Sales on account are collected over a three-month period as follows: 20% collected in the
month of sale, 60% collected in the month following sale, and 18% collected in the second
month following sale. The remaining 2% is uncollectible.
Purchases of inventory will total $280,000 for December. Thirty percent of a month's inven-
tory purchases are paid during the month of purchase. The accounts payable remaining from
November's inventory purchases total $161,000, all of which will be paid in December.
Selling and administrative expenses are budgeted at $430,000 for December. Of this amount,
$50,000 is for depreciation.
A new Web server for the Marketing Department costing $76,000 will be purchased for cash
during December, and dividends totaling $9,000 will be paid during the month.
The company maintains a minimum cash balance of $20,000. An open line of credit is avail-
able from the company's bank to bolster the cash position as needed.
Prepare a schedule of expected cash collections for December.
Prepare a schedule of expected cash disbursements for merchandise purchases for December.
Prepare a cash budget for December. Indicate in the financing section any borrowing that will be
needed during the month. Assume that any interest will not be paid until the following month.
PROBLEM 9-18 Direct Materials and Direct Labor Budgets [L04, LOS]
The production department of Zan Corporation has submitted the following forecast of units to be
produced by quarter for the upcoming fiscal year:
In addition, the beginning raw materials inventory for the 1st Quarter is budgeted to be 6,000 grams
and the beginning accounts payable for the 1st Quarter is budgeted to be $2,880.
Each unit requires 8 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 pro-
duction 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 $11.50 per hour.
Prepare the company's direct materials budget and schedule of expected cash disbursements
for purchases of materials for the upcoming fiscal year.
Prepare the company's direct labor budget for the upcoming fiscal year, assuming that the di-
rect labor workforce is adjusted each quarter to match the number of hours required to pro-
duce the forecasted number of units produced.
PROBLEM 9-19 Cash Budget; Income Statement; Balance Sheet [L02, L04, L08, L09, L01C]
Minden Company is a wholesale distributor of premium European chocolates. The company's bal-
ance sheet as of April 30 is given below: