CHAPTER 7 - Solution to Class Problem

CHAPTER 7 - Solution to Class Problem - CHAPTER7...

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CHAPTER 7 SOLUTION TO COMPREHENSIVE BUDGETING EXAMPLE SALES BUDGET April May June Quarter Budgeted unit sales ........ 20,000 50,000 30,000 100,000 Selling price per unit .......          ×     $10              ×     $10              ×     $10                 ×     $10     Total sales ...................... $200,000 $500,000 $300,000 $1,000,000 SCHEDULE OF EXPECTED CASH COLLECTIONS April May June Quarter Accounts receivable  beginning balance ........... $ 30,000 $ 30,000 April sales 70%  ×  $200,000 .............. 140,000 140,000 25%  ×  $200,000 .............. $ 50,000 50,000 May sales 70%  ×  $500,000 .............. 350,000 350,000 25%  ×  $500,000 .............. $125,000 125,000 June sales 70%  ×  $300,000 ..............                                                   210,000       210,000     Total cash collections ......... $170,000 $400,000 $335,000 $905,000 1
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PRODUCTION BUDGET April May June July Budgeted unit sales  [TM 7-4] ..... 20,000 50,000 30,000 25,000  Add desired ending inventory. . 10,000   6,000       5,000       3,000     * Total needs .............................. 30,000 56,000 35,000 28,000  Less beginning inventory .........   4,000     10,000   6,000       5,000       Required production ................. 26,000 46,000 29,000 23,000   * Budgeted sales for August = 15,000 units.    Desired ending inventory in July = 15,000 units  ×  20% = 3,000 units. DIRECT MATERIALS BUDGET April May June Quarter Required production in units  [TM 7-6] ..................................... 26,000 46,000 29,000 101,000 Raw materials per unit (pounds)            ×     5                ×     5                ×     5                ×     5     Production needs ....................... 130,000 230,000 145,000 505,000 Add desired ending inventory*...   23,000       14,500       11,500       11,500     Total needs ................................ 153,000 244,500 156,500 516,500 Less beginning inventory ...........   13,000       23,000       14,500       13,000     Raw materials to be purchased.. 140,000 221,500 142,000 503,500 Cost of raw materials to be  purchased at $0.40 per pound. $56,000 $88,600 $56,800 $201,400 * For June: 23,000 units produced in July  [TM 7-6]   ×  5 pounds = 115,000  pounds; 115,000 pounds  ×  10% = 11,500 pounds 2
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SCHEDULE OF EXPECTED CASH DISBURSEMENTS FOR  MATERIAL Accounts payable  beginning balance .......... $12,000 $ 12,000 April purchases 50%  ×  $56,000 ............... 28,000 28,000 50%  ×  $56,000 ............... $28,000 28,000 May purchases 50%  ×  $88,600 ...............
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