6 Water Sport Inc. manufactures a small personal water tube used for children learning to swim. Management is now preparing detailed budgets for the third quarter, July through September, and has assembled the following information to assist: a. The Marketing Department has estimated sales as follows for the remainder of the year (number of water tubes): nts July August September 8,400 October 6,900 November 5,900 December 4,800 4,400 3,900 eBook The selling price of the water tubes is $50. Print b. All sales are on account. Based on past experience, sales are expected to be collected in the following pattern: eferences 50% in the month of sale 45% in the month following sale 5% uncollectible The beginning accounts receivable balance (excluding uncollectible amounts) on July 1 will be $169,500. c. The company maintains finished goods inventories equal to 20% of the following month's sales. The inventory of finished goods on July 1 will be 1,680 units. d. Each water tube requires 4 kilograms of synthetic polyisoprene rubber compound. To prevent shortages, the company would like the inventory of synthetic rubber compound on hand at the end of each month to be equal to 20% of the following month's production needs. The inventory of synthetic rubber compound on hand on July 1 will be 6,480 kilograms. e. The synthetic rubber compound costs $2.50 per kilogram. Water Sport pays for 70% of its purchases in the month of purchase; the remainder is paid for in the following month. The accounts payable balance for synthetic rubber compound purchases will be $17,100 on July 1. Required: 1. Prepare a sales budget, by month and in total, for the third quarter. (Show your budget in both units of water tubes and dollars.) Also prepare schedule of expected cash collections, by month and in total, for the third quarter. Sales budget August July September Quarter Budgeted sales (units) Selling price per unit Total budgeted sales es September Quarter Schedule of expected cash collections July August Accounts receivable, beginning balance July sales: August sales: September sales Total cash collections 2. Prepare a production budget for each of the months July through October. Production budget July August September October Budgeted sales (units) Total needs Required production (units) 3. Prepare a direct materials purchases budget for synthetic rubber compound, by month and in total, for the third quarter. Also prepare a schedule of expected cash disbursements for synthetic rubber compound, by month and in total, for the third quarter. Direct materials purchases budget July August September Quarter Required production (units) Material D236 needed per unit (kgs.) Production needs (kgs.) Total Material D236 needs Raw materials to be purchased Cost of raw materials to be purchased at $2.50 per kg September Quarter Schedule of expected cash disbursement July August Accounts payable, beginning balance July purchases: August purchases: September purchases: Total cash disbursements ES The Centrico Medical Laboratory, a government-sponsored charity, is located on the island of Ste. Lucretia. The laboratory has just finished its operations for September, which was a particularly busy month due to a chemical spill that affected a few neighbouring small islands, causing many illnesses. The chemical spill and contamination largely bypassed Ste. Lucretia's water supply, but residents of Ste. Lucretia willingly donated supplies and the laboratory assisted in the medical testing to help people on other islands. As a consequence, the medical laboratory collected and processed over 25% more laboratory samples from potentially ill residents than had been originally planned for the month. A report prepared by a government official comparing actual costs to costs included in the static budget for the medical laboratory appears below. (The currency in Ste. Lucretia is the East Caribbean dollar.) Continued support from the government depends on the lab's ability to demonstrate control over its costs: eBook CENTRICO MEDICAL LABORATORY Cost Control Report For the Month Ended September 30 Print Static Budget Variance 240.00 Static Budget 790.00 Actual 1,030.00 Ferences Laboratory samples collected Variable costs: Medical supplies Lab tests Refreshments for staff and volunteers Administrative supplies $ 16,980.00 18,648.00 1,841.00 235.00 $12,324.00 14,931.00 1,501.00 395.00 $4,656.00 3,717.00 340.00 (160.00) Total variable cost 37,704.00 29,151.00 8,553.00 Fixed costs: Staff salaries Equipment depreciation Rent Utilities 248.00 20,700.00 3,188.00 2,700.00 526.00 20,700.00 2,940.00 2,700.00 495.00 31.00 Total fixed cost 27,114.00 26,835.00 279.00 Total cost $ 64,818.00 $55,986.00 $8,832.00 The managing director of the medical laboratory is very unhappy with this report, claiming that his costs were higher than expected due to the emergency on the neighbouring islands. He also points out that the additional costs were fully covered by payments from grateful recipients on the other islands. The government official who prepared the report counters that all of the figures were submitted by the medical laboratory to the government; he was just pointing out that actual costs were considerably higher than promised in the budget. Required: 1. Prepare a new performance report for September using the flexible budget approach. (Note: Even though there are no revenues in this setting, the flexible budget approach can still be used to prepare a flexible budget performance report. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance). Round your answers to 2 decimal places.) Centrico Medical Laboratory Flexible Budget Performance Report For the Month Ended September 30 Actual Costs Flexible Cost Formula Incurred for Budget 1,030 Lab Based on (per unit) 1,030 Lab samples samples Costs Flexible Budget Variance Variable costs: Medical supplies Lab tests Refreshments for staff and volunteers Administrative supplies Total variable cost Fixed costs: Staff salaries Equipment depreciation Rent Utilities Total fixed cost Total cost