Question 1:
Cash budget
The controller of Santa Fe Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information:
|
|
March
|
April
|
May
|
|
Sales .................................................................................
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$70,000
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$84,000
|
$92,000
|
|
Manufacturing costs................................................
|
32,000
|
39,000
|
42,500
|
|
Selling and administrative expenses.............................
|
12,000
|
18,000
|
21,000
|
|
Capital expenditures ...............................................
|
|
|
20,000
|
The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% are expected to be collected in full in the month following the sale and the remainder the following month. Depreciation, insurance, and property tax expense repre¬sent $3,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in July, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month.
Current assets as of March 1 include cash of $10,000, marketable securities of $40,000, and accounts receivable of $75,600 ($60,000 from February sales and $15,600 from Janu¬ary sales). Sales on account for January and February were $52,000 and $60,000, respec¬tively.
Current liabilities as of March 1 include a $12,000, 15%, 90-day note payable due May 20 and $4,000 of accounts payable incurred in February for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. It is expected that $1,800 in dividends will be received in March. An estimated income tax payment of $16,000 will be made in April. Santa Fe's regular quarterly dividend of $3,000 is expected to be declared in April and paid in May. Management desires to maintain a minimum cash balance of $30,000.
Instructions
1. Prepare a monthly cash budget and supporting schedules for March, April, and May.
2. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?
Question 2:
Sales, Production, Direct Materials Purchases, and Direct Labor Cost Budgets
The budget director of Gourmet Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for July 2014 is summarized as follows:
a. Estimated sales for July by sales territory:
| Maine: |
|
| Backyard Chef |
280 units at $750 per unit |
| Master Chef |
250 units at $1,500 per unit |
| Vermont: |
|
| Backyard Chef |
210 units at $800 per unit |
| Master Chef |
160 units at $1,600 per unit |
| New Hampshire: |
|
| Backyard Chef |
305 units at $850 per unit |
| Master Chef |
275 units at $1,700 per unit |
b. Estimated inventories at July 1:
| Direct materials: |
Finished products: |
|
|
| Grates |
300 units |
Backyard Chef |
36 units |
| Stainless steel |
1,800 lbs. |
Master Chef |
18 units |
| Burner subassemblies |
150 units |
|
|
| Shelves |
300 units |
|
|
c. Desired inventories at July 31:
| Direct materials: |
Finished products: |
|
|
| Grates |
320 units |
Backyard Chef |
31 units |
| Stainless steel |
2,100 lbs. |
Master Chef |
23 units |
| Burner subassemblies |
135 units |
|
|
| Shelves |
285 units |
|
|
d. Direct materials used in production:
| In manufacture of Backyard Chef: |
|
| Grates |
3 units per unit of product |
| Stainless steel |
24 lbs. per unit of product |
| Burner subassemblies |
2 units per unit of product |
| Shelves |
4 units per unit of product |
| In manufacture of Master Chef: |
|
| Grates |
6 units per unit of product |
| Stainless steel |
42 lbs. per unit of product |
| Burner subassemblies |
4 units per unit of product |
| Shelves |
5 units per unit of product |
e. Anticipated purchase price for direct materials:
| Grates |
$16 per unit |
Burner subassemblies |
$125 per unit |
| Stainless steel |
$5 per lb. |
Shelves |
$8 per unit |
f. Direct labor requirements:
| Backyard Chef: |
|
| Stamping Department |
0.60 hr. at $17 per hr. |
| Forming Department |
0.80 hr. at $14 per hr. |
| Assembly Department |
2.0 hrs. at $12 per hr. |
| Master Chef: |
|
| Stamping Department |
0.80 hr. at $17 per hr. |
| Forming Department |
150 hrs. at $14 per hr. |
| Assembly Department |
2.50 hrs. at $12 per hr. |
Instructions
1. Prepare a sales budget for May.
2. Prepare a production budget for May.
3. Prepare a direct materials purchases budget for May.
4. Prepare a direct labor cost budget for May.
Attachment:- Template.rar