Question

Soprano Co. is in the process of preparing the second quarter budget for 2016, and the following data have been assembled:

The company sells a single product at a selling price of $43 per unit. The estimated sales volume for the next six months is as follows:

March	6,100	units	June	8,000	units
April	7,000	units	July	9,300	units
May	10,400	units	August	6,400	units

All sales are on account. The company's collection experience has been that 43% of a month's sales are collected in the month of sale, 51% are collected in the month following the sale, and 6% are uncollectible. It is expected that the net realizable value of accounts receivable (i.e., accounts receivable less allowance for uncollectible accounts) will be $133,773 on March 31, 2016.

Management's policy is to maintain ending finished goods inventory each month at a level equal to 51% of the next month's budgeted sales. The finished goods inventory on March 31, 2016, is expected to be 3,570 units.

To make one unit of finished product, 4 pounds of materials are required. Management's policy is to have enough materials on hand at the end of each month to equal 45% of the next month's estimated usage. The raw materials inventory is expected to be 15,721 pounds on March 31, 2016.

The cost per pound of raw material is $6.00, and 73% of all purchases are paid for in the month of purchase; the remainder is paid in the following month. The accounts payable balance for raw material purchases is expected to be $48,845 on March 31, 2016.

Required:
a. Prepare a sales budget in units and dollars, by month and in total, for the second quarter (April, May, and June) of 2016.

  

   

b. Prepare a schedule of cash collections from sales, by month and in total, for the second quarter of 2016.

   

  

c. Prepare a production budget in units, by month and in total, for the second quarter of 2016.

d. Prepare a materials purchases budget in pounds, by month and in total, for the second quarter of 2016. (Do not round intermediate calculations.)

   

e. Prepare a schedule of cash payments for materials, by month and in total, for the second quarter of 2016. (Do not round intermediate calculations.)

Answer 1

Answer 1

SOPRANO CO. Sales budget For the year ending 2nd quarter of 2016
	April	May	June	Total
Sales units	7000	10400	8000	25400
Price per unit	$43	$43	$43	$43
Total sales	$301,000	$447,200	$344,000	$1,092,200

Answer 2

SOPRANO CP. Cash collection budget of 2nd quarter 2016
	April		May		June		Total
Sales	$        301,000		$        447,200		$        344,000		$        1,092,200
43% collection in the month	$        129,430	301000*43%	$        192,296	447200*43%	$        147,920	344000*43%	$            469,646
51% collection in the month following sale	$        133,773	(6100*43)*51%	$        153,510	301000*51%	$        228,072	447200*51%	$            515,355
Total	$        263,203		$        345,806		$        375,992		$            985,001

Answer 3

SOPRANO CO. Production budget For the 2nd quarter 2016
	April	May	June	Total	July
Budgeted sales units	7000	10400	8000	25400	9300
Add: ending finish unit	5304	4080	4743	14127	3264
	12304	14480	12743	39527	12564
Less: beginning finish units	3570	5304	4080	12954	4743
Planned Production in Units	8734	9176	8663	26573	7821

Answer 4

SOPRANO CO. Direct material budget For the 2nd quarter 2016
	April	May	June	Total	July
Budgeted Production in Units	8734	9176	8663	26573	7821
DM Required per Unit	4	4	4	4	4
DM Required of Production	34936	36704	34652	106292	31284
Add: Budgeted Ending DM	16517	15593	14078	46188
	51453	52297	48730	152480
Less: Beginning Direct Material	15721	16517	15593	47831
Budgeted DM Purchases	35732	35780	33137	104649
Cost per Pound	$                     6	$                     6	$                     6	$                     6
Budgeted DM Purchases in $	$        214,391	$        214,682	$        198,821	$        627,894