Question

In: Operations Management

Actual sales in December were $ 70 comma 000$70,000. Selling price per unit is projected to...

Actual sales in December were

$ 70 comma 000$70,000.

Selling price per unit is projected to remain stable at

$ 10$10

per unit throughout the budget period. Sales for the first five months of the upcoming year are budgeted to be as? follows:

January. . . . . . . . .

$80,000

February. . . . . . . .

$92,000

March. . . . . . . . . .

$99,000

April. . . . . . . . . . . .

$97,000

May. . . . . . . . . . . .

$85,000

b.

Sales are

3030?%

cash and

7070?%

credit. All credit sales are collected in the month following the sale.

c.

DamonDamon

Manufacturing has a policy that states that each? month's ending inventory of finished goods should be

2525?%

of the following?month's sales? (in units).

d.

Of each? month's direct material? purchases,

2020?%

are paid for in the month of? purchase, while the remainder is paid for in the month following purchase.

TwoTwo

pounds of direct material is needed per unit at

$ 2.00$2.00

per pound. Ending inventory of direct materials should be

10 %10%

of next? month's production needs.

e.

Most of the labor at the manufacturing facility is? indirect, but there is some direct labor incurred. The direct labor hours per unit is

0.010.01.

The direct labor rate per hour is

$ 12$12

per hour. All direct labor is paid for in the month in which the work is performed. The direct labor total cost for each of the upcoming three months is as? follows:

January. . . . . . . . .

$996

February. . . . . . . .

$1,125

March. . . . . . . . . .

$1,182

f.

Monthly manufacturing overhead costs are

$ 5 comma 000$5,000

for factory? rent,

$ 3 comma 000$3,000

for other fixed manufacturing? expenses, and

$ 1.20$1.20

per unit for variable manufacturing overhead. No depreciation is included in these figures. All expenses are paid in the month in which they are incurred.

g.

Computer equipment for the administrative offices will be purchased in the upcoming quarter. In? January,

DamonDamon

Manufacturing will purchase equipment for

$ 5 comma 000$5,000

?(cash), while? February's cash expenditure will be

$ 12 comma 000$12,000

and? March's cash expenditure will be

$ 16 comma 000.$16,000.

h.

Operating expenses are budgeted to be

$ 1.00$1.00

per unit sold plus fixed operating expenses of

$ 1 comma 000$1,000

per month. All operating expenses are paid in the month in which they are incurred. No depreciation is included in these figures.

i.

Depreciation on the building and equipment for the general and administrative offices is budgeted to be

$ 4 comma 500$4,500

for the entire?quarter, which includes depreciation on new acquisitions.??

j.

DamonDamon

Manufacturing has a policy that the ending cash balance in each month must be at least

$ 4 comma 000$4,000.

It has a line of credit with a local bank. The company can borrow in increments of

$ 1 comma 000$1,000

at the beginning of each? month, up to a total outstanding loan balance of

$ 125 comma 000$125,000.

The interest rate on these loans is

11?%

per month simple interest? (not compounded). The company would pay down on the line of credit balance

in

increments of

$ 1 comma 000$1,000

if it has excess funds at the end of the quarter. The company would also pay the accumulated interest at the end of the quarter on the funds borrowed during the quarter.

k.

The? company's income tax rate is projected to be? 30% of operating income less interest expense. The company pays

$ 10 comma 000$10,000

cash at the end of February in estimated taxes.

DamonDamon

Manufacturing is preparing its master budget for the first quarter of the upcoming year. The following data pertain to

DamonDamon

?Manufacturing's operations:

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requirements

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.

Requirement 1. Prepare a schedule of cash collections for? January, February, and? March, and for the quarter in total.

Damon Manufacturing

Cash Collections Budget

For the Quarter Ended March 31

Month

January

February

March

Quarter

Cash sales

Credits sales

Total cash collections

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12

parts remaining

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Data Table

Current Assets as of December 31 (prior year):

Cash. . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,500

Accounts receivable, net. . . . . . . . . . . . . . .

$48,000

Inventory. . . . . . . . . . . . . . . . . . . . . . . .

$15,100

Property, plant, and equipment, net. . . . . . . . . . . .

$120,000

Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . .

$42,400

Capital stock. . . . . . . . . . . . . . . . . . . . . . . . . . .

$123,500

Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . .

$22,500


Actual sales in December were

$ 70 comma 000$70,000.

Selling price per unit is projected to remain stable at

$ 10$10

per unit throughout the budget period. Sales for the first five months of the upcoming year are budgeted to be as? follows:

January. . . . . . . . .

$80,000

February. . . . . . . .

$92,000

March. . . . . . . . . .

$99,000

April. . . . . . . . . . . .

$97,000

May. . . . . . . . . . . .

$85,000

Solutions

Expert Solution

1. Schedule of cash collections:
January February March Total
Budgeted Sales 80000 92000 99000 271000
Cash sales 24000 27600 29700 81300
Collections from credit sales:
      December sales 47000 47000
      January sales 56000 56000
      February sales 64400 64400
Total Cash collections 71000 83600 94100 248700
2. Production Budget
January February March Total
Unit Sales 8000 9200 9900 27100
Add: Desired ending inventory 2300 2475 2425 2425
(25% of the next month's sale)
Desired units 10300 11675 12325 29525
Less: Beginning inventory 2000 2300 2475 2000
Budgeted Production 8300 9375 9850 27525
3. Direct material budget
January February March Total
Budgeted Production 8300 9375 9850 27525
Direct material per unit (pounds) 2 2 2 2
Direct material required for production 16600 18750 19700 55050
Add: Desired Ending inventory 1875 1970 1880 1880
(10% of net month's requirement)
18475 20720 21580 56930
Less: Beginning Inventory 1710 1875 1970 1710
Budgeted direct material purchases (units) 16765 18845 19610 55220
Cost per unit 2 2 2 2
Direct material purchases 33530 37690 39220 110440
4. Schedule of payments
January February March Total
Direct material purchases 33530 37690 39220 110440
Payments for :
December purchases 42400 42400
January purchses 6706 26824 33530
February purchases 7538 30152 37690
March purchases 7844 7844
Payments for direct material purchases 49106 34362 37996 121464
5. Direct labor budget
January February March Total
Budgeted production 8300 9375 9850 27525
Direct labor hour per unit 0.01 0.01 0.01 0.01
Direct labor hours 83 93.75 98.5 275.25
Direct labor rate per hour 12 12 12 12
Direct labor cost 996 1125 1182 3303
6. Manufacturing overhead budget
January February March Total
Budgeted production 8300 9375 9850 27525
Variable overhead rate per unit 1.2 1.2 1.2 1.2
Variable overhead cost 9960 11250 11820 33030
Fixed overhead:
   Factory Rent 5000 5000 5000 15000
   Other fixed overheads 3000 3000 3000 9000
Total fixed overhead 8000 8000 8000 24000
Total manufacturing overhead 17960 19250 19820 57030
7. Operating expenses budget
January February March Total
Budgeted unit sales 8000 9200 9900 27100
Variable operating expeses per unit 1 1 1 1
Variable overhead expenses 8000 9200 9900 27100
Fixed operating expenses 1000 1000 1000 3000
Total operating expenses 9000 10200 10900 30100

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