Calculate the number of units of finished goods to be manufactured in January 20×1.

MA – CH9 HW2

1.

value: 16.66 points

 

Coyote Loco, Inc., a manufacturer of salsa, has the following historical collection pattern for its credit sales.
 
70 percent collected in the month of sale.
15 percent collected in the first month after sale.
10 percent collected in the second month after sale.
4 percent collected in the third month after sale.
1 percent uncollectible.

 

     The sales on account have been budgeted for the last seven months as follows:

 

       
  June $ 49,000  
  July   60,000  
  August   70,000  
  September   80,000  
  October   90,000  
  November   100,000  
  December   85,000  
 

 

Required:

 

1. Compute the estimated total cash collections during October from credit sales. (Omit the “$” sign in your response.)

 

 

  Total cash collections $

 

2. Compute the estimated total cash collections during the fourth quarter from sales made on account during the fourth quarter. (Omit the “$” sign in your response.)

 

  Total cash collections $

 

 

 

 

 

2.

value: 16.66 points

 

 

Sound Investments, Inc. is a large retailer of stereo equipment. The controller is about to prepare the budget for the first quarter of 20×2. Past experience has indicated that 75 percent of the store’s sales are cash sales. The collection experience for the sales on account is as follows:

 

 

80 percent during month of sale
15 percent during month following sale
5 percent uncollectible

 

     The total sales for December 20×1 are expected to be $190,000. The controller feels that sales in January 20×2 could range from $100,000 to $160,000.

 

Required:

 

1. Demonstrate how financial planning can be used to project cash receipts in January of 20×2 for three different levels of January sales. Use the following columnar format. (Omit the “$” sign in your response.)

 

 

  Total Sales in January 20×2
   
  $100,000 $130,000 $160,000
  Cash receipts in January, 20×2      
     From December sales on account $ $ $
     From January cash sales      
     From January sales on account      
       
    Total cash receipts $ $ $
       

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3.

value: 16.66 points

 

Handy Hardware is a retail hardware store. Information about the store’s operations follows.

 

November 20×1 sales amounted to $200,000.
Sales are budgeted at $220,000 for December 20×1 and $200,000 for January 20×2.
Collections are expected to be 60 percent in the month of sale and 38 percent in the month following the sale. Two percent of sales are expected to be uncollectible. Bad debts expense is recognized monthly.
The store’s gross margin is 25 percent of its sales revenue.
A total of 80 percent of the merchandise for resale is purchased in the month prior to the month of sale, and 20 percent is purchased in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses paid in cash amount to $22,600.
Annual depreciation is $216,000.

 

 

The company’s balance sheet as of November 30, 20×1, is as follows:

 

 

HANDY HARDWARE, INC. Balance Sheet November 30, 20×1
Assets
  Cash $ 22,000  
  Accounts receivable (net of $3,500 allowance for uncollectible accounts)   76,000  
  Inventory   140,000  
  Property, plant, and equipment (net of $590,000 accumulated depreciation)   862,000  
       
  Total assets $ 1,100,000  
   

 

 

 

 

 

Liabilities and Stockholders’ Equity
  Accounts payable $ 162,000  
  Common stock   795,000  
  Retained earnings   143,000  
       
  Total liabilities and stockholders’ equity $ 1,100,000  
   

 

 

 

 

 

 

 

 

Required:

 

 

1. Compute the budgeted cash collections for December 20×1. (Omit the “$” sign in your response.)

 

 

  Budgeted cash collections $

 

 

2. Compute the budgeted income (loss) before income taxes for December 20×1. (Omit the “$” sign in your response.)

 

 

  Budgeted before taxes $

 

 

3. Compute the projected balance in accounts payable on December 31, 20×1. (Omit the “$” sign in your response.)

 

 

  Accounts payable balance $

 

 

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4.

value: 16.66 points

 

Mary and Kay, Inc., a distributor of cosmetics throughout Florida, is in the process of assembling a cash budget for the first quarter of 20×1. The following information has been extracted from the company’s accounting records:

 

All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 35 percent are collected in the following month. Uncollectibles amounting to 5 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding on December 31, 20×0, will be recovered and that the recovery will be in January 20×1.
Seventy percent of the merchandise purchases are paid for in the month of purchase; the remaining 30 percent are paid for in the month after acquisition.
The December 31, 20×0, balance sheet disclosed the following selected figures: cash, $20,000; accounts receivable, $55,000; and accounts payable, $22,000.
Mary and Kay, Inc. maintains a $20,000 minimum cash balance at all times. Financing is available (and retired) in $1,000 multiples at an 8 percent interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time.
Additional data:

 

  January February March
  Sales revenue $ 150,000   $ 180,000   $ 185,000  
  Merchandise purchases   90,000     100,000     140,000  
  Cash operating costs   31,000     24,000     45,000  
  Proceeds from sale of equipment           5,000  
 

 

Required:

 

1. Prepare a schedule that discloses the firm’s total cash collections for January through March. (Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

 

 

  January February March
  Collection of accounts receivable: $ $ $
  Collection of January sales      
  Collection of February sales      
  Collection of March sales      
  Sale of equipment      
       
       Total cash collections $ $ $
   

 

 

 

 

 

 

 

2. Prepare a schedule that discloses the firm’s total cash disbursements for January through March. (Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

 

  January February March
  Payment of accounts payable $ $ $
  Payment of January purchases      
  Payment of February purchases      
  Payment of March purchases      
  Cash operating costs      
       
       Total cash disbursements $ $ $
   

 

 

 

 

 

 

 

3. Prepare a schedule that discloses the firm’s cash needs, if any, for January through March. The schedule should present the following information in the order cited: Beginning cash balance, total receipts (from requirement (1)), total payments (from requirement (2)), the cash excess (deficiency) before financing, borrowing ne-eded to maintain minimum balance, loan principal repaid, loan interest paid, and ending cash balance. (Leave no cells blank – be certain to enter “0” wherever required. Amounts to be deducted should be indicated by a minus sign. Omit the “$” sign in your response.)

