Question

1) Prepare a schedule of cash collections for ianuary February and March, and for the quarter in totall. Use the following format: Quarter 27500 16000 25070 February March 24000 29700 Credit Sales 64400 Total cash collection 71000 33600 100 (2) Prepare a production budget, using the following format January February March 9900 Plus: Der ending investory 210 275 2425 Total needed 10100 11675 12325 Less: Beginning inventory 2000 Units to produce 9850 *Hunt: Units sales Sales in dollars/Seng price per un Quarter 2735 herman Manufacturing preparing its master budget for the first quarter of the upcoming year. The allowing data pertain to Silverman Manufacturing operations: urrent Assets as of December 31 prior year Cash $4500 Accounts receivable et $ 69,000 Inventory S 15,120 roperty, plant and equipment, net $ 121.500 Los payable $2400 Capital sock$125.000 Retained earnings $ 22,920 anuary $80,000 February $12.000 March $99.000 April May S85.000 (aActual sales in December were $70.000 Sigrice per i proced to remain tablet $10 per unit throughout the budget per Sales for the first five months of the upcoming year are budgeted to be as follows: (b) Sales are 30% cash and cred. All credit sales are collected in the month following the sale Silverman Manufacturing has a polythat states that each monthsanding inventory of Fished goods should be 25% of the following month's sales ) (d) of each month's direct material purchases, 20 are paid in the month of purchase, while the remainder is paid for in the month following purchase. Two pounds of direct material is needed per unit at $2 per pound. Ending inventory of direct materials should be 10% of month's production needs Momentum e$5.000 for factor $1.000 fe thered manufacturing expenses, and $1.20 per unit for variable manufacturing overhead. Ne depreciations included in these figures. All expenses are paid in the month in which they are incurred in Computer equipment for the administrative offices will be purchased in the upcoming Quarter nay. Sherman Manat h a n $5,000 wheebruary's cash expenditure will be $12.000 and March's cash expenditure will be $16.000 Operating expenses are budgeted to be $1 per unit sold plus fined operating expenses of $1,000 per month. All operating expenses are paid in the month in which they incurred Depreciation on the b a nd forth and the offices is buted to be $4,800 for the entre quarter, which includes depreciation on new acquisitions Silverman Manufacturing has a policy that the ending cash balance in each month must be at least $4,000. It has a line of credit with a local bank. The company can borrow in increments of $1.000 at the beginning of each month up to t o nding of $100.000. The interest to these loans i per mothe r compounded hveran Mastering would pay down on the line of credit balance has encefunds at the end of the quarter. The company would also pay the accumulated interest at the end of the quarter on the funds borrowed during the quarter The company's income tax rate is rected to be of operating income interest expense. The con $10,000 the f i nestimated Prepare a direct materials but using the following format: January February March Units to be produced 83009175 X Pounds of DM needed per unit Quarter 27525 SOSO for production Plus: Desired ending in 1875 1970 Less: Beginning inw. FOM Quantity to purchase x Cost per pound Toulot of purchases please show formula for desired ending in Of M arch

Answer 1

Desired ending inventory of Mar is direct 25% of direct material required for April's production units. So we need to calculate production unit for April. April's production units and other calculation is provided in subsequent working notes :

Direct Material Budget		January	February	March
Units to be produced		8,300	9,375	9,850
Pound of Direct material Needed per unit		2	2	2
Quantity (lbs) needed for production		16,600	18,750	19,700
Plus : Desired ending inventory of direct material (25% of Unit produce next month *2 per unit)		1,875	1,970	1,880
Total Qty(lbs) needed		18,475	20,720	21,580
Less : Beginning inventory of Direct material cost (25% of Unit produce current month *2 per unit)		1,660	1,875	1,970
Quantities (lbs) to be purchased		16,815	18,845	19,610
Cost per pound to purchase		2	2	2
Total Cost of DM Purchase		33,630	37,690	39,220

Working notes :

Calculation of sales Units
Particulars	December	January	February	March
Sales Value	70,000	80,000	92,000	99,000
Price per Unit	10	10	10	10
Number of Units sold	7,000	8,000	9,200	9,900
Cash Sales Unit	2,100	2,400	2,760	2,970
Credit Sales Unit	4,900	5,600	6,440	6,930

		January	February	March	Quarter
Cash Sales Collection		24,000	27,600	29,700	81,300
Credit Sales Collection (For Jan, Dec credit sales will be realised)		49,000	56,000	64,400	169,400
Total		73,000	83,600	94,100	250,700

Production Budget	December	January	February	March	April	May
Units Sales	7000	8000	9200	9900	9700	8500
Plus : Desired Inventory (25% of Next month sales units)	2000	2300	2475	2425	2125
Total Needed		10300	11675	12325	11825
Less : Beginning Inventory (25% of current month sales units)		-2000	-2300	-2475	-2425
Units to product		8300	9375	9850	9400