Question
In: Accounting
Milo-Freeze Company manufactures and sells a product that has seasonal variations in demand, with peak sales...
Milo-Freeze Company manufactures and sells a product that has seasonal variations in demand, with peak sales coming in the third quarter. The following information concerns operations for Year 2- the coming year- and for the first two quarters of Year 3: a) The company’s single product sells for $10 per unit. Budgeted sales in units for the next six quarters are as follows: Year 2 Quarter Year 3 Quarter 1 2 3 4 1 2 Budgeted unit sales 40,000 60,000 100,000 50,000 70,000 80,000 b) Sales are collected in the following pattern: 75% in the quarter the sales are made, and the remaining 25% in the following quarter. On January 1, Year 2, the company’s balance sheet showed $65,000 in accounts receivable, all of which will be collected by the end of first quarter. Bad debts are negligible and can be ignored. c) The company desires an ending inventory of finished units on hand at the end of each quarter equal to 30% of the budgeted sales for the next quarter. On December 31, Year 1, the company had 12,000 units on hand. d) Six pounds of raw materials are required to complete one unit of product. The company requires an ending inventory of raw materials on hand at the end of each quarter equal to 10% of the production needs of the following quarter. On December 31, Year 1, the company had 23,000 pounds of raw materials on hand. e) The raw material costs $0.80 per pound. Purchases of raw material are paid for in the following pattern: 60% paid in the quarter the purchases are made, and the remaining 40% paid in the following quarter. On January 1, Year 2, the company’s balance sheet showed $81,500 in accounts payable for raw material purchases, all of which will be paid for in the first quarter of the year.
Prepare the following budgets and schedules for the year, showing both quarterly and total figures:
- A sales budget.
- A cash collections budget.
- A production budget.
- A direct materials budget.
- Cash payments for purchases of materials schedule.
Solutions
Expert Solution
| Sales budget for Year 2: | ||||||||
| Quarter 1 Yr2 | Quarter 2 Yr2 | Quarter 3 Yr2 | Quarter 4 Yr2 | Year 2 | Quarter 1 Yr3 | Quarter 2 Yr3 | ||
| Budgeted sale unit | 40000 | 60000 | 100000 | 50000 | 70000 | 80000 | ||
| Selling price | $10 | $10 | $10 | $10 | $10 | $10 | ||
| Budgeted Sales Value | $400,000 | $600,000 | $1,000,000 | $500,000 | $2,500,000 | $700,000 | $800,000 | |
| Cash Collections budget for Year 2: | ||||||||
| Quarter 1 Yr2 | Quarter 2 Yr2 | Quarter 3 Yr2 | Quarter 4 Yr2 | Year 2 | Quarter 1 Yr3 | Quarter 2 Yr3 | ||
| Budgeted Sales Value | 400000 | 600000 | 1000000 | 500000 | 700000 | 800000 | ||
| Collection of: | ||||||||
| Qter 4, Yr 1 | 65000 | |||||||
| Quarter 1 Yr2 | 300000 | 100000 | ||||||
| Quarter 2 Yr2 | 450000 | 150000 | ||||||
| Quarter 3 Yr2 | 750000 | 250000 | ||||||
| Quarter 4 Yr2 | 375000 | 125000 | ||||||
| Quarter 1 Yr3 | 525000 | 175000 | ||||||
| Quarter 2 Yr3 | 600000 | |||||||
| Collection total | 365000 | 550000 | 900000 | 625000 | 2440000 | 650000 | 775000 | |
| Production budget for Year 2: | ||||||||
| Quarter 1 Yr2 | Quarter 2 Yr2 | Quarter 3 Yr2 | Quarter 4 Yr2 | Year 2 | Quarter 1 Yr3 | Quarter 2 Yr3 | ||
| Budgeted sale unit | 40000 | 60000 | 100000 | 50000 | 250000 | 70000 | 80000 | |
| Add:Desired Closing Stock | 18000 | 30000 | 15000 | 21000 | 21000 | 24000 | #REF! | |
| Total needed | 58000 | 90000 | 115000 | 71000 | 271000 | 94000 | #REF! | |
| Less:Opening Stock | 12000 | 18000 | 30000 | 15000 | 12000 | 21000 | 24000 | |
| desired production | 46000 | 72000 | 85000 | 56000 | 259000 | 73000 | #REF! | |
| Direct Materials budget for Year 2: | ||||||||
| Quarter 1 Yr2 | Quarter 2 Yr2 | Quarter 3 Yr2 | Quarter 4 Yr2 | Year 2 | Quarter 1 Yr3 | Quarter 2 Yr3 | ||
| desired production | 46000 | 72000 | 85000 | 56000 | 73000 | 56000 | ||
| RM needed per unit | 6 | 6 | 6 | 6 | 6 | 6 | ||
| Total RM needed for Production | 276000 | 432000 | 510000 | 336000 | 1554000 | 438000 | 336000 | |
| Add:Desired Closing RM Stock | 43200 | 51000 | 33600 | 43800 | 43800 | 33600 | #REF! | |
| Total Rm needed | 319200 | 483000 | 543600 | 379800 | 1597800 | 471600 | #REF! | |
| Less:RM opening Balance | 23000 | 43200 | 51000 | 33600 | 23000 | 43800 | 33600 | |
| Desired RM purchased (pounds) | 296200 | 439800 | 492600 | 346200 | 1574800 | 427800 | #REF! | |
| Cost per pound | $0.80 | $0.80 | $0.80 | $0.80 | $0.80 | $0.80 | $0.80 | |
| Budgeted RM purchase value | $236,960 | $351,840 | $394,080 | $276,960 | $1,259,840 | $342,240 | #REF! | |
| Cash payments for purchases of materials schedule for Year 2 : | ||||||||
| Quarter 1 Yr2 | Quarter 2 Yr2 | Quarter 3 Yr2 | Quarter 4 Yr2 | Year 2 | Quarter 1 Yr3 | Quarter 2 Yr3 | ||
| Budgeted RM purchase value | 236960 | 351840 | 394080 | 276960 | 342240 | 241920 | ||
| Payment for : | ||||||||
| Qter 4 Year 1 | 81500 | |||||||
| Quarter 1 Yr2 | 142176 | 94784 | ||||||
| Quarter 2 Yr2 | 211104 | 140736 | ||||||
| Quarter 3 Yr2 | 236448 | 157632 | ||||||
| Quarter 4 Yr2 | 166176 | 110784 | ||||||
| Quarter 1 Yr3 | 205344 | 136896 | ||||||
| Quarter 2 Yr3 | 145152 | |||||||
| Purchase Payments total | 223676 | 305888 | 377184 | 323808 | 1230556 | 316128 | 282048 | |
ekkarill92 answered 6 months agoRelated Solutions
Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand....
