Walker Company prepares monthly budgets. The current budget plans for a September ending merchandise inventory of 30,000 units. Company policy is to end each month with merchandise inventory equal to 15% of budgeted sales for the following month. Budgeted sales and merchandise purchases for the next three months follow. The company budgets sales of 200,000 units in October. Prepare the merchandise purchases budgets for the months of July, August, and September.
The total number of units to be purchased in the month of July, August and September by Walker Company are 200,250 units, 308,250 units and 259,500 units.
The total number of units to be purchased will be calculated using the beginning and ending inventory.
Merchandise purchase budget
For the month of July, August and September
Budgeted ending inventory
Add: Budgeted units of sales
Required units of available inventory
Less: Beginning inventory
Units to be purchased
Mike’s Motors Corp. manufactures motors for dirt bikes. The company requires a minimum $30,000 cash balance at each month-end. If necessary, the company borrows to meet this requirement, at a cost of 2% interest per month (paid at the end of each month). Any cash balance above $30,000 at month-end is used to repay loans. The cash balance on July 1 is $34,000, and the company has no outstanding loans at that time. Forecasted cash receipts and forecasted cash payments (other than for loan activity) are as follows. Prepare a cash budget for July, August, and September.
The Guitar Shoppe reports the following sales forecast: August, $150,000; September, $170,000. Cash sales are normally 40% of total sales, 55% of credit sales are collected in the month following sale, and the remaining 5% of credit sales are written off as uncollectible. Prepare a schedule of cash receipts for September.
Jasper Company has sales on account and for cash. Specifically, 70% of its sales are on account and 30% are for cash. Credit sales are collected in full in the month following the sale. The company forecasts sales of $525,000 for April, $535,000 for May, and $560,000 for June. The beginning balance of accounts receivable is $400,000 on April 1. Prepare a schedule of budgeted cash receipts for April, May, and June.
Ramos Co. provides the following sales forecast and production budget for the next four months:
The company plans for finished goods inventory of 120 units at the end of June. In addition, each finished unit requires 5 pounds of direct materials and the company wants to end each month with direct materials inventory equal to 30% of next month’s production needs. Beginning direct materials inventory for April was 663 pounds. Direct materials cost $2 per pound. Each finished unit requires 0.50 hours of direct labor at the rate of $16 per hour. The company budgets variable overhead at the rate of $20 per direct labor hour and budgets fixed overhead of $8,000 per month. Prepare a direct materials budget for April, May, and June.
Refer to the information in Exercise 20-3. In addition, each finished unit requires five pounds of raw materials and the company wants to end each month with raw materials inventory equal to 30% of next month’s production needs., Beginning raw materials inventory for April was 663 pounds. Assume direct materials cost $4 per pound. Prepare a direct materials budget for April, May, and June.
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