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Edwards Company has projected sales and production in units forthe second quarter of the coming year as follows:


April May June
Sales 20,000 10,000 15,000
Production 15,000 15,000 20,000


Required:
a.

Cash-related production costs are budgeted at $7 per unitproduced. Of these production costs, 25% are paid in the month inwhich they are incurred and the balance in the following month.Selling and administrative expenses (all paid in cash) will amountto $70,000 per month. The accounts payable balance on March 31totals $77,000, all of which will be paid in April. Prepare aschedule for each month showing budgeted cash disbursements forEdwards Company. (Omit the "$" sign in yourresponse.)


April May June
Production cost $ $ $
Cashdisbursement:
Production thismonth
Production priormonth
Selling andadministration
Totaldisbursement $ $ $


b.

Assume that all units are sold on account for $19 each. Cashcollections from sales are budgeted at 60% in the month of sale,30% in the month following the month of sale and the remaining 10%in the second month following the month of sale. Accountsreceivable on April 1 totaled $168,000 ($38,000 from February'ssales and the remainder from March sales.) Prepare a schedule foreach month showing budgeted cash receipts for Edwards Company.(Omit the "$" sign in your response.)


April May June
Total sales $ $ $
Cash receipts:
February sales
March sales
April sales
May sales
June sales
Total receipts $ $ $

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Beverley Smith
Beverley SmithLv2
28 Sep 2019

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Edwards Company has projected sales and production in units forthe second quarter of the coming year as follows:


April May June
Sales 32,000 22,000 27,000
Production 27,000 27,000 32,000


Required:
a.

Cash-related production costs are budgeted at $5 per unitproduced. Of these production costs, 30% are paid in the month inwhich they are incurred and the balance in the following month.Selling and administrative expenses (all paid in cash) will amountto $50,000 per month. The accounts payable balance on March 31totals $98,000, all of which will be paid in April. Prepare aschedule for each month showing budgeted cash disbursements forEdwards Company. (Omit the "$" sign in yourresponse.)


April May June
Production cost $ $ $
Cashdisbursement:
Production thismonth
Production priormonth
Selling andadministration
Totaldisbursement $ $ $


b.

Assume that all units are sold on account for $11 each. Cashcollections from sales are budgeted at 50% in the month of sale,40% in the month following the month of sale and the remaining 10%in the second month following the month of sale. Accountsreceivable on April 1 totaled $277,000 ($47,000 from February'ssales and the remainder from March sales.) Prepare a schedule foreach month showing budgeted cash receipts for Edwards Company.(Omit the "$" sign in your response.)


April May June
Total sales $ $ $
Cash receipts:
February sales
March sales
April sales
May sales
June sales
Total receipts $ $ $
Edwards Companyhas projected sales and production in units for the second quarterof the year as follows:
April May June
Sales 30,000 20,000 25,000
Production 25,000 25,000 30,000
Assume that all units will besold on account for $15 each.
Cash collections from salesare budgeted at
70% in the month of sale
20% in the month following the month of sale
the remaining 10% in the second month following themonth of sale
Accounts receivable on March31 totaled $255,000
($45,000 from February's salesand the remainder from March.)
Production (inventory) costsof $10 per unit are paid in the month after they are incurred.
Edwards produced 27,000 unitsin March.
Selling and administrativeexpenses (excluding depreciation) are budgeted to be 15% of eachmonth's sales.
Prepare a schedule forbudgeted cash receipts in April, May, and June for EdwardsCompany.
Calculate the accountsreceivable balance as of June 30.
Prepare a schedule of cashdisbursements in April, May, and June for Edwards Company.
Edwards Company wants topurchase equipment costing $50,000 some time in the secondquarter.
When should it make thepurchase, assuming that it must pay immediately upon purchase?

