ADM 2341 Lecture Notes - Lecture 9: Budget, Accounts Receivable, Accounts Payable

33 views8 pages

skycricket871

18 Dec 2015

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Problem 9-11 (60 minutes: the sales budget for the third quarter: The schedule of expected cash collections from sales: 0: the production budget for july through october: Problem 9-11 (continued: the direct materials budget for the third quarter: Add desired ending inventory 2,720 1,960 1,560 * 1,560. Cost of raw materials to be purchased at . 50. *3,900 pairs (october) 2 lbs. per pair= 7,800 lbs. = 8,000 units + 75,000 (next month"s sales) x 20% Sales) x 20: during july and august the company is building inventories in anticipation of peak sales in september. In september and october inventories are being reduced in anticipation of a decrease in sales during the last months of the year. Therefore, production is less than sales during these months to cut back on inventory levels: direct materials budget: Material d236 needed per unit x 4 kgs. x 4 kgs. * 48,400 units (october production) 4 kgs. per unit =

Related Questions

Crydon, Inc., manufactures an advanced swim fin for scubadivers. Management is now preparing detailed budgets for the thirdquarter, July through September, and has assembled the followinginformation to assist in preparing the budget:

a.	The Marketing Department hasestimated sales as follows for the remainder of the year (in pairsof swim fins):

The selling price of the swimfins is $15 per pair.


July	5,200	October	3,200
August	6,200	November	2,200
September	4,200	December	2,200

b.	All sales are on account. Basedon past experience, sales are expected to be collected in thefollowing pattern:


44%	in the month ofsale
47%	in the monthfollowing sale
9%	uncollectible

The beginning accountsreceivable balance (excluding uncollectible amounts) on July 1 willbe $134,000.

c.	The company maintains finished goods inventories equal to 12% ofthe following monthâs sales. The inventory of finished goods onJuly 1 will be 624 pairs.

d.	Each pair of swim fins requires 5 pounds of geico compound. Toprevent shortages, the company would like the inventory of geicocompound on hand at the end of each month to be equal to 20% of thefollowing monthâs production needs. The inventory of geico compoundon hand on July 1 will be 5,320 pounds.

e.	Geico compound costs $3.00 per pound. Crydon pays for 59% of itspurchases in the month of purchase; the remainder is paid for inthe following month. The accounts payable balance for geicocompound purchases will be $11,100 on July 1.

Required:

1a.

Prepare a sales budget, by month and in total, for the thirdquarter.

July august september quarter

budgeted sales(pair)

Selling price per pair

total budgeted sales

1b.	Prepare a schedule of expected cash collections, by month and intotal, for the third quarter.

Accounts receivable, beginning balance

July sales

August sales

September sales

Total cash collections

Prepare a production budget for each of the months July throughOctober.

July august september octomber

budgeted sales (pairs)

total needed

required productions

3a.

Prepare a direct materials budget for geico compound, by monthand in total, for the third quarter. (Do not roundintermediate calculations.)

July august september quarter

required production pairs

raw material needed per pair

productions needs

total needs

raw material to be purchased

cost of raw material to be pur

3b.

Prepare a schedule of expected cash disbursements for geicocompound, by month and in total, for the third quarter. (Donot round intermediate calculations.)

July ausust september quarter

accounts payable, beginning balance

july purchases

august purchases

september purchases

total cash disburments

jadetoad665

Susquehanna Corp. is a manufacturer of earrings. You have been hired as a new management trainee of the company. In the past, the company has done very little in budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming year. You have gathered the beginning balance sheet and the necessary assumptions for you to create the budget. The company has an agreement with a bank that allows the company to borrow in increments of $10,000 at the beginning of each quarter. The interest is 2% per quarter and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company will pay the bank all of the accumulated interest for the quarter on the loan and as much of the loan as possible (in increments of $10,000), while still retaining at least $40,000 in cash. Insurance for the whole year will be paid in January. Prepare the master budget for the year 2017.

Earrings Corp.

