Question 1 - Water Sport Inc. manufactures a small personal water tube used for children learning to swim. Management is now preparing detailed budgets for the third quarter, July through September, and has assembled the following information to assist:
a. The Marketing Department has estimated sales as follows for the remainder of the year (number of water tubes):
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July
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6,600
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October
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3,000
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August
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5,100
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November
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2,600
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September
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4,100
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December
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2,100
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The selling price of the water tubes is $60.
b. All sales are on account. Based on past experience, sales are expected to be collected in the following pattern:
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50%
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in the month of sale
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45%
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in the month following sale
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5%
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uncollectable
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The beginning accounts receivable balance (excluding uncollectible amounts) on July 1 will be $160,500.
c. The company maintains finished goods inventories equal to 20% of the following month's sales. The inventory of finished goods on July 1 will be 1,320 units.
d. Each water tube requires 3 kilograms of synthetic polyisoprene rubber compound. To prevent shortages, the company would like the inventory of synthetic rubber compound on hand at the end of each month to be equal to 20% of the following month's production needs. The inventory of synthetic rubber compound on hand on July 1 will be 3,780 kilograms.
e. The synthetic rubber compound costs $4.00 per kilogram. Water Sport pays for 70% of its purchases in the month of purchase; the remainder is paid for in the following month. The accounts payable balance for synthetic rubber compound purchases will be $11,700 on July 1.
Required -
1. Prepare a sales budget by month and in total for the third quarter (Show your budget in both units of water tubes and dollars ) Also prepare a schedule of expected cash collections, by month and in total, for the third quarter.
2. Prepare a production budget for each of the months July through October.
3. Prepare a direct materials purchases budget for synthetic rubber compound by month and in total for the third quarter Also prepare a schedule of expected cash disbursements for synthetic rubber compound by month and in total for the third quarter.
Question 2 - The Bakery Department of Culbert Dessert Corporation has submitted the folloving forecast of fruit pies to be produced by quarter for the upcoming fiscal year.
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First Quarter
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Second Quarter
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Third Quarter
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Fourth Quarter
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Units to be proiduced
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9,100
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12,100
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10,100
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14,100
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Each unit requires 0 60 direct labour-hours and direct labour-hour 'workers are paid 510 00 per hour.
In addition the variable manufacturing overhead rate is 52 00 per direct labour-hour The fixed manufacturing overhead is 525.750 per quarter The only non-cash element of manufacturing overhead is depreciation which is 57.550 per quarter.
Required -
1. Prepare the company's direct labour budget for the upcoming fiscal year assuming that the direct labour workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.
2. Prepare the company's manufacturing overhead budget As per Schedule 5 your manufacturing overhead budget should also include the budgeted cash disbursements for overhead.