Question

Evergreen Corporation is preparing the master budget for the third quarter ending March 31, 2009.  It sells a single product for $20 a unit.  Sales are 25% cash and 75% credit.  The credit sales are collected 30% in the month of the sale and the remaining 70% is collected in the next month.  No credit sales occurred in December 2008. The December 31 inventory of finished goods is 15,000 units and projected sales are 20,000, 55000, 65,000, 75,000, and 85,000 units for the first  months of the year.  The desired ending inventory for each month is 35% of the next month's sales. The inventory of Finished Goods expected to be on hand on April 30 is 10,500 units.  Each Finished Unit requires 2 kilograms of materials at a cost of $1.00 per kilo and it takes 15 minutes to complete one unit.  Evergreen anticipates having 20,000 kilos of materials on hand at December 31, 2008.  The company requires 15% of the next month production materials needs to be available before the start of the month.  Labour is paid at the rate of $9.00 per hour and is paid when incurred.  Production overhead is incurred based on units of production and costs $1.50 per unit. Sixty percent of the purchases are paid in the month of purchase and 40% are paid in the following month.  Purchases in December 2008 were $232,500.

Operating expenses are paid in the month incurred and consist of sales commissions (8% of sales), shipping cost (4% of sales), office salaries of $15,000 a month, advertising of $2,800 per month,  and amortization of $3,200 per month, and other miscellaneous expenses of $4,500 per month.  The cash balance must not be negative. The beginning cash balance is $48,000.  Loans are obtained at the end of the month in which a cash shortage occurs and are made in even multiples of $1,000.  Interest is 1% per month based on the beginning-of-month loan balance and must be paid at the end of each month when the loan is repaid.   Evergreen paid $4,000 in cash dividends in January and purchased land for $150,000 in March paying cash.

				Schedule of Selling and Admin Expenses
			January	February	March	TOTAL
Salaries and Wages
Commissions		0.08
Advertising
Shipping		0.04
Amortization
Other Expenses
Total Operating Expenses

Answer 1

Schedule of Selling and Admin Expenses					TOTAL($)
		January($)	February($)	March($)
Salaries and Wages		15,000	15,000	15,000	45,000
Commissions	0.08	32,000	88,000	1,04,000	2,24,000
Advertising		2,800	2,800	2,800	8,400
Shipping	0.04	16,000	44,000	52,000	1,12,000
Amortization		3,200	3,200	3,200	9,600
Other Expenses		4,500	4,500	4,500	13,500
Total Operating Expenses		73,500	1,57,500	1,81,500	4,12,500

Working Note	January	February	March	Total
Sales	4,00,000	11,00,000	13,00,000	28,00,000
Working	(20,000Unit *$20 per Unit)	(55,000Unit *$20 per Unit)	65,000Unit *$20 per Unit)