Balance Sheet

Budgeting Assumptions

Sales Budget Assumptions

Same for all quarters

Budgeted sales in pairs of earrings

Selling price per pair

$ 23.50

Accounts receivable

224,000

Percentage of sales collected in the quarter of sale

60%

Raw materials inventory (240,000 grams of silver)

120,000

Percentage of sales collected in the quarter after sale

40%

Finished goods inventory (48,000 pairs of earrings)

480,000

Total current assets

$ 872,000

Production Budget Assumptions

Plant and equipment:

Percentage of next quarter's sales needed in ending finished goods inventory

40%

Land

50,000

Buildings and equipment

650,000

Direct Materials Budget Assumptions

Accumulated depreciation

(330,000)

Grams of silver per pair of earring

Total Plant and equipment, net

370,000

Cost per gram of silver

$ 0.50

Total assets

$ 1,242,000

Percentage of next quarter's production needs in ending inventory

20%

Percentage of purchases paid in the quarter of purchase

55%

Liabilities and Stockholders' Equity

Percentage of purchases paid in the quarter after purchase

Direct Labor Budget Assumptions

Stockholders' equity:

Direct labor-hours required per pair

0.20

Common stock

$ 700,000

Direct labor cost per hour

$ 12.00

Retained earnings

449,000

Total stockholders' equity

1,149,000

Manufacturing Overhead Budget Assumptions

Total liabilities and stockholders' equity

$ 1,242,000

Variable manufacturing overhead per direct labor-hour

$ 1.50

Fixed manufacturing overhead excluding depreciation per quarter

$ 145,950

Depreciation on factory assets per quarter

Selling and Administrative Expense Budget Assumptions

Variable selling and administrative expense per pair

$ 2.80

Fixed selling and administrative expense:

Advertising expense per quarter

$ 270,000

Executive salaries per quarter

$ 105,000

Insurance expense per quarter

$ 48,000

(the whole year's insurance will be paid in January)

Rent expense per quarter

$ 240,000

Depreciation on non-factory assets per quarter

Cash Budget Assumptions

Dividends per quarter

$ 15,000

Interest rate per quarter

Loans can be made and repaid in increments of $10,000

Earrings Corp.

Master Budget

For the Year Ended December 31, 2017

Sales Budget

Quarter

Year

Budgeted unit sales (in pairs)

Selling price per unit

Total sales

Schedule of Expected Cash Collections

Beginning accounts receivable

Total cash collections

Add: Desired units of ending finished goods inventory

Total needs

Less: Units of beginning finshed goods inventory

Required production in units

Direct Materials Budget

Quarter

Year

Required production in pairs

Units of raw materials needed per pair

Units of raw materials needed to meet production

Add desired units of ending raw materials inventory

214,000

Total units of raw materials needed

Less units of beginning raw materials inventory

Units of raw materias to be purchased

Cost of raw materials per pound

Cost of raw materials to be purchased

Schedule of Expected Cash Disbursements for Purchases of Materials

Beginning accounts payable

First quarter purchases

Second quarter purchases

Third quarter purchases

Forth quarter purchases

Total cash disbursements for materials

Direct Labor Budget

Quarter

Year

Required production in pairs

Direct labor-hours per pair

Total direct labor-hours needed

Direct labor cost per hour

Total direct labor cost

Manufacturing Overhead Budget

Quarter

Year

Budgeted direct labor-hours

Variable manufacturing overhead rate

Variable manufacturing overhead

Fixed manufacturing overhead

Total manufacturing overhead

Less depreciation on factory assets

Cash disbursements for manufacturing overhead

Total manufacturing overhead

Budgeted direct labor-hours

Predetermined overhead rate for the year 2017

Ending Finished Goods Inventory Budget (absorption costing basis)

Production cost per case:

Manufacturing overhead

hours

per hour

Unit product cost

Budgeted finished goods inventory:

Ending finished goods inventory in cases

Unit product cost

Ending finished goods inventory in dollars

Selling and Administrative Expense Budget

Quarter

Year

Budgeted unit sales

Variable selling and administrative expense per pair

Total variable selling and administrative expense

Fixed selling and administrative expense per quarter:

Depreciation on non-factory assets

Total fixed selling and administrative expense

Total selling and administrative expense

Adjustment for prepaid insurance

#VALUE!

