10 9 points eBook Print References Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It began negotiating for a one-month bank loan of $500,000 starting May 1. The bank would charge interest at the rate of 1.25 percent per month and require the company to repay interest and principal on May 31. In considering the loan, the bank requested a projected income statement and cash budget for May. The following information is available: . The company budgeted sales at 600,000 units per month in April, June, and July and at 550,000 units in May. The selling price is $4 per unit. . The inventory of finished goods on April 1 was 120,000 units. The finished goods inventory at the end of each month equals 20 percent of sales anticipated for the following month. There is no work in process. . The inventory of raw materials on April 1 was 44,250 pounds. At the end of each month, the raw materials inventory equals no less than 30 percent of production requirements for the following month. The company purchases materials in quantities of 65,500 pounds per shipment. Selling expenses are 10 percent of gross sales. Administrative expenses, which include depreciation of $2,000 per month on office furniture and fixtures, total $155,000 per month. . The manufacturing budget for tiles, based on normal production of 500,000 units per month, follows: Materials (0.25 pound per tile, 125,000 pounds, $4 per pound) Labor Variable overhead Fixed overhead (includes depreciation of $210,000) Total $ 500,000 420,000 200,000 420,000 $1,540,000 Required: a-1. Prepare schedules computing inventory budgets by months for production in units for April, May, and June. a-2. Prepare schedules computing inventory budgets by months for raw materials purchases in pounds for April and May. b. Prepare a projected income statement for May. Cost of goods sold should equal the variable manufacturing cost per unit times the number of units sold plus the total fixed manufacturing cost budgeted for the period. When calculating net sales assume cash discounts of 1 percent and bad debt expense of 0.50 percent. Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B Prepare schedules computing inventory budgets by months for production in units for April, May, and June. Budgeted sales BRIGHTON, INC. Schedule Computing Production Budget (Units) Inventory required at end of month For April, May, and June April May June 600,000 550,000 600,000 110,000 120,000 120,000 710,000 670,000 720,000 120,000 110,000 120,000 590,000 560,000 600,000 Total needs Less: Inventory on hand at beginning of month Budgeted production - Units Req A1 Req A2 Req B Prepare schedules computing inventory budgets by months for raw materials purchases in pounds for April and May. Schedule Computing Raw Materials Inventory Purchase Budget (Pounds) For April and May April May Budgeted Production needs in pounds 147,500 140,000 Inventory required at end of month 42,000 45,000 Total pound needs 189,500 185,000 Less: Inventory on hand at beginning of month 44,250 Balance required to purchase 145,250 185,000 Budgeted purchases - Pounds < Req A1 Req B > Req A1 Req A2 Req B Prepare a projected income statement for May. Cost of goods sold should equal the variable manufacturing cost per unit times the number of units sold plus the total fixed manufacturing cost budgeted for the period. When calculating net sales assume cash discounts of 1 percent and bad debt expense of 0.50 percent. (Do not round intermediate calculations.) Sales revenue Cash discounts on sales Estimated bad debts BRIGHTON, INC. Projected Income Statement For the Month of May $ 2,200,000 $ 22,000 11,000 Net Sales Cost of Sales: Variable cost Fixed Cost 420,000 Expenses: Selling expense 220,000 Administrative expense 155,000 Interest expense 6,250 Operating profit < Req A2 33,000 $ 2,167,000 420,000 $ 1,747,000 381,250 $ 1,365,750 Req B >