Question

Q2. Maple-Foods Canada Company makes one single product and they have given you the following information to prepare a master budget for 4 months of operations(Assume information if its missing, but carefully. For some questions, assumed values may not be required):                              [20 Marks]

a) The budgeted selling price per unit is $70.
Budgeted unit sales for June, July, August, and September are 8,400, 10,000, 12,000, and 13,000 units, respectively. All sales are on credit.

b) Forty percent of credit sales are collected in the month of the sale and 60% in the following month.

c) The ending finished goods inventory equals 15% of the following month’s unit sales.

d) The ending raw materials inventory equals 10% of the following month’s raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $2.00 per pound.

e) Thirty percent of raw materials purchases are paid for in the month of purchase and 70% in the following month.

f) The direct labor wage rate is $15 per hour. Each unit of finished goods requires two direct labor-hours.

g) The variable selling and administrative expense per unit sold is $1.80. The fixed selling andadministrative expense per month are $60,000.

Based on the information given above, answer the following questions:

1. What are the budgeted sales for July?
            Answer-$700,000

2. What are the expected cash collections for July?
(Assuming Beginning AR = 0)

ANSWER- $280,000

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

ANSWER- $602,800

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

ANSWER – 10,300 Units

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

ANSWER- $102,000

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

ANSWER- $90,520

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

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

9. What is the amount of total scheduled cash disbursement for July?

Answer 1

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Maple-Foods Canada
Ans 1- Sales Budget	June	July	Note
Units sold	8,400.00	10,000.00	A
Price per unit	70.00	70.00	B
Budgeted sales	588,000.00	700,000.00	C=A*B

Ans 2	Amount $
40% of July sales	280,000.00
60% of June sales	352,800.00
Expected cash collections for July	632,800.00
Ans 3	Amount $
60% of July sales	420,000.00
Accounts receivable balance at the end of July	420,000.00

Ans 4	June	July	August	September	Note
Units sold	8,400.00	10,000.00	12,000.00	13,000.00	See A
Add: Desired ending finished goods inventory	1,500.00	1,800.00	1,950.00		D= 15% of A of next month.
Total goods needed	9,900.00	11,800.00	13,950.00
Less: Expected beginning finished goods inventory	1,260.00	1,500.00	1,800.00		E= 15% of A of same month.
Units to be produced	8,640.00	10,300.00	12,150.00		F
Units should be produced in July		10,300.00

Ans 5	July	August	Note
Units to be produced	10,300.00	12,150.00	See F
Raw materials needed per unit	5.00	5.00	G
Raw materials needed for production	51,500.00	60,750.00	H=F*G
Add: Desired ending raw material inventory	6,075.00		I= 10% of H of next month.
Total material needed	57,575.00
Less: Expected beginning raw material inventory	5,150.00		J= 10% of H of same month.
Raw materials to be purchased (Pounds)	52,425.00		K
Unit rate	2.00		L
Raw materials purchases for July ($)	104,850.00		M=K*L

Ans 6	Amount $	Note
70% of July purchases	73,395.00	N=M*70%
Estimated accounts payable balance at the end of July	73,395.00	See N
Ans 7	July
Add: Desired ending raw material inventory	6,075.00	See I
Unit rate	2.00	See L
Estimated raw materials inventory balance at the end of July	12,150.00	O=I*L

Ans 8	Materials	Labor	Total	Note
Ending finished goods inventory	1,800.00	1,800.00		See D
Resource needed per unit	5.00	2.00		See G
Rate per unit	2.00	15.00		See L
Total	18,000.00	54,000.00	72,000.00	P=D*G*L

Estimated finished goods inventory balance at the end of July is $ 72,000.

Workings for Ans 9	Amount $	Note
Units to be produced	10,300.00	See F
Labor hour per unit	2.00	See G
Rate per unit	15.00	See L
Labor cost for July	309,000.00	Q=F*G*L
Units to be sold	10,000.00	See A
Selling and administrative expense per unit	1.80	R
Variable Selling and administrative expense	18,000.00	S=A*R
Fixed Selling and administrative expense	60,000.00	T
Total Selling and administrative expense	78,000.00	U=S+T
Ans 9	July
70% of June purchases	91,125.00
30% of July purchases	5,150.00
Labor costs	309,000.00	See Q
Selling and administrative expense	78,000.00	See U
Total scheduled cash disbursement for July	483,275.00