Silver Company makes a product that is very popular as a Mother's Day gift

1. 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) $380,000 $580,000 $200,000 $1,160,000
   
   
   
   
   From past experience, the company has learned that 20% of a month's sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 20% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $310,000, and March sales totaled $340,000.
   
   Required:
   1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

Schedule of Expected Cash Collections
February: (April $62,000)(May--)(June--)(total $62,000)
March: (204,000)(68,000)(--)(272,000)
April:(76,000)(228,000)(76,000)(380,000)
May:(--)(116,000)(348,000)(464,000)
June:(--)(--)(40,000)(40,000)
Total Cash Collections:(342,000)(412,000)(464,000)(1,218,000)


Explaination:
February sales: $310,000 × 20% $ 62,000 $ 62,000
March sales: $340,000 × 60%, 20% 204,000 $ 68,000 272,000
April sales: $380,000 × 20%, 60%, 20% 76,000 228,000 $ 76,000 380,000
May sales: $580,000 × 20%, 60% 116,000 348,000 464,000
June sales: $200,000 × 20% 40,000 40,000
Total cash collections $ 342,000 $ 412,000 $ 464,000 $ 1,218,000
Notice that even though sales peak in May, cash collections peak in June. This occurs because the bulk of the company's customers pay in the month following sale. The lag in collections that this creates is even more pronounced in some companies. Indeed, it is not unusual for a company to have the least cash available in the months when sales are greatest.

2. 2. Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date.
   (Continuation of Silver Company Question)

May sales $116,000
June sales 160,000
Total accounts receivable at June 30 $276,000


Explanation:
Accounts receivable at June 30:

From May sales: $580,000 × 20% = $116,000
From June sales: $200,000 × (60% + 20%) = $160,000

3. Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows:
   
   Sales in Units
   April 82,000
   May 90,000
   June 122,000
   July 96,000
   
   
   
   The company is now in the process of preparing a production budget for the second quarter. Past experience has shown that end-of-month inventory levels must equal 15% of the following month's sales. The inventory at the end of March was 12,300 units.
   
   Required:
   Prepare a production budget for the second quarter; in your budget, show the number of units to be produced each month and for the quarter in total.

Budgeted unit sales 82,000 90,000 122,000 294,000
Add: Desired units of ending finished goods inventory 13,500 18,300 14,400 14,400
Total needs 95,500 108,300 136,400 308,400
Less: Units of beginning finished goods inventory 12,300 13,500 18,300 12,300
Required production in units 83,200 94,800 118,100 296,100

Explanation:
Desired units of ending finished goods inventory is 15% of the following month's sales in units.

4. Two grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $1.80 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3:
   
   Year 2
   Year 3
   First Second Third Fourth First
   Budgeted production, in bottles 80,000 110,000 170,000 120,000 90,000
   
   
   
   Musk oil has become so popular as a perfume ingredient that it has become necessary to carry large inventories as a precaution against stock-outs. For this reason, the inventory of musk oil at the end of a quarter must be equal to 20% of the following quarter's production needs. Some 32,000 grams of musk oil will be on hand to start the first quarter of Year 2.
   
   Required:
   Prepare a direct materials budget for musk oil, by quarter and in total, for Year 2.

Required production in units of finished goods 80,000 110,000 170,000 120,000 480,000
Units of raw materials needed per unit of finished goods 2 2 2 2 2
Units of raw materials needed to meet production 160,000 220,000 340,000 240,000 960,000
Add: Desired units of ending raw materials inventory 44,000 68,000 48,000 36,000 36,000
Total units of raw materials needed 204,000 288,000 388,000 276,000 996,000
Less: Units of beginning raw materials inventory 32,000 44,000 68,000 48,000 32,000
Units of raw materials to be purchased 172,000 244,000 320,000 228,000 964,000
Unit cost of raw materials $1.80 $1.80 $1.80 $1.80 $1.80
Cost of raw materials to purchased $309,600 $439,200 $576,000 $410,400 $1,735,200

5. The production manager of Rordan 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 11,400 8,500 8,700 11,000
   
   
   Each unit requires 0.45 direct labor-hours, and direct laborers are paid $20 per hour.
   
   
   Required:
   1. Complete the company's direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.

Required production in units 11,400 8,500 8,700 11,000 39,600
Direct labor time per unit (hours) 0.45 0.45 0.45 0.45 0.45
Total direct labor-hours needed 5,130 3,825 3,915 4,950 17,820
Direct labor cost per hour $20 $20 $20 $20 $20
Total direct labor cost $102,600 $76,500 $78,300 $99,000 $356,400

6. 2. Complete the company's direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is not adjusted each quarter. Instead, assume that the company's direct labor workforce consists of permanent employees who are guaranteed to be paid for at least 4,600 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 4,600 hours anyway. Any hours worked in excess of 4,600 hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct labor. (Input all amounts as positive values.)
   (Refer to question Rordan Corporation)

Total direct labor-hours needed 5,130 3,825 3,915 4,950
Regular hours paid 4,600 4,600 4,600 4,600
Overtime hours paid 530 0 0 350
Wages for regular hours $92,000 $92,000 $92,000 $92,000 368,000
Overtime wages 15,900 10,500 26,400
Total direct labor cost $107,900 $92,000 $92,000 $102,500 $394,400

Explanation:
2.
Wages for regular hours:
1st Quarter = 4,600 × $20 per hour = $92,000
2nd Quarter = 4,600 × $20 per hour = $92,000
3rd Quarter = 4,600 × $20 per hour = $92,000
4th Quarter = 4,600 × $20 per hour = $92,000

Overtime wages:
1st Quarter = 530 × $20 per hour × 1.5 hours = $15,900
2nd Quarter = 0 × $20 per hour × 1.5 hours = $0
3rd Quarter = 0 × $20 per hour × 1.5 hours = $0
4th Quarter = 350 × $20 per hour × 1.5 hours = $10,500

7. The direct labor budget of Yuvwell Corporation for the upcoming fiscal year contains the following details concerning budgeted direct labor-hours:
   
   1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
   Budgeted direct labor-hours 9,800 9,100 9,400 10,200
   
   
   
   The company's variable manufacturing overhead rate is $4.25 per direct labor-hour and the company's fixed manufacturing overhead is $66,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $16,500 per quarter.
   
