Question

A Corporation has recently acquired a small manufacturing operation in British Columbia that produces one of its more popular items. This plant will provide these units for resale in retail hardware stores in British Columbia and Alberta. Because the budget prepared by the plant was incomplete, Jordan Leigh, Waterways’ CFO, was sent to B.C. to oversee the plant’s budgeting process for the second quarter of 2017. Jordan asked the various managers to collect the following information for preparing the second-quarter budget. Sales Unit sales for February 2017 99,000 Unit sales for March 2017 111,000 Expected unit sales for April 2017 119,000 Expected unit sales for May 2017 124,000 Expected unit sales for June 2017 129,000 Expected unit sales for July 2017 144,000 Expected unit sales for August 2017 169,000 Average unit selling price $12 Based on the experience from the home plant, Jordan has suggested that the B.C. plant keep 10% of the next month’s unit sales in ending inventory. The plant has contracts with some of the major home hardware giants, so all sales are on account; 50% of the accounts receivable is collected in the month of sale, and the balance is collected in the month after sale. This was the same collection pattern from the previous year. The new plant has no bad debts. Direct Materials The combined quantity of direct materials (consisting of metal, plastic and rubber) used in each unit is 1.10 kg. Metal, plastic, and rubber together amount to $1.50 per kg. Inventory of combined direct material on March 31 consisted of 13,145 kg. This plant likes to keep 10% of the materials needed for the next month in its ending inventory. Fifty percent of the payables is paid in the month of purchase, and 50% is paid in the month after purchase. Accounts Payable on March 31 will total $124,800. Direct Labour Labour requires 15 minutes per unit for completion and is paid at an average rate of $12 per hour. Manufacturing Overhead Indirect materials $0.50 per labour hour Indirect labour $0.50 per labour hour Utilities $0.60 per labour hour Maintenance $0.30 per labour hour Salaries $44,800 per month Depreciation $14,400 per month Property taxes $2,200 per month Insurance $1,050 per month Janitorial $2,400 per month Selling and Administrative Variable selling and administrative cost per unit is $1.40. Advertising $12,000 a month Depreciation $2,600 a month Insurance $1,200 a month Other fixed costs $3,500 a month Salaries $60,000 a month Other Information The Cash balance on March 31 will be $115,000, but Waterways has decided it would like to maintain a cash balance of at least $500,000 beginning on April 30. The company has an open line of credit with its bank. The terms of the agreement require borrowing to be in $1,000 increments at 2% interest. Borrowing is considered to be on the first day of the month and repayments are on the last day of the month. Assume interest is paid at the end of the quarter. In May, $880,000 of new equipment to update operations will be purchased. Three months’ insurance is prepaid on the first day of the first month of the quarter. For the second quarter of 2017, prepare a schedule for expected cash collections from customers. (Round answers to 0 decimal places, e.g. 5,275.) April May June Total Collections from March $ $ $ $ April April May May June Total cash collections A Corporation has recently acquired a small manufacturing operation in British Columbia that produces one of its more popular items. This plant will provide these units for resale in retail hardware stores in British Columbia and Alberta. Because the budget prepared by the plant was incomplete, Jordan Leigh, Waterways’ CFO, was sent to B.C. to oversee the plant’s budgeting process for the second quarter of 2017. Jordan asked the various managers to collect the following information for preparing the second-quarter budget. Sales Unit sales for February 2017 99,000 Unit sales for March 2017 111,000 Expected unit sales for April 2017 119,000 Expected unit sales for May 2017 124,000 Expected unit sales for June 2017 129,000 Expected unit sales for July 2017 144,000 Expected unit sales for August 2017 169,000 Average unit selling price $12 Based on the experience from the home plant, Jordan has suggested that the B.C. plant keep 10% of the next month’s unit sales in ending inventory. The plant has contracts with some of the major home hardware giants, so all sales are on account; 50% of the accounts receivable is collected in the month of sale, and the balance is collected in the month after sale. This was the same collection pattern from the previous year. The new plant has no bad debts. Direct Materials The combined quantity of direct materials (consisting of metal, plastic and rubber) used in each unit is 1.10 kg. Metal, plastic, and rubber together amount to $1.50 per kg. Inventory of combined direct material on March 31 consisted of 13,145 kg. This plant likes to keep 10% of the materials needed for the next month in its ending inventory. Fifty percent of the payables is paid in the month of purchase, and 50% is paid in the month after purchase. Accounts Payable on March 31 will total $124,800. Direct Labour Labour requires 15 minutes per unit for completion and is paid at an average rate of $12 per hour. Manufacturing Overhead Indirect materials $0.50 per labour hour Indirect labour $0.50 per labour hour Utilities $0.60 per labour hour Maintenance $0.30 per labour hour Salaries $44,800 per month Depreciation $14,400 per month Property taxes $2,200 per month Insurance $1,050 per month Janitorial $2,400 per month Selling and Administrative Variable selling and administrative cost per unit is $1.40. Advertising $12,000 a month Depreciation $2,600 a month Insurance $1,200 a month Other fixed costs $3,500 a month Salaries $60,000 a month Other Information The Cash balance on March 31 will be $115,000, but Waterways has decided it would like to maintain a cash balance of at least $500,000 beginning on April 30. The company has an open line of credit with its bank. The terms of the agreement require borrowing to be in $1,000 increments at 2% interest. Borrowing is considered to be on the first day of the month and repayments are on the last day of the month. Assume interest is paid at the end of the quarter. In May, $880,000 of new equipment to update operations will be purchased. Three months’ insurance is prepaid on the first day of the first month of the quarter. For the second quarter of 2017, prepare a schedule for expected cash collections from customers. (Round answers to 0 decimal places, e.g. 5,275.) April May June Total Collections from March $ $ $ $ April April May May June Total cash collections

Answer 1

Corporation in British Columbia
Expected sales (2017)
Feb		99000	Actual
Mar		111000	Actual
Apr		119000	Expected
May		124000	Expected
Jun		129000	Expected
Jul		144000	Expected
Aug		169000	Expected
Av Selling Price		12
Inventory
Level	10%	11900
Receivables collection schedule:
In month of sale		50%
In month after sale		50%
Production process:
Direct Material			1.1	kg	1.5	per kg
Beginning inventory			13145		1.5		19718
Inventory Level:
Requirements of next month			10%
Accounts payable payment schedule:
In the month of purchase			50%
Next month			50%
Accounts Payable on		31-Mar-17					124800
Process:
Direct Labour/unit			15	minutes	0.2	3
Manufacturing Overhead
Indirect material $			0.5			0.125
Indirect Labour			0.5			0.125
Variable selling and administrative						1.4
Second quarter of 2017
Schedule of cash collections
	Apr	May	Jun	Total
Mar	55500			55500
Apr	59500	59500		119000
May		62000	62000	124000
Jun			64500	64500
Total	115000.00	121500.00	126500.00	363000.00
Note:
The question only asks for the schedule of cash
collections. This does not use most of the
information provided in the question.
For example, it does not ask for a cash
budget.