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coursehero_chapter 7 problems

coursehero_chapter 7 problems - PROBLEM 717B Production and...

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PROBLEM 7-17B Production and Direct Materials Budgets (1) July: 14,400 units Giovinazzo of Milan, Italy, manufactures and distributes perfume throughout Europe. Each unit of Conquer, one of the company’s products, requires 8 cc (cubic centimeters) of alcohol.  The company is now planning raw materials needs for the third quarter, the quarter in which peak sales of Conquer occur. To keep production and sales moving smoothly, the company has the following inventory requireme a. The finished goods inventory on hand at the end of each month must be equal to 2,000 units of Conquer plus 25% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 5,500 units. b. The raw materials inventory on hand at the end of each month must be equal to 55% of the following month’s production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 63,360 cc  c. The company maintains no work in process inventories. A sales budget for Conquer for the last six months of the year follows. Budgeted Unit Sales July  14,000 August  15,600 September  22,000 October  18,000 November  16,200 December  14,800 Required: 1 Prepare a production budget for Conquer for the months July, August, September, and October. 2 Examine the production budget that you prepared in (1) above. Why will the company produce more units than it sells in July and August, and fewer units than it sells in September and October? 3 Prepare a direct materials budget showing the quantity of alcohol to be purchased for July, August, and September, and for the quarter in total. PROBLEM 7-18B Schedule of Expected Cash Collections; Cash Budget (1) July: $253,500 (2) July 31 cash balance: $11,000 a. On July 1, the beginning of the third quarter, the company will have a cash balance of $46,000. b. Actual sales for the last two months and budgeted sales for the third quarter follow (all sales are on account): May (actual)  $200,000  June (actual)  $240,000  July (budgeted)  $350,000  August (budgeted)  $410,000  September (budgeted)  $340,000  Past experience shows that 25% of a month’s sales are collected in the month of sale, 65% in the month following sale, and 5% in the second month following sale. The remainder is uncollectible c. Budgeted merchandise purchases and budgeted expenses for the third quarter are given below: during the quarter. Since Eye Care Company has experienced difficulty in paying off its loans in the past, the loan officer at the bank has asked the company to prepare a cash budget for the quarter. In response to this  request, the following data have been assembled:
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July August September Merchandise purchases  $210,000  $246,000  $204,000  Salaries and wages  $29,000  $30,000  $30,000 
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