Inc., had $12,800 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 $3,500. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $200 in depreciation. During April, Iguana plans to pay $3,500 for a piece of equipment.Explanation / Answer
ANSWER 1
Particulars
April
May
June
Total
Budgeted sales revenue
$9,000
$10,500
$13,500
$33,000
Budgeted unit produced
320
390
440
1,150
Budgeted cost of material purchase
$4,164
$4,860
$5,298
$14,322
Budgeted labor cost
$1,760
$2,145
$2,420
$6,325
Total budgeted manufacturing overhead
$896
$917
$932
$2,745
Budgeted cost of goods sold
$6,496
$7,742
$8,632
$22,870
Total selling and administration expenses
$1,030
$1,060
$1,120
$3,210
Working notes
Particulars
April
May
June
July
Budgeted sales unit
300
350
450
425
Selling price per unit
30
30
30
30
Budgeted sales revenue
$9,000
$10,500
$13,500
$12,750
Sales (unit)
300
350
450
425
Ending inventory (add)
140
180
170
190
Beginning inventory (less)
-120
-140
-180
-170
Budgeted unit produced
320
390
440
445
Raw material required (budgeted production units* 4) (in foot)
1280
1560
1760
Ending raw material (add)
468
528
534
Beginning raw material (less)
-360
-468
-528
Budgeted raw material purchase ( in feet)
1388
1620
1766
Cost of raw material per feet
3
3
3
Budgeted cost of material purchase
$4,164
$4,860
$5,298
Budgeted unit produced
320
390
440
Times required for production ( in hours )
160
195
220
Labor cost per hour
11
11
11
Budgeted labor cost
$1,760
$2,145
$2,420
Budgeted unit produced
320
390
440
445
Variable manufacturing overhead per unit
0.30
0.30
0.30
Variable manufacturing overhead
96
117
132
Fixed manufacturing overhead
800
800
800
Total budgeted manufacturing overhead
$896
$917
$932
Budgeted unit sold
300
350
450
Variable selling and administration per unit
0.60
0.60
0.60
Variable selling and administration
180
210
270
Fixed selling and administration
850
850
850
Total selling and administration expenses
$1,030
$1,060
$1,120
Raw material required (budgeted production units* 4) (in foot)
1,280
1,560
1,760
Raw material per feet ($)
$3
$3
$3
Cost of raw material consumed
$3,840
$4,680
$5,280
Budgeted labor cost
$1,760
$2,145
$2,420
Total budgeted manufacturing overhead
$896
$917
$932
Budgeted cost of goods sold
$6,496
$7,742
$8,632
ANSWER 2
Budgeted income statements
For the quarter ending June
Budgeted income statements for the quarter ending June
April
May
June
Total
Budgeted sales revenue
$9,000
$10,500
$13,500
$33,000
Cost of raw material consumed
$3,840
$4,680
$5,280
$13,800
Budgeted labor cost
$1,760
$2,145
$2,420
$6,325
Total budgeted manufacturing overhead
$896
$917
$932
$2,745
Budgeted gross margin
$2,504
$2,758
$4,868
$10,130
Total selling and administration expenses
$1,030
$1,060
$1,120
$3,210
Budgeted net operating profit
$1,474
$1,698
$3,748
$6,920
ANSWER 3
Budgeted cash receipts
Particulars
March
April
May
June
July
Budgeted sales unit
300
300
350
450
425
Selling price per unit
30
30
30
30
30
Budgeted sales revenue
9000
9000
10500
13500
12750
Cash sales (80%)
7200
7200
8400
10800
10200
Credit sales (20%)
1800
1800
2100
2700
2550
Budgeted cash receipts
Particulars
April
May
June
Total
Cash received from cash sales
7200
8400
10800
26400
Cash received from credit sales during months (50% of credit sales)
900
1050
1350
3300
Cash received from cash sales during following months
900
900
1050
2850
Budgeted cash receipts
$9,000
$10,350
$13,200
$32,550
Budgeted cash payments
Particulars
March
April
May
June
Total
Budgeted cost of material purchase
$4,164
$4,164
$4,860
$5,298
Cash paid during the months (80%)
$3,331.20
$3,888.00
$4,238.40
$11,457.60
Cash paid during following month (20 %)
$832.80
$832.80
$972.00
$2,637.60
Budgeted cash payments for raw material suppliers
$4,164.00
$4,720.80
$5,210.40
$14,095.20
Budgeted labor cost
$1,760
$2,145
$2,420
$6,325.00
Total budgeted manufacturing overhead
$696
$717
$732
$2,145.00
Total selling and administration expenses
$1,030
$1,060
$1,120
$3,210.00
Payment for plant equipments
$3,500
$0
$0
$3,500.00
Budgeted cash payments
$11,150.00
$8,642.80
$9,482.40
$29,275.20
Cash budget
Particulars
April
May
June
Total
Beginning cash balance
12,800.00
12,650.00
12,357.20
12,800.00
Plus budgeted cash receipts
9,000.00
10,350.00
13,200.00
32,550.00
Less budgeted cash payments
-11,150.00
-8,642.80
-9,482.40
-29,275.20
Preliminary cash balance
10,650.00
14,357.20
16,074.80
16,074.80
Cash borrowed (add)
2,000.00
2,000.00
Cash repaid (less)
-2,000.00
-2,000.00
Ending cash balance
$12,650.00
$12,357.20
$16,074.80
16,074.80
Particulars
April
May
June
Total
Budgeted sales revenue
$9,000
$10,500
$13,500
$33,000
Budgeted unit produced
320
390
440
1,150
Budgeted cost of material purchase
$4,164
$4,860
$5,298
$14,322
Budgeted labor cost
$1,760
$2,145
$2,420
$6,325
Total budgeted manufacturing overhead
$896
$917
$932
$2,745
Budgeted cost of goods sold
$6,496
$7,742
$8,632
$22,870
Total selling and administration expenses
$1,030
$1,060
$1,120
$3,210
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