1_ Kidman Publishers Inc. budgeted production of 71,000 diaries in 2016. Paper i

Question

1_ Kidman Publishers Inc. budgeted production of 71,000 diaries in 2016. Paper is required to produce a diary. Assume 92 square yards of paper are required for each diary. The estimated January 1, 2016, paper inventory is 392,000 square yards. The desired December 31, 2016, paper inventory is 359,000 square yards.

If paper costs $0.11 per square yard, determine the direct materials purchases budget for 2016. If required, round your final answer to the nearest dollar..........$

2_Kerrie Publishers Inc. collects 80% of its sales on account in the month of the sale and 20% in the month following the sale.

If sales on account are budgeted to be $558,000 for April and $480,000 for May, what are the budgeted cash receipts from sales on account for May?...........$

Explanation / Answer

Calculation of direct material purchase budget as follows.

Budgeted Sales Diaries = 71000 diaries

One diary = 92 square yards of paper

for 71000 diaries = 71000*92=6532000 square yards of paper

Quantity of square yards to be purchased.

Required for sales = 6532000

Add: Closing inventory = 359000

Less: opening Inventory = 392000

square yards to be purchases=6499000 square yards.

Cost of square yards = 6499000*$0.11 =$714890.

2.)

Budgeted cash receipts from sales in the month of may is as follows.

Amount realized = 80% of may month sales + 20% of april month sales

=80%$480000+20%$558000

=$495600.

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