Question

1.Blue Wave Co. predicts the following unit sales for the coming four months: September, 3,900 units; October, 4,900 units; November, 6,900 units; and December, 8,200 units. The company’s policy is to maintain finished goods inventory equal to 60% of the next month’s sales. At the end of August, the company had 2,700 finished units on hand.

Prepare a production budget for each of the months of September, October, and November.

2.asper Company has sales on account and for cash. Specifically, 61% of its sales are on account and 39% are for cash. Credit sales are collected in full in the month following the sale. The company forecasts sales of $530,000 for April, $540,000 for May, and $565,000 for June. The beginning balance of Accounts Receivable is $310,000 on April 1.

Prepare a schedule of budgeted cash receipts for April, May, and June.

3.Zisk Co. purchases raw materials on account. Budgeted purchase amounts are April, $91,000; May, $121,000; and June, $131,000. Payments are made as follows: 70% in the month of purchase and 30% in the month after purchase. The March 31 balance of accounts payable is $33,000.

Prepare a schedule of budgeted cash payments for April, May, and June.

4.

Karim Corp. requires a minimum $9,500 cash balance. Loans taken to meet this requirement cost 2% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on July 1 is $9,900, and the company has no outstanding loans. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) follow.

	July			August			September
Cash receipts	$	25,500		$	33,500		$	41,500
Cash payments		30,250			31,500			33,500

5.

Foyert Corp. requires a minimum $8,000 cash balance. Loans taken to meet this requirement cost 1% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on October 1 is $8,000 and the company has an outstanding loan of $4,000. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) follow.

	October			November			December
Cash receipts	$	24,000		$	18,000		$	22,000
Cash payments		27,000			17,000			14,000

Answer 1