A company manufactures and sells a product, which has seasonal variations in demand with a peak in

the third quarter. The following is given:

a$)$ During the second year and two quarters of the third year they plan to sell $40,60,100,50,70,80$

thousands of items at unit price $$8.$

b$)75\%$ of sales are collected in the quarter the sales are made, and the remaining $25\%$ in the

following quarter. On January $1,$ year $2,$ the balance sheet shows $$65,000$ in accounts receivable.

c$)$ The ending inventory of finished goods should cover $30\%$ of the budgeted sales for the next

quarter. On December $31,$ year$1,$ company had $12,000$ units on hand.

d$)$ Three pounds of raw materials are needed to produce a single unit. The ending inventory of raw

materials should be at $10\%$ of the budgeted production for the next quarter. On December $31,$

year$1,$ company had $13,800$ pounds of materials on hand.

e$)$ The raw materials cost $$0\mathrm{.}80$ per pound. Purchases of raw materials are paid for in the following

way: $60\%$ in the quarter the purchase is made, the remaining $40\%$ in the following quarter. On

January $1,$ year $2,$ the balance sheet showed $$81,500$ in accounts payable.

f$)$ It takes $12$ minutes to produce a single item and cost of labor hour is $$8.$

g$)$ Predetermined overhead rate is $$0\mathrm{.}5$ per labor hour, fixed manufacturing overhead is $$40,000$ per

quarter and depreciation of machines $$8000.$

h$)$ Selling and administrative costs are planned to be $$0\mathrm{.}1$ variable per unit, $$20000$ advertising,

$$24000$ salaries and $$6000$ depreciation per quarter.

i$)$ The company has $$50000$ in cash at the beginning of the year. It will invest $$40000,$

$$50000,$ $$30000,$ $$30000$ in equipment in consecutive quarters. In each quarter $$60000$ should

be paid out as dividends. The company can borrow short$-$term at $10\%.$

j$)$ The land is worth $$80000,$ buildings and equipment $$700000$ with accumulated depreciation

$$200000.$ Equity is $$300000.$

Prepare:

$1.$ The sales budget and the schedule of expected cash collections.

$2.$ The production budget.

$3.$ The direct materials purchases budget with a schedule of expected cash payments.

$4.$ The direct labor budget.

$5.$ The manufacturing overhead budget.

$6.$ The calculation of the cost of finished goods per unit. Find the final worth of finished goods

inventory.

$7.$ The budget for selling and administrative expenses.

$8.$ The cash budget.

$9.$ The pro$-$forma income statement for year $2.$

$10.$ The balance sheet at the end of year $2,$ if the following is given:

Balance sheet $-$ beginning of year $2$

Cash $ $50000$ A$/$P $ $81500$

A$/$R $ $65000$ Equity $ $300000$

Inventory: RE $ $381153$

raw materials $ $11040$

finished goods $ $56613$

Land $ $80000$

Building & equipment $ $700000$

Less: Accum. depreciation $-$$ $200000$

Total $ $762653$ Total $ $762653$