Question

Samah Nylon Company is a manufacturer and seller of Tennis Rackets.  Information on budgeted sales in units is given below. Use this information to answer all parts of question one.

                     Month                                        Units

February 2018                                    30,000

March 2018                                         34,000

April 2018                                           52,000

May 2018                                            57,000

June 2018                                            65,000

July 2018                                            40,000

Aug 2018                                            60,000                                    

Required:                    

The selling price per unit is AED 40.

All sales are on account. Based on past experience, sales are collected in the following pattern:

Month of sale	65%
Month following sale	35%

The company maintains finished goods inventories equal to 28% of the following month's sales. The ending inventory on 31^stMarch was 10,500 units.

Each Racket requires 5 pounds of raw materials.

The company requires that the ending inventory of raw materials be equal to 30% of the following month's production needs. The beginning inventory of materials on April 1^stwas 64,875 units

The raw materials costs $1.40 per pound.

60% of a month's purchases of raw materials is paid for in the month of purchase; the remainder is paid for in the following month.  The accounts payable balance at the end of March was AED 44,604 to be paid in full in April.

Required:

Prepare a sales budget, by month and in total, for the second quarter. (Show your budget in both units and dollars.)

Prepare a schedule of expected cash collections, by month and in total, for the second quarter.

Prepare a production budget for each of the months of April-July.

Prepare a direct materials budget, by month and in total, for the second quarter.

Prepare a schedule of expected cash disbursements, by month and in total, for the second quarter.

Answer 1

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1. Sales Budget and Schedule for Collection
		Apr	May	Jun	Total	Jul	Aug
Budgeted Unit Sales		52,000	57,000	65,000	174,000	40,000	60,000
Selling Price		$                   40	$                  40	$                              40	$               40	$             40	$             40
Budgeted Sale		$      2,080,000	$     2,280,000	$                  2,600,000	$ 6,960,000	$1,600,000	$2,400,000
		Apr	May	Jun	Total	Accounts Receivable
					$                -
					$                -
Credit Sale:
Jan Sale		$      1,352,000	$        728,000		$ 2,080,000
Feb Sale			$     1,482,000	$                     798,000	$ 2,280,000
Mar Sale				$                  1,690,000	$ 1,690,000	$   910,000
Total Collection		$      1,352,000	$     2,210,000	$                  2,488,000	$ 6,050,000	$   910,000
2. Production Budget
		Apr	May	Jun	Total	Jul	Aug
Budgeted Unit Sales		52,000	57,000	65,000	174,000	40,000	$     60,000
Add: Desired ending Inventory	28%	15,960	18,200	11,200	11,200	16,800
Total Need		67,960	75,200	76,200	185,200	56,800
Less: Beginning Inventory		-10,500	-15,960	-18,200	-10,500	-11,200
Budgeted Production		57,460	59,240	58,000	174,700	45,600
3. Raw Material Purchase Budget
		Apr	May	Jun	Total	Jul
Budgeted Production		57,460	59,240	58,000	174,700	45,600
RM needed per unit		5	5	5	5	5
Raw Material needed for Production		287,300	296,200	290,000	873,500	228,000
Add: Desired ending Inventory	30%	88,860	87,000	68,400	68,400
Total needs		376,160	383,200	358,400	941,900
Less: beginning Inventory		-64,875	-88,860	-87,000	-64,875
Budgeted Purchase		311,285	294,340	271,400	877,025
per Unit Cost		$               1.40	$              1.40	$                           1.40	$            1.40
Total budgeted Purchases		$         435,799	$        412,076	$                     379,960	$ 1,227,835
4. Schedule for Payment of Raw Material:	60%	40%
		Apr	May	Jun	Total	Accounts Payable,
Accounts Payable, Beginning		$           44,604			$        44,604
Apr Pur		$         261,479	$        174,320		$     435,799
May Pur			$        247,246	$                     164,830	$     412,076
June Pur				$                     227,976	$     227,976	$   151,984
Total Payment for Purchases		$         306,083	$        421,565	$                     392,806	$ 1,120,455	$   151,984