TUTORIAL 5.docx - TUTORIAL 5 BUDGETING Question 1 Mynor Corporation manufactures and sells a seasonal product that has peak sales in the third quarter

# TUTORIAL 5.docx - TUTORIAL 5 BUDGETING Question 1 Mynor...

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TUTORIAL 5 : BUDGETING Question 1 Mynor Corporation manufactures and sells a seasonal product that has peak sales in the third quarter. The following information concerns operations for Year 2 – the coming year – and for the first two quarters of Year 3: a) The company’s single product sells for RM8 per unit. Budgeted sales in units for the next six quarters are as follows (all sales are on credit): Year 2 Quarter Year 3 Quarter 1 2 3 4 1 2 Budgeted unit sales 40,00 0 60,000 100,000 50,00 0 70,000 80,000 b) Sales are collected in the following pattern: 75% in the quarter the sales are made, and the remaining 25% in the following quarter. On 1 January, Year 2, the company’s showed RM65,000 in accounts receivable, all of which will be collected in the first quarter of the year. c) The company desires an ending finished goods inventory at the end of each quarter equal to 30% of the budgeted unit sales for the next quarter. On 31 December, Year 1, the company had 12,000 units on hand. d) 5kg of raw materials are required to complete one unit of product. The company requires ending raw materials inventory at the end of each quarter equal to 10% of the following quarter’s production needs. On 31 December, Year 1, the company had 23,000kg of raw materials in hand e) The raw material costs RM0.80 per pound. Raw material purchases are paid for in the following pattern: 60% paid in the quarter in the purchase are made, and the remaining 40% paid in the following quarter. On 1 January, Year 2, the company showed RM81,500 accounts payable for raw material purchases, all of which will be paid in the first quarter of the year.

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