Question

Titan manufactures and sells a product. It projects unit sales for Jan, Feb, March and April of 2500, 2250, 3000, and 3750, respectively. At the end of a month, Titan plans to have finished goods inventory equal to 20% of the following month's sales.

*Make a Monthly production schedule for Jan-March (Titan had 800 units of finished goods on hand at the end of December.)

2.) Cubs sales for Jan, Feb, and March are budgeted to be $5000, $4500, and $6000. 60% of sales are on credit with the 40% in cash. The credit collection history shows 30% of collections are in the month of sale and 70% in the following month. Assuming that the collection of the $1500 balance in Accounts receivable at the end of December occurs in January, prepare a budget of the total cash receipts for each month Jan-March.

Answer 1

Ans.1	TITAN MANUFACTURES
	Production Budget
	For the First Quarter
		Jan.	Feb.	March
	Unit sales	2500	2250	3000
	Add: Ending inventory	450	600	750
	Total needed	2950	2850	3750
	Less: Beginning inventory	-800	-450	-600
	Units produced	2150	2400	3150
	*Calculation of ending inventory:			*Calculation of beginning inventory:
	Months	Amount		Months	Amount
	Jan.	2250*20%	450	Jan.	given	800
	Feb.	3000*20%	600	Feb.	Ending inventory of jan.	450
	March	3750*20%	750	March	Ending inventory of feb.	600
	*Ending inventory of previous month is equal to the beginning inventory of current month.
Ans.2	CUBS
	Cash Collection Budget
	For the First Quarter
		Jan.	Feb.	March
	Cash sales	2000	1800	2400
	Collection of credit sales:
	Balance of december	1500
	30% of credit sales in month of sales	900	810	1080
	70% of credit sales in the following month		2100	1890
	Total Cash collections	4400	4710	5370
	*Calculation of cash sales:
	40% of sales	5000*40%	4500*40%	6000*40%
	Cash sales	2000	1800	2400
	*Calculation of credit sales:	5000*60%	4500*60%	6000*60%
	Credit sales	3000	2700	3600
	WORKING NOTES:
		Jan.	Feb.	March
	Balance of december	1500
	30% of credit sales in month of sales	3000*30%	3000*70%
	70% of credit sales in the following month		2700*30%	2700*70%
				3600*30%
	*Explanations for January	Balance of december 1500.
		30% of january credit sales.
	*Explanations for February	70% of january credit sales
		30% of february credit sales.
	*Explanations for March	70% of february credit sales
		30% of march credit sales.