Less depreciation on non-factory assets

Cash disbursements for selling and administrative expense

Cash Budget

Quarter

Year

Beginning cash balance

Add cash receipts:

Collections from customers

Total cash available

Less cash disbursements:

Direct materials

Direct labor

Manufacturing overhead

Selling and administrative

Equipment purchases

Dividends

Total cash disbursements

Excess (deficiency) of cash available over disbursements

Financing:

Borrowings (at the beginnings of quarters)

$ 50,000.00

$ -

Repayments (at end of the year)

[The following informationapplies to the questions displayed below.]

Beech Corporation is a merchandising company that is preparing amaster budget for the third quarter of the calendar year. Thecompanyâs balance sheet as of June 30th is shown below:

Beech Corporation
Balance Sheet
June 30

Assets

Plant and equipment,net of depreciation

214,000

Total assets

$ 483,250

Liabilities and Stockholdersâ Equity

Total liabilitiesand stockholdersâ equity

$ 483,250

alue:
10.00 points

Required information

Beechâs managers have made thefollowing additional assumptions and estimates:

1.	Estimated sales for July, August, September, and October will be$250,000, $270,000, $260,000, and $280,000, respectively.
2.	All sales are on credit and all credit sales are collected. Eachmonthâs credit sales are collected 45% in the month of sale and 55%in the month following the sale. All of the accounts receivable atJune 30 will be collected in July.
3.	Each monthâs ending inventory must equal 20% of the cost of nextmonthâs sales. The cost of goods sold is 75% of sales. The companypays for 30% of its merchandise purchases in the month of thepurchase and the remaining 70% in the month following the purchase.All of the accounts payable at June 30 will be paid in July.
4.	Monthly selling and administrative expenses are always $46,000.Each month $5,000 of this total amount is depreciation expense andthe remaining $41,000 relates to expenses that are paid in themonth they are incurred.
5.	The company does not plan to borrow money or pay or declaredividends during the quarter ended September 30. The company doesnot plan to issue any common stock or repurchase its own stockduring the quarter ended September 30.

Required:

1.	Prepare a schedule of expected cash collections for July,August, and September. Also compute total cash collections for thequarter ended September 30.

Schedule of Expected Cash Collections
	Month
	July	August	September	Quarter
From accounts receivable				$0
From July sales				0
From August sales				0
From September sales				0
Total cash collections	$0	$0	$0	$0

2-a.

Prepare a merchandise purchases budget for July, August, andSeptember. Also compute total merchandise purchases for the quarterended September 30.

Merchandise Purchases Budget
	July	August	September	Total
Budgeted cost of goodssold

Total needs

Required purchases

2-b.

Prepare a schedule of expected cash disbursements formerchandise purchases for July, August, and September. Also computetotal cash disbursements for merchandise purchases for the quarterended September 30.

Schedule of Cash Disbursements for Purchases
	July	August	September	Total
From accounts payable				$0
From July purchases				0
From August purchases				0
From September purchases				0
Total cash disbursements	$0	$0	$0	$0

4.Prepare a balance sheet as of September 30.

Beech Corporation
Balance Sheet
September 30
Assets
Cash
Accounts receivable
Inventory
Plant and equipment, net


Total assets	$0
Liabilities and Stockholders'Equity
Accounts payable
Common stock
Retained earnings


Total liabilities andstockholders' equity	$0

Prepare an income statement for the quarter ended September30.

Beech Corporation
Income Statement
For the Quarter Ended September 30
Sales
Cost of goods sold
Gross margin	0
Selling and administrative expenses
Net operating income	0
Interest expense
Net income	$0

olivekoala956

ADM 2341 Lecture Notes - Lecture 9: Budget, Accounts Receivable, Accounts Payable

Document Summary

Get access

Related Documents

ACCTG322 Lecture Notes - Net Income, Share Capital, Income Statement

ADMS 2510 Study Guide - Earnings Before Interest And Taxes, Income Statement, Accounts Payable

AFM123 Chapter Notes - Chapter 7: Budget, Finished Good, Income Statement

Related Questions