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Problem-1
The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on account):
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |
| Budgeted unit sales | 11,700 | 12,700 | 14,700 | 13,700 |
The selling price of the company’s product is $16 per unit. Management expects to collect 75% of sales in the quarter in which the sales are made, 20% in the following quarter, and 5% of sales are expected to be uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is $71,600.
The company expects to start the first quarter with 1,755 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 15% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the fourth quarter is 1,955 units.
Required:
- Calculate the estimated sales for each quarter of the fiscal year and for the year as a whole.
- Calculate the expected cash collections for each quarter of the fiscal year and for the year as a whole.
- Calculate the required production in units of finished goods for each quarter of the fiscal year and for the year as a whole.
Problem-2
Silver Company makes a product that is very popular as a Mother’s Day gift. Thus, peak sales occur in May of each year, as shown in the company’s sales budget for the second quarter given below:
| April | May | June | Total | |
| Budgeted sales (all on account) | $470,000 | $670,000 | $230,000 | $1,370,000 |
From past experience, the company has learned that 25% of a month’s sales are collected in the month of sale, another 65% are collected in the month following sale, and the remaining 10% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $400,000, and March sales totaled $430,000.
Required:
- Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.
- What is the accounts receivable balance on June 30th?
Problem-3
Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of April 30 is given below:
| Minden Company | |
| Balance Sheet | |
| 30-Apr | |
| Assets | |
| Cash | $9,400 |
| Accounts receivable | $78,500 |
| Inventory | $44,000 |
| Buildings and equipment, net of depreciation | $221,000 |
| Total assets | $352,900 |
| Liabilities and Stockholders’ Equity | |
| Accounts payable | $72,000 |
| Note payable | $19,700 |
| Common stock | $180,000 |
| Retained earnings | $81,200 |
| Total liabilities and stockholders’ equity | $352,900 |
The company is in the process of preparing a budget for May and has assembled the following data:
- Sales are budgeted at $256,000 for May. Of these sales, $76,800 will be for cash; the remainder will be credit sales. One-half of a month’s credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of the April 30 accounts receivable will be collected in May.
- Purchases of inventory are expected to total $188,000 during May. These purchases will all be on account. Forty percent of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during May.
- The May 31 inventory balance is budgeted at $83,000.
- Selling and administrative expenses for May are budgeted at $91,500, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $4,000 for the month.
- The note payable on the April 30 balance sheet will be paid during May, with $435 in interest. (All of the interest relates to May.)
- New refrigerating equipment costing $7,000 will be purchased for cash during May.
- During May, the company will borrow $23,100 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.
Required:
- Calculate the expected cash collections from customers for May.
- Calculate the expected cash disbursements for merchandise purchases for May.
- Prepare a cash budget for May.
- Prepare a budgeted income statement for May.
- Prepare a budgeted balance sheet as of May 31.
Problem-4
The production department of Zan Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |
| Units to be produced | 21,000 | 24,000 | 23,000 | 22,000 |
In addition, 21,000 grams of raw materials inventory is on hand at the start of the 1st Quarter and the beginning accounts payable for the 1st Quarter is $8,000.
Each unit requires 4 grams of raw material that costs $1.20 per gram. Management desires to end each quarter with an inventory of raw materials equal to 25% of the following quarter’s production needs. The desired ending inventory for the 4th Quarter is 8,000 grams. Management plans to pay for 60% of raw material purchases in the quarter acquired and 40% in the following quarter. Each unit requires 0.20 direct labor-hours and direct laborers are paid $12.50 per hour.
Required:
1.&2. Calculate the estimated grams of raw material that need to be purchased and the cost of raw material purchases for each quarter and for the year as a whole.
- Calculate the expected cash disbursements for purchases of materials for each quarter and for the year as a whole.
- Calculate the estimated direct labor cost for each quarter and for the year as a whole.
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