Question

In: Accounting

Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will...

Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It began negotiating for a one-month bank loan of $500,000 starting May 1. The bank would charge interest at the rate of 1.00 percent per month and require the company to repay interest and principal on May 31. In considering the loan, the bank requested a projected income statement and cash budget for May.

The following information is available:

  • The company budgeted sales at 600,000 units per month in April, June, and July and at 500,000 units in May. The selling price is $4 per unit.
  • The inventory of finished goods on April 1 was 120,000 units. The finished goods inventory at the end of each month equals 20 percent of sales anticipated for the following month. There is no work in process.
  • The inventory of raw materials on April 1 was 58,000 pounds. At the end of each month, the raw materials inventory equals no less than 40 percent of production requirements for the following month. The company purchases materials in quantities of 67,500 pounds per shipment.
  • Selling expenses are 10 percent of gross sales. Administrative expenses, which include depreciation of $2,000 per month on office furniture and fixtures, total $165,000 per month.
  • The manufacturing budget for tiles, based on normal production of 500,000 units per month, follows:

Materials (0.25 pound per tile, 125,000 pounds, $4 per pound) $ 500,000
Labor 380,000
Variable overhead 200,000
Fixed overhead (includes depreciation of $190,000) 410,000
Total $ 1,490,000

Required:

a-1. Prepare schedules computing inventory budgets by months for production in units for April, May, and June.
a-2. Prepare schedules computing inventory budgets by months for raw materials purchases in pounds for April and May.

b. Prepare a projected income statement for May. Cost of goods sold should equal the variable manufacturing cost per unit times the number of units sold plus the total fixed manufacturing cost budgeted for the period. When calculating net sales assume cash discounts of 1 percent and bad debt expense of 0.50 percent.

Solutions

Expert Solution


Related Solutions

Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will...
Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It began negotiating for a one-month bank loan of $500,000 starting May 1. The bank would charge interest at the rate of 1.25 percent per month and require the company to repay interest and principal on May 31. In considering the loan, the bank requested a projected income statement and cash budget for May. The following information...
Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will...
Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It began negotiating for a one-month bank loan of $500,000 starting May 1. The bank would charge interest at the rate of 1.00 percent per month and require the company to repay interest and principal on May 31. In considering the loan, the bank requested a projected income statement and cash budget for May. The following information...
Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will...
Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It began negotiating for a one-month bank loan of $500,000 starting May 1. The bank would charge interest at the rate of 1.00 percent per month and require the company to repay interest and principal on May 31. In considering the loan, the bank requested a projected income statement and cash budget for May. The following information...
Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will...
Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It began negotiating for a one-month bank loan of $500,000 starting May 1. The bank would charge interest at the rate of 0.75 percent per month and require the company to repay interest and principal on May 31. In considering the loan, the bank requested a projected income statement and cash budget for May. The following information...
Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will...
Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It began negotiating for a one-month bank loan of $500,000 starting May 1. The bank would charge interest at the rate of 1.00 percent per month and require the company to repay interest and principal on May 31. In considering the loan, the bank requested a projected income statement and cash budget for May. The following information...
Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will...
Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It began negotiating for a one-month bank loan of $500,000 starting May 1. The bank would charge interest at the rate of 1.00 percent per month and require the company to repay interest and principal on May 31. In considering the loan, the bank requested a projected income statement and cash budget for May. The following information...
Lane Products manufactures a popular kitchen utensil. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations.
Lane Products manufactures a popular kitchen utensil. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations.
The controller of Chittenango Chain Company believes that the identification of the variable and fixed components...
The controller of Chittenango Chain Company believes that the identification of the variable and fixed components of the firm’s costs will enable the firm to make better planning and control decisions. Among the costs the controller is concerned about is the behavior of indirect-materials cost. She believes there is a correlation between machine hours and the amount of indirect materials used. A member of the controller’s staff has suggested that least-squares regression be used to determine the cost behavior of...
The controller of Chittenango Chain Company believes that the identification of the variable and fixed components...
The controller of Chittenango Chain Company believes that the identification of the variable and fixed components of the firm’s costs will enable the firm to make better planning and control decisions. Among the costs the controller is concerned about is the behavior of indirect-materials cost. She believes there is a correlation between machine hours and the amount of indirect materials used. A member of the controller’s staff has suggested that least-squares regression be used to determine the cost behavior of...
a company that manufactures a kitchen products wants to add a manual handheld garlic press to...
a company that manufactures a kitchen products wants to add a manual handheld garlic press to its product line. The company wants to distribute the product theough wal-mart,target or a chain of stores in your region a) Determine the order winning and order qualifying criteria for the product. b) select the store chains that would sell the product. c) Determine the toral number of units sold per week by the store chain. d) Calculate the number of products that muat...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT