Swanson, Inc., manufactures an advanced swim fin for scuba divers. Management is now preparing detailed budgets for the third quarter, July through September, and has assembled the following information to assist in preparing the budget:
| a. |
The Marketing Department has estimated sales as follows for the remainder of the year (in pairs of swim fins). The selling price of the swim fins is $13 per pair. |
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| July |
5,600 |
October |
3,600 |
| August |
6,600 |
November |
2,600 |
| September |
4,600 |
December |
2,600 |
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| b. |
All sales are on account. Based on past experience, sales are expected to be collected in the following pattern: |
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| 43% |
in the month of sale |
| 48% |
in the month following sale |
| 9% |
uncollectible |
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The beginning accounts receivable balance (excluding uncollectible amounts) on July 1 will be $130,000. |
| c. |
The company maintains finished goods inventories equal to 9% of the following month's sales. The inventory of finished goods on July 1 will be 504 pairs.
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| d. |
Each pair of swim fins requires 4 pounds of geico compound. To prevent shortages, the company would like the inventory of geico compound on hand at the end of each month to be equal to 20% of the following month's production needs. The inventory of geico compound on hand on July 1 will be 4,552 pounds.
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| e. |
Geico compound costs $2.50 per pound. Crydon pays for 60% of its purchases in the month of purchase; the remainder is paid for in the following month. The accounts payable balance for geico compound purchases will be $11,800 on July 1.
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| 1a. |
Prepare a sales budget, by month and in total, for the third quarter.
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July |
August |
September |
Quarter - Total |
| Total budgeted sales |
$ |
$ |
$ |
$ |
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| 1b. |
Prepare a schedule of expected cash collections, by month and in total, for the third quarter. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations.)
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| Schedule of Expected Cash Collections |
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July |
August |
September |
Quarter - Total |
| Accounts receivable, beginning balance |
$ |
$ |
$ |
$ |
| July sales |
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| August sales |
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| September sales |
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| Total cash collections |
$ |
$ |
$ |
$ |
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| 2. |
Prepare a production budget for each of the months July through October. (Input all amounts as positive values.) |
| Production Budget |
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July |
August |
September |
October |
| Budgeted sales (pairs) |
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| Total needs |
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| Required production (pairs) |
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| 3a. |
Prepare a direct materials budget for geico compound, by month and in total, for the third quarter. (Do not round intermediate calculations. Input all amounts as positive values.)
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| Direct Materials Budget |
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July |
August |
September |
Quarter - Total |
| Production needs (lbs.) |
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| Total needs |
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| Raw materials to be purchased |
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| Cost of raw materials to be purchased |
$ |
$ |
$ |
$ |
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| 3b. |
Prepare a schedule of expected cash disbursements for geico compound, by month and in total, for the third quarter.(Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required.)
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| Schedule of Expected Cash Disbursements |
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July |
August |
September |
Quarter - Total |
| Accounts payable, beginning balance |
$ |
$ |
$ |
$ |
| July purchases |
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| August purchases |
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| September purchases |
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| Total cash payments |
$ |
$ |
$ |
$ |