   Required:
   1. Complete the company's manufacturing overhead budget for the upcoming fiscal year.

Variable manufacturing overhead $41,650 $38,675 $39,950 $43,350 $163,625
Fixed manufacturing overhead 66,000 66,000 66,000 66,000 264,000
Total manufacturing overhead 107,650 104,675 105,950 109,350 427,625
Less depreciation 16,500 16,500 16,500 16,500 66,000
Cash disbursements for manufacturing overhead $91,150 $88,175 $89,450 $92,850 $361,625


Explanation:

1st
Quarter 2nd
Quarter 3rd
Quarter 4th
Quarter Year
Budgeted direct labor-hours 9,800 9,100 9,400 10,200 38,500
Variable manufacturing overhead rate ×$4.25 ×$4.25 ×$4.25 ×$4.25 ×$4.25
Variable manufacturing overhead $41,650 $38,675 $39,950 $43,350 $163,625

8. 2. Compute the company's manufacturing overhead rate (including both variable and fixed manufacturing overhead) for the upcoming fiscal year. (Round your final answers to 2 decimal places.) (Refer to question regarding Yuvwell Corporation).

Total budgeted manufacturing overhead for the year $427,625
Budgeted direct labor-hours for the year 38,500
Predetermined overhead rate for the year $11.11

9. The budgeted unit sales of Weller Company for the upcoming fiscal year are provided below:
   1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
   Budgeted unit sales 16,000 18,000 15,000 14,000
   
   
   
   The company's variable selling and administrative expense per unit is $1.50. Fixed selling and administrative expenses include advertising expenses of $9,000 per quarter, executive salaries of $35,000 per quarter, and depreciation of $15,000 per quarter. In addition, the company will make insurance payments of $4,000 in the first quarter and $4,000 in the third quarter. Finally, property taxes of $6,000 will be paid in the second quarter.
   
   Required:
   Prepare the company's selling and administrative expense budget for the upcoming fiscal year. (Input all amounts as positive values. Round "Variable cost" answers to 2 decimal places.)

Budgeted unit sales 16,000 18,000 15,000 14,000 63,000
Variable selling and administrative expense per unit $1.50 $1.50 $1.50 $1.50 $1.50
Variable selling and administrative expense 24,000 27,000 22,500 21,000 94,500
Fixed selling and administrative expenses:
Advertising 9,000 9,000 9,000 9,000 36,000
Executive salaries 35,000 35,000 35,000 35,000 140,000
Insurance 4,000 0000 4,000 0000 8,000
Property taxes 0000 6,000 0000 0000 6,000
Depreciation 15,000 15,000 15,000 15,000 60,000
Total fixed selling and administrative expenses 63,000 65,000 63,000 59,000 250,000
Total selling and administrative expenses 87,000 92,000 85,500 80,000 344,500
Less: Depreciation 15,000 15,000 15,000 15,000 60,000
Cash disbursements for selling and administrative expenses $72,000 $77,000 $70,500 $65,000 $284,500

10. Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year. Management has prepared the following summary of its budgeted cash flows:
    
    1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
    Total cash receipts $250,000 $400,000 $280,000 $300,000
    Total cash disbursements $309,000 $279,000 $269,000 $289,000
    
    
    The company's beginning cash balance for the upcoming fiscal year will be $34,000. The company requires a minimum cash balance of $10,000 and may borrow any amount needed from a local bank at a quarterly interest rate of 3%. The company may borrow any amount at the beginning of any quarter and may repay its loans, or any part of its loans, at the end of any quarter. Interest payments are due on any principal at the time it is repaid. For simplicity, assume that interest is not compounded.
    
    
    Required:
    Complete the company's cash budget for the upcoming fiscal year. (Cash deficiency, repayments, and interest, should be indicated by a minus sign.)

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Beginning cash balance $34,000 $10,000 $93,900 $104,900 $34,000
Total cash receipts 250,000 400,000 280,000 300,000 1,230,000
Total cash available 284,000 410,000 373,900 404,900 1,264,000
Less total cash disbursements 309,000 279,000 269,000 289,000 1,146,000
Excess (deficiency) of cash available over disbursements (25,000) 131,000 104,900 115,900 118,000
Financing:
Borrowings 35,000 0000 0000 0000 35,000
Repayments 0000 (35,000) 0000 0000 (35,000)
Interest 0000 (2,100) 0000 0000 (2,100)
Total financing 35,000 (37,100) 0 0 (2,100)
Ending cash balance $10,000 $93,900 $104,900 $115,900 $115,900


Explanation:
Borrowings (at beginnings of quarters): Since the deficiency of cash available over disbursements is $25,000, the company must borrow $35,000 to maintain the desired ending cash balance of $10,000.

Interest: $35,000 × 3% × 2 = $2,100