Assignment 2 Budgeting

The budgeted selling price per unit is $70.
Budgeted unit
sales for June, July, August, and September are 8,400,
10,000, 12,000, and 13,000 units, respectively. All sales are
on credit.
II.Forty percent of credit sales are collected in the month of
the sale and 60% in the following month.
III.The ending finished goods inventory equals 20% of the
following month’s unit sales.
IV.The ending raw materials inventory equals 10% of the
following month’s raw materials production needs. Each
unit of finished goods requires 5 pounds of raw materials.
The raw materials cost $2.00 per pound.
V.Thirty percent of raw materials purchases are paid for in
the month of purchase and 70% in the following month.
VI.The direct labor wage rate is $15 per hour. Each unit of
finished goods requires two direct labor-hours.
VII.The variable selling and administrative expense per
unit sold is $1.80. The fixed selling and administrative
expense per month is $60,000.
Required:
1)What are the budgeted sales for July?
2)What are the expected cash collections for July?
3)What is the accounts receivable balance at the end of
July? 4)According to the production budget, how many
units should be produced in July?
5)If 61,000 pounds of raw materials are needed to meet
production in August, how many
pounds of raw materials should be purchased in July?
6)What is the estimated cost of raw materials purchases for
July?
7)If the cost of raw material purchases in June is $88,880,
what are the estimated cash disbursements for raw
materials purchases in July?
8)What is the estimated accounts payable balance at the
end of July?
9)What is the estimated raw materials inventory balance at
the end of July?
10) What is the total estimated direct labor cost for July
assuming the direct labor workforce is adjusted to match
the hours required to produce the forecasted number of
units produced?
11) If the company always uses an estimated predetermined
plant-wide overhead rate of $10 per direct labor-hour, what
is the estimated unit product cost?
12) What is the estimated finished goods inventory balance
at the end of July?
13) What is the estimated cost of goods sold and gross
margin for July?
14) What is the estimated total selling and administrative
expense for July?
15) What is the estimated net operating income for July?
8.Garden Depot is a retailer that is preparing its budget for

the upcoming fiscal year. Management has prepared the
following summary of its budgeted cash flows: 1st
Quarter2nd Quarter3rd Quarter4th Quarter Total cash
receipts$180,000$330,000$210,000$230,000 Total cash
disbursements$260,000$230,000$220,000$240,000 The
company’s beginning cash balance for the upcoming fiscal
year will be $20,000. The company requires a minimum
cash balance of $10,000 and may borrow any amount
needed from a local bank at a quarterly interest rate of 3%.
The company may borrow any amount at the beginning of
any quarter and may repay its loans, or any part of its loans,
at the end of any Page3of9
quarter. Interest payments are due on any principal at the
time it is repaid. For simplicity, assume that interest is not
compounded.
Required:Prepare the company’s cash budget for the
upcoming fiscal year.
9.Beech Corporation is a merchandising company that is

preparing a master budget for the third quarter of the
calendar year. The company’s balance sheet as of June 30th
is shown below: Beech Corporation Balance Sheet June 30
Assets
Cash………………………………………………………
…………… $90,000 Accounts
Receivable……………………………………………….…
$136,000
Inventory……………………………………………………
…………..$62,000 Plant and equipment, net of
depreciation……………………………. $210,000 Total
Assets………………………………………………………
……$498,000 Liabilities and Stockholders’ Equity
Accounts
Payable……………………………………………………...
$71,100 Common
Stock……………………………………………………….
$327,000 Retained
earnings……………………………………………………..
.$99,900 Total liabilities and stockholders’
equity……………………………. $498,000 Beech’s
managers have made the following additional assumptions
and estimates: 1Estimated sales for July, August,
September, and October will be $210,000, $230,000,
$220,000, and $240,000, respectively. 2All sales are on
credit and all credit sales are collected. Each month’s credit
sales are collected 35% in the month of sale and 65% in the
month following the sale. All of the accounts receivable at
June 30 will be collected in July. 3Each month’s ending
inventory must equal 30% of the cost of next month’s sales.
The cost of goods sold is 60% of sales. The company pays
for 40% of its merchandise purchases in the month of the
purchase and the remaining 60% in the month following
the purchase. All of the
accounts payable at June 30 will be paid in July. 4Monthly
selling and administrative expenses are always $60,000.
Each month $5,000 of this total amount is depreciation
expense and the remaining $55,000 relates to expenses that
are paid in the month they are incurred. 5The company
does not plan to borrow money or pay or declare dividends
during the quarter ended September 30. The company does
not plan to issue any common stock or repurchase its own
stock during the quarter ended September 30. Required:
A.Prepare a schedule of expected cash collections for July,
August, and September. Also compute total cash collections
for the quarter ended September 30. B.Prepare a
merchandise purchases budget for July, August, and
September. Also compute total merchandise purchases for
the quarter ended September 30. C.Prepare a schedule of
expected cash disbursements for merchandise purchases for
July, August, and September. Also compute total cash
disbursements for merchandise purchases for the quarter
ended September 30. Page4of9

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The budgeted selling price per unit is $70.

8.Garden Depot is a retailer that is preparing its budget for

9.Beech Corporation is a merchandising company that is

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