Question

Please provide a

1) Sales budget, including a schedule of expected cash collections.

2) Production budget.

Kimmel Gnomes, located in South Dakota, may be the only other manufacturer of high quality clay garden gnomes that are hand finished. Kimmel Gnomes are stoneware, rather than terracotta. Stoneware uses higher-quality clay than terracotta and the gnomes are fired at higher temperature, yielding a stronger, more durable gnome. The gnomes are fired inside and out and are colored with glaze before firing, rather than being painted after firing. As a result Kimmel gnomes retain their color when exposed to the elements and they are not affected by moisture or freezing. The Large Gnome Division manufactures and sells gnomes between 12 and 15 inches in length or height (the "Hedgerow Gnome" model is shown in the picture to the left). Many different styles are made, but each large gnome requires virtually the same amount of time and materials. During 2018-19fiscal year, the average selling price for large gnomes is expected to be $107 per gnome. The Large Gnome Division forecasts the following number gnome sales. Quarter Gnome sales First 44,000 Second 82,000 Third 42,000 Fourth 76,000 The collection pattern for Accounts Receivable is as follows: o o o 75 percent of all sales are collected within the quarter in which they are sold 25 percent of all sales are collected in the following quarter. There are no bad debts/uncollectables. Due to higher than expected demand this year, the Large Gnome Division expects to have no finished gnomes in inventory on July 1, 2018, the beginning of the first quarter of the new fiscal year. To avoid having that problem in the coming fiscal year, the Large Gnome Division would like to have the ending inventory of Gnomes at the end of each of the first three quarters equal to 26% of the budgeted sales for the next quarter. They would like to have 23,000 finished gnomes on hand on June 30, 2019.

Answer 1

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Kimmel Gnomes						Note
Sales Budget	First	Second	Third	Fourth	Total
Sales (units)	44,000.00	82,000.00	42,000.00	76,000.00	244,000.00	A
Sell Price	107.00	107.00	107.00	107.00		B
Sales Budget	4,708,000.00	8,774,000.00	4,494,000.00	8,132,000.00	26,108,000.00	C=A*B
Collection Budget	First	Second	Third	Fourth	Total
Sales Budget	4,708,000.00	8,774,000.00	4,494,000.00	8,132,000.00	26,108,000.00	See C
Collection of Accounts receivable of June 30	1,230,000.00				1,230,000.00	D= Taken from Balance Sheet
75% collected in same month	3,531,000.00	6,580,500.00	3,370,500.00	6,099,000.00	19,581,000.00	E= C*75%
25% collected in next month		1,177,000.00	2,193,500.00	1,123,500.00	4,494,000.00	F= 725% of C of previous month
Expected cash collections	4,761,000.00	7,757,500.00	5,564,000.00	7,222,500.00	25,305,000.00	G=D+E+F
Production Budget	First	Second	Third	Fourth	Total
Sales (units)	44,000.00	82,000.00	42,000.00	76,000.00	244,000.00	See A
Add: Desired Ending Inventory	21,320.00	10,920.00	19,760.00	23,000.00		H= 26% of A of next month. For Fourth quarter 23,000 units is given in the sum.
Total units needed	65,320.00	92,920.00	61,760.00	99,000.00		I= A+H
Less: Expected Beginning Inventory	-	21,320.00	10,920.00	19,760.00		J= 26% of A. For First quarter it is given the there is no finished goods inventory in the sum.
Production Budget	65,320.00	71,600.00	50,840.00	79,240.00	267,000.00	K=I-J