Question

JC Floor Design makes ceramic tiles

December sales were:

500,000 units

Selling price $2 per unit

1,000,000 total sales

The Marketing Department, projects sales to:

increase by 5% in January     

February sales will be 15,000 units less than January

March sales will be 3% higher than February sales

April sales will be the 5,300 units less than march

The price is not expected to increase

JC inventory policy is to maintain an ending inventory equals to 30% of next month sales. Actual inventory is 168,000 units                         

                                                                                   

Clay the material to make the tiles cost $.50 per pound and each tile requires .6 pound. Actual clay inventory is 60,000 pounds and the inventory policy is to maintain an inventory equal to 25% of next month production requirement.

April production is expected to be 525,000 units. The cost of direct materials purchased in December was $150,000                                

                                                                                   

Each tile requires .10 hours and the labor hourly rate is $8.00 per hour       

Variable overhead rate is 20% of labor and fixed overhead is 25,000 monthly

Selling and administrative expenses are expected to be

Administrative salaries	$15,000 per month
Sales salaries	$12,000 per month
Sales commissions	10% of sales

70% of sales are cash sales and the remaining are collected in the next month

Material are paid 60% cash and the remaining the next month

                                               

The company has the following obligations:

100,000 in dividends will be paid in February

A new machine will be acquired in January with a cost of 250,000

A short-term loan with an outstanding balance of $150,000 is used to manage the cash position. Interest on the short-term loan are 1% monthly

Taxes of last quarter were $240,000 and will be paid in March. The company tax rate is 35%. and taxes are paid in the next quarter.

REQUIRED:

Compute Product Cost, Total sales expenses for the quarter, Selling and Administrative expenses for February, Cash Receipts for January, Total cash payments for materials in March, Total cash available for February, ending cash balance for March,  Total Cash Payments for February, the preliminary cash balance for January, and the repayment of loan for February

Answer 1

Sales Budget
	December	January	February	March	April
Units	5,00,000	5,25,000	5,10,000	5,25,300	5,20,000
SP	$                2.00	$                 2.00	$                2.00	$                 2.00	$                2.00
Total Sales	$ 10,00,000.00	$ 10,50,000.00	$ 10,20,000.00	$ 10,50,600.00	$ 10,40,000.00
Inventory & Production
		January	February	March
Closing		1,53,000	1,57,590	1,56,000
Sales		5,25,000	5,10,000	5,25,300
Less: Opening		168000	1,53,000.0	1,57,590.0
Production		5,10,000	5,14,590	5,23,710
Material Purchased
		January	February	March
Closing		77,189	78,557	78,750
Production required		3,06,000.00	3,08,754.00	3,14,226.00
Less: Opening		60,000.00	77,188.50	78,556.50
Material Purchased (pounds)		3,23,189	3,10,122	3,14,420
Material Cost
		January	February	March
Purchased		3,23,189	3,10,122	3,14,420
Rate		0.5	0.5	0.5
Purchase Cost		1,61,594	1,55,061	1,57,210
Overhead Cost
		January	February	March
Production		5,10,000	5,14,590	5,23,710
Variable Overhead (0.10*8*20%* prod)		81,600	82,334	83,794
Fixed Overhead		25,000	25,000	25,000
Overhead Cost		1,06,600	1,07,334	1,08,794
Selling & Administrative Cost
		January	February	March
Selling & Administrative Exp
Administrative Salaries		15,000	15,000	15,000
Sales Salaries		12,000	12,000	12,000
Sales Commissions (10%*Sales)		52,500	51,000	52,530
Total Overhead Expenses		79,500	78,000	79,530
Product Cost
		January	February	March
Direct Material		1,61,594	1,55,061	1,57,210
Direct Labour		4,08,000.0	4,11,672.0	4,18,968.0
Overhead Cost		1,06,600	1,07,334	1,08,794
Selling & Administrative Exp		79,500	78,000	79,530
Product Cost		7,55,694	7,52,067	7,64,501
Cash Receipts
		January	February	March
From Current month Sales		$    7,35,000.00	$   7,14,000.00	$    7,35,420.00
From Last month Sales		$    1,50,000.00	$   1,57,500.00	$    1,53,000.00
Cash Receipts		$   8,85,000.00	$   8,71,500.00	$   8,88,420.00
Cash Payments
		January	February	March
Direct Material:
In current month		$       96,956.55	$      93,036.60	$       94,325.85
in next month		$       60,000.00	$      64,637.70	$       62,024.40
Direct Labour		$    4,08,000.00	$   4,11,672.00	$    4,18,968.00
Overhead Cost		$    1,06,600.00	$   1,07,334.40	$    1,08,793.60
Selling & Administrative Exp		$       79,500.00	$      78,000.00	$       79,530.00
Dividend Paid			$   1,00,000.00
Machine Purchased		$    2,50,000.00
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