Question

In: Accounting

Windy City Corp. manufactures component parts for wind turbines. The controller is building a master budget...

Windy City Corp. manufactures component parts for wind turbines. The controller is building a master budget for the first quarter of the upcoming calendar year. Selected information from the accounting records is presented next:

a. Accounts Receivable as of January 1 are $59,250. Selling price per unit is projected to remain stable at $14 per unit throughout the budget period. Sales for the first five months of the upcoming year are budgeted to be as follows:

January

$99,400

February

$119,900

March

$111,200

April

$107,000

May

$104,700



b. Sales are 25% cash and 75% credit. All credit sales are collected in the month following the sale.

c. Windy City has a policy that states that each month’s ending inventory of finished goods should be 10% of the following month’s sales (in units).

d. Three pounds of direct material is needed per unit at $2.90 per pound. Ending inventory of direct materials should be 20% of next month’s production needs.

e. Monthly manufacturing overhead costs are $5,510 for factory rent, $2,900 for other fixed manufacturing costs, and $1.10 per unit produced for variable manufacturing overhead. All costs are paid in the month in which they are incurred.

Required:

1. What are the budgeted total cash collections for the 1st quarter?

2. What is the budgeted production for the quarter in terms of number of units?

3. What is the budgeted direct materials cost for the quarter?

4. What is the budgeted manufacturing overhead for the quarter?

Solutions

Expert Solution

Solution 1:

Windy City Corp. - Computation of Budgeted cash collection for 1st quarter
Particulars January Feburary March Total
Budgeted Sales $99,400.00 $119,900.00 $111,200.00 $330,500.00
Cash Sales (25%) $24,850.00 $29,975.00 $27,800.00 $82,625.00
Credit Sales (75%) $74,550.00 $89,925.00 $83,400.00 $247,875.00
Collection of cash against credit sale (months following the sales) $59,250.00 $74,550.00 $89,925.00 $223,725.00
Total Budgeted Cash Collection in 1st quarter (Cash Sales + Cash collection against credit sales) $84,100.00 $104,525.00 $117,725.00 $306,350.00

Solution 2:

Windy City Corp
Production Budget
First quarter of the year
Particulars January Feburary March April
Unit Sales 7100 8565 7943 7643
Desired Ending Inventory (10% of following month sale) 857 794 764 748
Total Needed 7957 9359 8707 8391
Less: Beginning Inventory 710 857 794 764
Unit Produced 7247 8502 7913 7627

Solution 3:

Windy City Corp
Production Budgeted Direct Material Cost
First quarter of the year
Particulars January Feburary March Total
Budgeted Production (In units) 7247 8502 7913 23662
Required quanity of material (In Pound) 21741 25506 23739 70986
Desired Ending Inventory (20% of following month production needs) (In Pound) 5101 4748 4576 4576
Total Needed 26842 30254 28315 75562
Less: Beginning Inventory 4348 5101 4748 4348
Required purchase quanity of material 22494 25153 23567 71214
Budgeted Direct material Cost $2.90 $2.90 $2.90 $2.90
Budgeted Direct material Cost $65,233 $72,944 $68,344 $206,521

Solution 4:

Windy City Corp
Budgeted Manufacturing Overhead
First quarter of the year
Particulars January Feburary March Total
Factory Rent $5,510 $5,510 $5,510 $16,530
Other fixed manufacturing cost $2,900 $2,900 $2,900 $8,700
Variable manufacturing overhead $7,972 $9,352 $8,704 $26,028
Budgted Manufacturing overhead $16,382 $17,762 $17,114 $51,258

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