Assignment:
Cash budgeting. On December 1, 2011, the Itami Wholesale Co. is attempting to project cash receipts and disbursements through January 31, 2012. On this latter date, a note will be payable in the amount of $100,000. This amount was borrowed in September to carry the company through the seasonal peak in November and December.
Selected general ledger balances on December 1 are as follows:
|
Cash
|
$ 88,000
|
|
|
Inventory
|
65,200
|
|
|
Accounts payable
|
|
136,000
|
Sales terms call for a 3% discount if payment is made within the first 10 days of the month after sale, with the balance due by the end of the month after sale. Experience has shown that 50% of the billings will be collected within the discount period, 30% by the end of the month after purchase, and 14% in the following month. The remaining 6% will be uncollectible. There are no cash sales.
The average selling price of the company's products is $100 per unit. Actual and projected sales are as follows:
|
October actual
|
$ 280,000
|
|
November actual
|
320,000
|
|
December estimated
|
330,000
|
|
January estimated
|
250,000
|
|
February estimated
|
240,000
|
|
Total estimated for year ending June 30, 2012
|
$2,400,000
|
All purchases are payable within 15 days. Approximately 60% of the purchases in a month are paid that month, and the rest the following month. The average unit purchase cost is $80. Target ending inventories are 500 units plus 10% of the next month's unit sales.
Total budgeted marketing, distribution, and customer-service costs for the year are $600,000. Of this amount, $120,000 are considered fixed (and include depreciation of $30,000). The remainder varies with sales. Both fixed and variable marketing, distribution, and customer-service costs are paid as incurred.
Prepare a cash budget for December 2011 and January 2012. Supply supporting schedules for collections of receivables; payments for merchandise; and marketing, distribution, and customer-service costs.
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Input Prices
|
|
|
Direct materials
|
|
|
Plastic
|
$ 0.20 per ounce
|
|
Bristles
|
$ 0.50 per bunch
|
|
Direct manufacturing labor
|
$12 per direct manufacturing labor-hour
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Input Quantities per Unit of Output
|
Combs
|
Brushes
|
|
Direct materials
|
|
|
|
Plastic
|
5 ounces
|
8 ounces
|
|
Bristles
|
-
|
16 bunches
|
|
Direct manufacturing labor
|
0.05 hours
|
0.2 hours
|
|
Machine-hours (MH)
|
0.025 MH
|
0.1 MH
|
Inventory Information, Direct Materials
|
Plastic
|
Bristles
|
|
Beginning inventory
|
1,600 ounces
|
1,820 bunches
|
|
Target ending inventory
|
1,766 ounces
|
2,272 bunches
|
|
Cost of beginning inventory
|
$304
|
$946
|
Folette Inc. accounts for direct materials using a FIFO cost flow.
|
Sales and Inventory Information, Finished Goods
|
|
Combs
|
Brushes
|
|
Expected sales in units
|
12,000
|
14,000
|
|
Selling price
|
$ 6
|
$ 20
|
|
Target ending inventory in units
|
1,200
|
1,400
|
|
Beginning inventory in units
|
600
|
1,200
|
|
Beginning inventory in dollars
|
$ 1,800
|
$18,120
|
Folette Inc. uses a FIFO cost flow assumption for finished goods inventory.
Combs are manufactured in batches of 200, and brushes are manufactured in batches of 100. It takes 20 minutes to set up for a batch of combs, and one hour to set up for a batch of brushes. Folette Inc. uses activity-based costing and has classified all overhead costs as shown in the following table:
|
Cost Type
|
Budgeted Variable
|
Budgeted Fixed
|
Cost Driver/Allocation Base
|
|
Manufacturing:
|
|
|
|
|
Materials handling
|
$11,490
|
$15,000
|
Number of ounces of plastic used
|
|
Setup
|
6,830
|
11,100
|
Setup-hours
|
|
Processing
|
7,760
|
20,000
|
Machine-hours
|
|
Inspection
|
7,000
|
1,040
|
Number of units produced
|
|
Nonmanufacturing:
|
|
|
|
|
Marketing
|
14,100
|
60,000
|
Sales revenue
|
|
Distribution
|
0
|
780
|
Number of deliveries
|
Delivery trucks transport units sold in delivery sizes of 1,000 combs or 1,000 brushes.
Do the following for the year 2011:
1. Prepare the revenues budget.
2. Use the revenue budget to
a. find the budgeted allocation rate for marketing costs.
b. find the budgeted number of deliveries and allocation rate for distribution costs.
3. Prepare the production budget in units.
4. Use the production budget to
a. find the budgeted number of setups, setup-hours, and the allocation rate for setup costs.
b. find the budgeted total machine-hours and the allocation rate for processing costs.
c. find the budgeted total units produced and the allocation rate for inspection costs.
5. Prepare the direct material usage budget and the direct material purchases budgets in both units and dollars; round to whole dollars.
6. Use the direct material usage budget to find the budgeted allocation rate for materials handling costs.
7. Prepare the direct manufacturing labor cost budget.
8. Prepare the manufacturing overhead cost budget for materials handling, setup, and processing.
9. Prepare the budgeted unit cost of ending finished goods inventory and ending inventories budget.
10. Prepare the cost of goods sold budget.
11. Prepare the nonmanufacturing overhead costs budget for marketing and distribution.
12. Prepare a budgeted income statement (ignore income taxes).