Question

Part #4: E Company has budgeted sales revenues of $160,000 for May, $210,000 for June, $235,000 for July, and $172,000 for August. To prepare a cash budget, the company must determine the budgeted cash collections from sales. Generally the trend has been 55 percent collected in the month of sale, 25 percent collected in the month following sale, 18 percent collected in the second month following sale, and 2 percent uncollectible. Also, E Company grants a 2 percent cash discount to customers who pay in the month of sale (so they only collect 98 percent of the total amount for those sales instead of the usual 100 percent). Prepare a schedule of cash collections for the month of July only. Part #5: At the beginning of September, L Company had 1,600 finished goods units. Budgeted sales for October, November, December, and January are 8,000 units and 10,200 units and 13,600 units and 7,400 units respectively. L Company wants to have sufficient units on hand at the end of each month to meet 20 percent of the following month’s budgeted sales. Prepare a Production Budget with columns for October, November, December and Total 4th Quarter.Part #6: H Company’s Direct Labor Budget indicates the number of direct labor hours to be used in July, August, and September are 20,000 and 19,100 and 22,900 respectively. Variable overhead is expected to be $0.80 per direct labor hour. Fixed overhead per month is expected to be $6,200. Prepare an Overhead Budget with columns for July, August, September, and Total 3rd Quarter.   

Part #5: At the beginning of September, L Company had 1,600 finished goods units. Budgeted sales for October, November, December, and January are 8,000 units and 10,200 units and 13,600 units and 7,400 units respectively. L Company wants to have sufficient units on hand at the end of each month to meet 20 percent of the following month’s budgeted sales. Prepare a Production Budget with columns for October, November, December and Total 4^th Quarter.

Part #6: H Company’s Direct Labor Budget indicates the number of direct labor hours to be used in July, August, and September are 20,000 and 19,100 and 22,900 respectively. Variable overhead is expected to be $0.80 per direct labor hour. Fixed overhead per month is expected to be $6,200. Prepare an Overhead Budget with columns for July, August, September, and Total 3^rd Quarter.

Answer 1

Part # 4

Budgeted cash collections for the month of July
Particulars	May	June	July	August
	$	$	$	$
Sales	160000	210000	235000	172000
Collection in the month of sale @ 55% of sales	88000	115500	129250	94600
(-) Cash Discount @ 2 % of collection in the month of sale	1760	2310	2585	1892
Net collection after cash discount	86240	113190	126665	92708
Collection in the month following sale @ 25%		40000	52500	58750
Collection in the second month following sale @ 18%			28800	37800
Budgeted cash collection for the month of July			207965

Part # 5

Production Budget
Particulars	October	November	December	Total 4th Quarter
	Units	Units	Units
i)   Budgeted Sales units	8000	10200	13600	31800
ii) Opening	1600	2040	2720	6360
iii) Production units to meet the current sales units (i-ii)	6400	8160	10880	25440
iv) Following month’s budgeted sales @ 20 %	2040	2720	1480	6240
Budgeted production (iii+iv)	8440	10880	12360	31680

Part # 6

Overhead Budget
Particulars	July	August	September	Total 3rd Quarter
Budgeted direct labor	20000	19100	22900	62000
i)Variable overhead	$ 16000	$ 15280	$ 18320	$ 49600
	( $ 0.80 x 20000)	( $ 0.80 x 19100)	( $ 0.80 x 22900)	( $ 0.80 x 62000)
ii)Fixed overhead	$ 6200	$ 6200	$ 6200	$ 18600
Total overhead (i+ii)	$ 22200	$ 21480	$ 24520	$ 68200