Kingsport Containers Company makes a single product that is
subject to wide seasonal variations in demand. The company uses a
job-order costing system and computes plantwide predetermined
overhead rates on a quarterly basis using the number of units to be
produced as the allocation base. Its estimated costs, by quarter,
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Quarter
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Second
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Fourth
Direct materials
$
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$
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$
60,000
$
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Direct labor
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Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand....
Kingsport Containers
Company makes a single product that is subject to wide seasonal
variations in demand. The company uses a job-order costing system
and computes plantwide predetermined overhead rates on a quarterly
basis using the number of units to be produced as the allocation
base. Its estimated costs, by quarter, for the coming year are
given below:
Quarter
First
Second
Third
Fourth
Direct materials
$
320,000
$
160,000
$
80,000
$
240,000
Direct
labor
120,000
60,000
30,000
90,000...
Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand....
Kingsport Containers Company makes a single product that is
subject to wide seasonal variations in demand. The company uses a
job-order costing system and computes plantwide predetermined
overhead rates on a quarterly basis using the number of units to be
produced as the allocation base. Its estimated costs, by quarter,
for the coming year are given below:
Quarter
First
Second
Third
Fourth
Direct
materials
$
160,000
$
80,000
$
40,000
$
120,000
Direct labor
80,000
40,000
20,000
60,000...
Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand....
Kingsport Containers Company makes a single product that is
subject to wide seasonal variations in demand. The company uses a
job-order costing system and computes plantwide predetermined
overhead rates on a quarterly basis using the number of units to be
produced as the allocation base. Its estimated costs, by quarter,
for the coming year are given below:
Quarter
First
Second
Third
Fourth
Direct materials
$
240,000
$
120,000
$
60,000
$
180,000
Direct labor
80,000
40,000
20,000
60,000
Manufacturing...
Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand....
Kingsport Containers Company makes a single product that is
subject to wide seasonal variations in demand. The company uses a
job-order costing system and computes plantwide predetermined
overhead rates on a quarterly basis using the number of units to be
produced as the allocation base. Its estimated costs, by quarter,
for the coming year are given below: Quarter First Second Third
Fourth Direct materials $ 240,000 $ 120,000 $ 60,000 $ 180,000
Direct labor 120,000 60,000 30,000 90,000 Manufacturing overhead...
Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand....
Kingsport Containers Company makes a single product that is
subject to wide seasonal variations in demand. The company uses a
job-order costing system and computes plantwide predetermined
overhead rates on a quarterly basis using the number of units to be
produced as the allocation base. Its estimated costs, by quarter,
for the coming year are given below:
Quarter
First
Second
Third
Fourth
Direct materials
$
280,000
$
140,000
$
70,000
$
210,000
Direct labor
120,000
60,000
30,000
90,000...
Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand....
Kingsport Containers Company makes a single product that is
subject to wide seasonal variations in demand. The company uses a
job-order costing system and computes plantwide predetermined
overhead rates on a quarterly basis using the number of units to be
produced as the allocation base. Its estimated costs, by quarter,
for the coming year are given below:
Quarter
First
Second
Third
Fourth
Direct materials
$
240,000
$
120,000
$
60,000
$
180,000
Direct labor
80,000
40,000
20,000
60,000...
Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand....
Kingsport Containers Company makes a single product that is
subject to wide seasonal variations in demand. The company uses a
job-order costing system and computes plantwide predetermined
overhead rates on a quarterly basis using the number of units to be
produced as the allocation base. Its estimated costs, by quarter,
for the coming year are given below:
Quarter
First
Second
Third
Fourth
Direct
materials
$
320,000
$
160,000
$
80,000
$
240,000
Direct labor
80,000
40,000
20,000
60,000...
Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand....
Kingsport Containers Company makes a single product that is
subject to wide seasonal variations in demand. The company uses a
job-order costing system and computes plantwide predetermined
overhead rates on a quarterly basis using the number of units to be
produced as the allocation base. Its estimated costs, by quarter,
for the coming year are given below:
Quarter
First
Second
Third
Fourth
Direct
materials
$
320,000
$
160,000
$
80,000
$
240,000
Direct labor
160,000
80,000
40,000
120,000
Manufacturing...
Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand....
Kingsport Containers Company makes a single product that is
subject to wide seasonal variations in demand. The company uses a
job-order costing system and computes plantwide predetermined
overhead rates on a quarterly basis using the number of units to be
produced as the allocation base. Its estimated costs, by quarter,
for the coming year are given below:
Quarter
First
Second
Third
Fourth
Direct
materials
$
200,000
$
100,000
$
50,000
$
150,000
Direct labor
80,000
40,000
20,000
60,000...
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