Question

Selling price	$75.00
June	8000
July	9000
August	10000
September	12000

Credit Sales Collected in the month of the sale	40%
Following month	60%
Ending finished goods inventory of the following month's unit sales	20%
Ending raw materials inventory of the following month's raw materials production needs	10%
Raw materials purchases are paid for in the month of purchase	30%
Following month	70%

Pounds of raw materials required for each unit of finished goods	5
Raw materials cost per pound	$2.00
Direct labor wage rate per hour	$15.00
Direct labor hours required for each unit of finished goods	2
Variable selling & administrative expense per unit sold	$1.80
fixed selling and administrative expense per month	$60,000.00

1. What are the budgeted sales for July?

2. What are the expected cash collections for July?

3. What is the accounts receivable balance at the end of July?

4. According to the production budget, how many units should be produced in July?

5. If 52,000 pounds of raw materials are needed to meet production in August, how many pounds of raw materials should be purchased in July?

6. What is the estimated cost of raw materials purchases for July?

7. If the cost of raw material purchases in June is $88,880, what are the estimated cash disbursements for raw materials purchases in July?

8. What is the estimated accounts payable balance at the end of July?

9. What is the estimated raw materials inventory balance at the end of July?

10.What is the total estimated direct labor cost for July assuming the direct labor workforce is adjusted to match the hours required to produce the forecasted number of units produced?

11.If the company always uses an estimated predetermined plantwide overhead rate of $10 per direct labor-hour, what is the estimated unit product cost?

12.What is the estimated finished goods inventory balance at the end of July?

13.What is the estimated cost of goods sold and gross margin for July?

14.What is the estimated total selling and administrative expense for July?

15.What is the estimated net operating income for July?

Assumptions to use for the budget:

1. the selling price is $75.00 per unit.

2. the beginning accounts receivable balance is $315,000

3. the beginning accounts payable balance is $49,000.

4. the beginning cash balance is $49,500

Other than the above all other information is as presented in the text.

Required:

Using the information above answer questions 1 through 15

Answer 1

Solution:

Part 1 –

Budgeted Sales for July = July Sales Units 9,000 x Unit Selling Price $75

= $675,000

Part 2 – Expected Cash Collection for July

Schedule of Expected Cash Collections
	July
Total July month sales	$675,000
Cash Collection from Sales on Account:
July Sales (40% of $675,000 is collected in the same month i.e. July)	$270,000
June Sales (60% of June Sales 8,000 Units x $75 is collected in July Month i.e. Next following month)	$360,000
Total Cash Collections in July	$630,000

Part 3 – Accounts Receivable balance at the end of July

Accounts Receivable which will be collected in August is the 60% of July Credit Sales.

Hence, Accounts Receivable balance at the end of July = July Credit Sales $675,000 * 60% = $405,000

Part 4 –

Number of units to be produced in July = 9,200 Units

Working for calculation of July Production Units

Production Budget
	June	July	August	September
Budgeted Units to be sold	8000	9000	10000	12000
Plus: Desired Finished Goods Ending Inventory (20% of following month's unit sales)	1800	2000	2400
Total units needed	9800	11000	12400
Less: Estimated Finished Goods Beginning Inventory (Ending inventory of previous month)	1600	1800	2000
Budgeted units to be produced	8200	9200	10400

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Pls ask separate question for remaining parts