As they get closer to the end of the current year, John and Chan begin to...

As they get closer to the end of the current year, John and Chan begin to think about next year. John is the head of the budget team and he has already gathered some of the information he needs to prepare the next year’s budget. His sales forecast remains 30,000 Men’s Razors and 10,000 Women’s Razors at a selling price of $45.00 and $55.00 for the whole year. John would consider changing the selling price of one or both of the products if he felt it would increase profits or market share.

The Men’s Razor is made out of 1 pound of raw materials at a cost of $5.00 per unit. The Women’s Razor uses 1.5 pounds of raw materials at a cost of $7.00 per unit. Raw Materials are purchased on credit and paid for fifty percent in the first quarter following the purchase and the remainder in the second quarter following the purchase. The last year’s Q3 and Q4 purchases of raw materials were $45,000 and $95,000 respectively. John wants an ending balance of raw materials equal to ten percent of the raw materials needed in the next quarter. The beginning balance of raw materials was 1,200 pounds split equally between the two products.

Unit sales for 2017 are forecasted to be:

	Q1	Q2	Q3	Q4	Q1 Next Year
Men’s Razor-Units	5,000	5,000	5,000	15,000	5,200
Women’s Razor-Units	2,000	2,000	2,000	4,000	2,300

Sales are forty percent cash and sixty percent credit. Credit sales are collected fifty percent in the quarter following the sale and forty-five percent in the second quarter following the sale. Five percent of credit sales are expected to go uncollected. Total sales for Q3 and Q4 of the previous year, which are expected to be partially collected during this year, were $300,000 and $850,000.

12. Prepare a Sales (Revenues) Budget and Cash Collection schedule for the year ended December 31, 2017.

13. Prepare a Raw Materials Purchases budget and Cash Payments schedule for the year ended December 31, 2017.

14. Prepare a Direct Labor budget for the year ended December 31, 2017. Recall from a previous part of the project that the Men’s Razor takes 1.5 DL hours to manufacture and the Women’s Razor takes 2.0 DL hours and that the subcontractors who assembly the razors get paid $10.00 per hour.

Expert Solution

ekkarill92 answered 1 year ago

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