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Singles Company is in the process of preparing its operating budgets for 2020

Accounting

Singles Company is in the process of preparing its operating budgets

for 2020. The company produces and sells one product "Habibi". The following data are taken from its statement of assumptions:


a. Sales and collections. The product is currently sold at a unit price of P150. The following estimates are developed by the Market Research Department as probable sales in January 2020:
Unit Sales Probability
40,000 30
50,000 50
60,000 20


Sales in the succeeding months are expected to increase by 10% from each month thereafter, except for the month of April which is expected to increase by 20% from the immediately preceding month.


Eighty percent (80%) of sales are to be made on credit with terms 2/10, n/40. Billings are made on the date of sales and collections are made as follows:
40% in the month of sales with 55% paying within the discount period
50% in the first month after sale
5% in the second month after sale
5% uncollectibles
The AR balance on December 31, 2019 is P4, 000, 000 with 75% of it is coming from the December sales.


b. Production. The finished goods inventory at the end in each month is set at80% of the next month's sales.


c. Materials. A unit of production Habibi needs 4 lbs of material X costing P5 per pound. Materials inventory at the end of each month is estimated to be 20% of the next month's needs plus 20,000 lbs. Payments to materials suppliers are 60% in the month of purchase and 40% in the following month of purchase. The AP balance on December 31, 2019 is P600, 000.


d. Labor. It takes 2 hours to produce a unit of product Habibi. On the average production workers are paid at a rate of P40 per hour. Payroll costing amounting to 20% of the total payroll cost per month are estimated to be paid in the next month.


e. Factory Overhead. The standard variable factory overhead rate is P5 per hour. Total budgeted fixed overhead is set at P6, 000, 000 to be incurred evenly during the year. The company's normal capacity is P50, 000 units per month.


Required. Budgeted operating and financial data for the months of January, February and March 2020:
a. Sales in units and in pesos, net of allowance for doubtful accounts and discounts.
b. collection from customers
c. Production
d. Materials purchases in units and in pesos
e. Payments to materials suppliers
f. Direct labor
g. Factory overhead
h. Total production cost

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