 

  January February March
  Beginning cash balance $ $ $
  Total receipts      
       
       Subtotal $ $ $
  Less: Total disbursements      
       
  Cash excess (deficiency) before financing $ $  
  Financing:      
       Borrowing to maintain $20,000 balance      
       Loan principal repaid      
       Loan interest paid      
       
  Ending cash balance $ $ $

 

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5.

value: 16.66 points

 

Badlands, Inc. manufactures a household fan that sells for $40 per unit. All sales are on account, with 40 percent of sales collected in the month of sale and 60 percent collected in the following month. The data that follow were extracted from the company’s accounting records.

 

Badlands maintains a minimum cash balance of $30,000. Total payments in January 20×1 are budgeted at $390,000.
A schedule of cash collections for January and February of 20×1 revealed the following receipts for the period:

 

  Cash Receipts
   
  January February
  From December 31 accounts receivable $ 216,000        
  From January sales   152,000   $ 228,000  
  From February sales         156,800  
 

 

March 20×1 sales are expected to total 10,000 units.
Finished-goods inventories are maintained at 20 percent of the following month’s sales.
The December 31, 20×0, balance sheet revealed the following selected figures: cash, $45,000; accounts receivable, $216,000; and finished goods, $44,700.

 

Required:
1. Determine the number of units that Badlands sold in December 20×0.

 

  December sales units

 

2. Compute the sales revenue for March 20×1. (Omit the “$” sign in your response.)

 

  Sales revenue $

 

3. Compute the total sales revenue to be reported on Badlands’ budgeted income statement for the first quarter of 20×1. (Omit the “$” sign in your response.)

 

  Total sales revenue $

 

4. Determine the accounts receivable balance to be reported on the March 31, 20×1, budgeted balance sheet. (Omit the “$” sign in your response.)

 

  Accounts receivable balance $

 

5. Calculate the number of units in the December 31, 20×0, finished-goods inventory.

 

  Finished-goods inventory units

 

6. Calculate the number of units of finished goods to be manufactured in January 20×1.

 

  Finished goods to be manufactured units

 

7. Calculate the financing required in January, if any, to maintain the firm’s minimum cash balance. (Omit the “$” sign in your response.)

 

 

  Financing required $

 

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6.

value: 16.70 points

 

Scholastic Furniture, Inc. manufactures a variety of desks, chairs, tables, and shelf units that are sold to public school systems throughout the Midwest. The controller of the company’s Desk Division is currently preparing a budget for the second quarter of the year. The following sales forecast has been made by the division’s sales manager.

 

       
  April 10,000  desk-and-chair sets  
  May 12,000  desk-and-chair sets  
  June 15,000  desk-and-chair sets  
   

 

Each desk-and-chair set requires 10 board feet of pine planks and 1.5 hours of direct labor. Each set sells for $50. Pine planks cost $.50 per board foot, and the division ends each month with enough wood to cover 10 percent of the next month’s production requirements. The division incurs a cost of $20 per hour for direct-labor wages and fringe benefits. The division ends each month with enough finished-goods inventory to cover 20 percent of the next month’s sales.

 

Required:
Complete the following budget schedules.

 

1. Sales budget (Omit the “$” sign in your response):

 

  April May June
  Sales (in sets)   10,000      
  Sales price per set × $ 50   × $ × $
           
  Sales revenue $ 500,000   $ $
   

 

 

 

 

 

 

 

 

 

 

 

2. Production budget (in sets): (Input all amounts as positive values.)

 

  April May June
  Sales 10,000      
  Add: Desired ending inventory 2,400     3,000
         
  Total requirements 12,400      
  Less: Projected beginning inventory 2,000      
         
   Planned production 10,400      
   

 

 

 

 

 

 

 

 

 

3. Raw-material purchases (Round your Cost per board foot answers to 2 decimal places. Input all amounts as positive values. Omit the “$” sign in your response):

 

  April May June
  Planned production (sets)   10,400      
  Raw material required per set       (board feet) × 10   × ×
           
  Raw material required for production       (board feet)   104,000      
  Add: Desired ending inventory of raw       material (board feet) (10% of  next       month’s requirement)   12,600     16,000
           
  Total requirements   116,600      
  Less: Projected beginning inventory of       raw material (board feet) (10% of       current  month’s requirement)   10,400      
           
  Planned purchases of raw material       (board feet)   106,200      
  Cost per board foot × $ .50   × $ × $
           
  Planned purchases of raw material       (dollars) $ 53,100   $ $
   

 

 

 

 

 

 

 

 

 

 

 

4. Direct-labor budget (Round your Direct-labor hours per set answers to 1 decimal place. Omit the “$” sign in your response):

 

  April May June
  Planned production (sets)   10,400      
  Direct-labor hours per set × 1.5   × ×
           
  Direct-labor hours required   15,600      
  Cost per hour × $ 20   × $ × $
           
   Planned direct-labor cost $ 312,000   $ $

 

 

 

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