Chapter 22: Q10RQ (page 1228)
What is the formula used to determine the number of units to be produced?
The production budget helps in preparing the production cost budget.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Preparing a financial budget—schedule of cash receipts
Berry expects total sales of \(359,000 in January and \)405,000 in February. Assume that Berry’s sales are collected as follows:
80% in the month of the sale
10% in the month after the sale
6% two months after the sales
4% never collected
November sales totaled \(350,000, and December sales were \)325,000. Prepare a schedule of cash receipts from customers for January and February. Round answers to the nearest dollar.
Question: Preparing a financial budget—schedule of cash receipts, schedule cash payments, cash budget
Baxter Company’s budget committee provides the following information: December 31, 2017, account balances:
1. Prepare the schedule of cash receipts from customers for January and February 2018. Assume cash receipts are 80% in the month of the sale and 20% in the month following the sale.
2. Prepare the schedule of cash payments for purchases for January and February 2018. Assume purchases are paid 60% in the month of purchase and 40% in the month following the purchase.
3. Prepare the schedule of cash payments for selling and administrative expenses for January and February 2018. Assume 40% of the accrual for Salaries and Commissions Payable is for commissions and 60% is for salaries. The December 31 balance will be paid in January. Salaries and commissions are paid 30% in the month incurred and 70% in the following month. Rent and income tax expenses are paid as incurred. Insurance expense is an expiration of the prepaid amount.
4. Prepare the cash budget for January and February 2018. Assume no financing took place.
Preparing a financial budget—cash budget
Wilson Company has \(11,000 in cash on hand on January 1 and has collected the following budget data:
January February Sales \) 1,400,000 \( 710,000 Cash receipts from customers 851,420 871,800 Cash payments for merchandise inventory 561,100 532,310
Assume Wilson has cash payments for selling and administrative expenses including salaries of \)55,000 plus commissions of 2% of sales, all paid in the month of sale. The company requires a minimum cash balance of $8,500. Prepare a cash budget for January and February. Will Wilson need to borrow cash by the end of February?
What is the capital expenditures budget?
Preparing an operating budget—sales, production, direct materials, direct labor, overhead, COGS, and S&A expense budgets The Irwin Batting Company manufactures wood baseball bats. Irwin’s two primary products are a youth bat, designed for children and young teens, and an adult bat, designed for high school and college-aged players. Irwin sells the bats to sporting goods stores, and all sales are on account. The youth bat sells for \(35; the adult bat sells for \)50. Irwin’s highest sales volume is in the first three months of the year as retailers prepare for the spring baseball season. Irwin’s balance sheet for December 31, 2018, follows:
Other data for Irwin Batting Company for the first quarter of 2019:
a. Budgeted sales are 1,400 youth bats and 3,300 adult bats.
b. Finished Goods Inventory on December 31, 2018, consists of 700 youth bats at \(15 each and 550 adult bats at \)10 each.
c. Desired ending Finished Goods Inventory is 220 youth bats and 300 adult bats; FIFO inventory costing method is used.
d. Direct materials requirements are 40 ounces of wood for youth bats and 70 ounces of wood for adult bats. The cost of wood is \(0.10 per ounce.
e. Raw Materials Inventory on December 31, 2018, consists of 90,000 ounces of wood at \)0.10 per ounce.
f. Desired ending Raw Materials Inventory is 90,000 ounces (indirect materials are insignificant and not considered for budgeting purposes).
g. Each bat requires 0.4 hours of direct labor; direct labor costs average \(26 per hour.
h. Variable manufacturing overhead is \)0.30 per bat.
i. Fixed manufacturing overhead includes \(1,300 per quarter in depreciation and \)14,977 per quarter for other costs, such as insurance and property taxes.
j. Fixed selling and administrative expenses include \(13,000 per quarter for salaries; \)3,500 per quarter for rent; \(1,400 per quarter for insurance; and \)450 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 1% of sales.
Requirements
1. Prepare Irwin’s sales budget for the first quarter of 2019.
2. Prepare Irwin’s production budget for the first quarter of 2019.
3. Prepare Irwin’s direct materials, direct labor budget, and manufacturing overhead budget for the first quarter of 2019. Round the predetermined overhead allocation rate to two decimal places. The overhead allocation base is direct labor hours.
4. Prepare Irwin’s cost of goods sold budget for the first quarter of 2019.
5. Prepare Irwin’s selling and administrative expense budget for the first quarter of 2019.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
