In: Accounting
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?
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 |