Roles What do they know
Sales Manager You want to sell 10,000 units in April, 15,000 in May, 8,000 units in June at $20 each.
Business Development You know that our competitor is struggling with manufacturing and supply is low, and your POV is that demand will increase by 10% in April and May
Manufacturing Supervisor You have seen that raw material supply shipments are being delayed - and you want to keep 15% of next months production needs on hand- also you would like 15% of raw material needs on hand for production of product for next month. You know it takes .5 hours standard to make each unit.
Human Resources Has settled the labors union by guaranteeing 40 hours minimum a week at $12/hour, but no OT. You expect 5500 direct labor hours standard per month. Based on our payroll system you can expect 1/2 the direct labor to be paid in the month it was incurred and the second 1/2 in the following month.
Purchasing Agent Your POV is that Supply of raw material is plentiful and you agree with the Manufacturing Supervisor that in fact shipments are slow do to trucking constraints, you want to keep 10% of raw material on hand for next months production needs. The price of wood is not expected fluctuate in the next 3 months at $1/lb standar rate. You know each unit manufactured requires a standard 4lb of wood.
Accounts Receivable Manager Based on historical data you know that 50% of the current month sales are collected in month while 45% are collected the following month, 5% are never collected.
Treasure Your goal is to keep $40,000 in the bank as a balance. We have a line of credit we can borrow from- when we fall short
Accountant Has calculated fixed Manufacturing Overhead as follows (each month)
Rent 15,000.00
Property Tax 3,000.00
Indirect Material 5,000.00
Indirect Labor 8,000.00
Variable Manufacturing Overhead at
Utilities $.5 per unit produced
Controller Your goal is to help guide and lead the team, and increase profit share over the next quarter, while keeping costs under control. Last years sales goal for the same 3 months was set at 32,000 units which we met. We did that with only keeping 10% of units produced on hand.
Accounts Payable You know that 50% of our purchases (VE) are paid the same month incurred and the reminder paid the following month. However our expenses (FE) are paid for in the month we incur them. While utilities are paid the 10th of the following month of production.
We manufacture and sell baseball bats, attached is the cross functional working team that has been assigned to come up with a plan for next quarter.
Work with the knowledge you are given to present a plan (budgets) to the board.
Sales Budget April May June July
# Units 10,000
Price 20 20 20 20
Total Rev 200,000
Production Budget April May June
# Units to sell - - - 10,000
Add desired end Inv
Total needed - - -
Less Beg Inv 2,000
Units to be Produced
Direct Material April May June
Production in Units - - -
Materials per unit 4 4 4
Production Needs - - -
Add desired ending Inventory 6,000
Total Needed - -
Less Beg Inventory 3,000 - -
Material to be purchased -
Direct-Labor April May June
Production in Units - - -
Direct Labor Hours per unit
Labor hours required - - -
Hours guaranteed
Labor hours paid
Wage rate
Total direct labor cost 0 0 0
Overhead Budget April May June
Rent
Property Tax
Indirect Material
Indirect Labor
Utilities
Total
Cash Receipts Budget April May June
Accounts Rec 3/31 $50,000
April Sales
May Sales
June Sales
Total cash collection
Cash Disbursement Budget April May June
Purchases Raw Material
March $20,000
April
May
June
Direct Labor Cost
March $33,000
April
May
June
Variable Manufacturing OH $5,000
Fixed Manufacturing OH
Total Cash Disbursements
Cash Budget April May June
Beginning cash Balance 40000
Add cash collections
Total cash available
Less Disbursements
Expected Balance
Target Balance
Excess (deficiency)
Questions
How did you decide on how many units to sell over the next 3 months?
How did the sales goal affect your production budget?
Assume Actual purchases for May of Direct Material were 2% less than budged and Actual price paid for material was $.90/ lb. Calculate the Direct material price variance. Is this a favorable or unfavorable variance?
Assume actual direct labor hours for April were 5,300 with an actual average rate of $12.50, calculate the direct labor rate variance, and determine if this is a favorable or unfavorable variance.
For May actual fixed overhead totaled $34,000, calculate the fixed overhead budget variance, is the favorable or unfavorable?

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