1. Sales forecast: January: 1,100 units; February: 1,500 units; March: 2,300 uni

Question

1. Sales forecast: January: 1,100 units; February: 1,500 units; March: 2,300 units; April: 2,500 units. The unit sales price is $58. All sales are on credit and collections are 30% in the month of sale and 70% the following month. Accounts receivable as of December 31,2016 is $15,900 and this amount is expected to be collected in January 2017 2. End of month inventory must equal 70% of next month's sales. The inventory at the end of December 2016 was 1,200 units. 3·The following are the expected costs for direct materials, direct labor and manufacturing overhead: DM Overhead January $8/unit February $8/unit March A. Direct materials are paid 20% in the month incurred and 80% in the following month. $15/unit $15/unit $15/unit 7,00+1.00 per unit produced 7,500$1.00 per unit produced 7,500$1.00 per unit produced S8/unit Account payable for materials as of December 31, 2016 is $5,000; this amount will be paid in January 2017 B. Direct labor is paid in the month incurred. C. Overhead costs are paid in the month incurred. Fixed overhead includes depreciation of $2,500 per month. 4. Selling costs are sales commissions: S.50 per unit sold; shipping costs: S.20 per unit sold. Administrative costs per month are: salaries: S1,500; rent: S500; depreciation: $800. All costs are paid in month incurred. 5. The company plans to buy equipment costing S30,000 to be paid in cash in January

Explanation / Answer

Requirement 1: Sales Budget: Particulars January February March a Units 1100 1500 2300 b Sales (a * 58) 63800 87000 133400 c Cash Collections: December 15900 January 19140 44660 February 26100 60900 March 40020 35040 70760 100920 Requirement 2: Production Budget: Particulars January February March Units Sold 1100 1500 2300 Add: Ending Inventory 1050 1610 1750 Less: Beginning Inventory 770 1050 1610 Units Produced 1380 2060 2440 Requirement 3: Direct Material Budget: Particulars January February March a Units Produced 1380 2060 2440 b Direct Material (a*8) 11040 16480 19520 c Cash Disbursements December 5000 January 2208 8832 February 3296 13184 March 3904 7208 12128 17088 Requirement 4: Direct Labor Budget: Particulars January February March a Units Produced 1380 2060 2440 b Direct Labor (a*15) 20700 30900 36600 Requirement 5: Manufacturing Overhead Budget: Particulars January February March a Units Produced 7208 12128 17088 b Manufacturing Overhead (7500+(a*1)) 14708 19628 24588

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