Question

Complete the following questions :

Cryon Corporation manufactures and sells a seasonal product that has a peak in sales in the third quarter. The following information reflects projections for Year 2 – the coming year – and the first two quarters of Year 3.

Units sell at $10 each. Budgeted sales for the next 6 quarters are outlined below.

	Year 2 Quarter				Year 3 Quarter
	1	2	3	4	1	2
Budgeted unit sales	40,000	65,000	110,000	70,000	65,000	55,000

Sales are collected in the following pattern: 75% are collected in the quarter the sales are made, and the remaining 25% are collected in the following quarter. On January 1, Year 2, the company had accounts receivable of $70,000, all of which will be collected in the first quarter of Year 2. Bad debts are negligible and can be ignored.

The company desires finished goods inventory at the end of each quarter equal to 30% of the budgeted unit sales for the next quarter. On December 31, Year 1, the company had 15,000 completed units on hand.

Five pounds of raw materials inventory is required to complete one unit of product. The company requires ending raw materials inventory at the end of each quarter equal to 10% of the following quarter’s production needs. On December 31, Year 1, the company had 38,000 pounds of raw material on hand.

Raw material cost is $0.80 per pound.

Required:

Prepare the following budgets and schedules for Year 2, showing quarterly figures:

A.Sales budget

B.Schedule of expected cash collections

C.Production budget

D.Direct materials budget that summarizes both pounds and dollars.

Answer 1

Description	Q1	Q2	Q3	Q4
Sale-Quantity	40,000	65,000	110,000	70,000
Sale revenue @ 10 per unit	400,000	650,000	1,100,000	700,000
Credit Sale	400,000	650,000	1,100,000	700,000
Credit sale collection- same quarter-75%	300,000	487,500	825,000	525,000
Credit sale collection- next quarter-25%	70,000	100,000	162,500	275,000
Monthly sale collection	370,000	587,500	987,500	800,000
Finished Stock
Opening Stock-Quanitity	15,000	19,500	33,000	21,000
Closing Stock -30% of following quarter sale	19,500	33,000	21,000	19,500
Required Units= (Sale+Closing stock)	59,500	98,000	131,000	89,500
less openign stock	15,000	19,500	33,000	21,000
Production during quarter	44,500	78,500	98,000	68,500
Raw material required for production @ 5 pound for 1 unit	222,500	392,500	490,000	342,500
Opening Stock-Quanitity	38,000	39,250	49,000	34,250
Closing Stock -10% of following month production	39,250	49,000	34,250	33,750
Raw Material Purchase	223,750	402,250	475,250	342,000