Question

• Beginning cash balance for August is $500,000 • The company budgeted sales at 550,000 units in August, September, and November and at 625,000 units per month in July and October. The selling price is $3.75 per unit. All sales are cash sales. That is, customers must pay ABC, Inc. before the tiles are shipped to the customer • The inventory of finished goods on July 1 was 125,000 units. The finished goods inventory at the end of each month equals 25 percent of sales anticipated for the following month. There is no work in process. • The inventory of raw materials on July 1 was 67,000 pounds. At the end of each month, the raw materials inventory equals no less than 35 percent of production requirements for the following month. • Selling expenses are 10 percent of gross sales. Administrative expenses, which include depreciation of $3,500 per month on office furniture and fixtures, total $165,000 per month. • The manufacturing budget for tiles, based on normal production of 600,000 units per month, follows: Materials (1/5 pound per tile, 120,000 pounds, $4 per pound) 480,000 Labor 600,000 Variable Overhead 300,000 Fixed Overhead (includes depreciation of $150,000) 400,000 Total $1,780,000 Required 1.

Prepare schedules computing inventory budgets by months for: 1. Production in units for July, August, September, and October. 2. Raw materials purchases in pounds for July, August, and September. 2. Prepare a Projected Operating Income Statement for August. 3. Prepare a Cash Budget for August. ABC, Inc. pays cash for all purchases. 4. Prepare a Flexible Budget (projected Income Statement) for 525,000 units of sale for August

Answer 1