Accounting 249 Homework 3 1. (6 points) Clay Corporation has projected sales and production in units for the second quarter of the coming year as follows: Sales Production....... April 50.000 60.000 May 40.000 50.000 June 60.000 50.000 Cash-related production costs are budgeted at $5 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to $100,000 per month. The accounts payable balance on March 31 totals $190,000, which will be paid in April. All units are sold on account for $14 each. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on April 1 totalled $500,000 ($90,000 from February's sales and $410,000 from March's sales). a. (3 points) Prepare a schedule for each month showing budgeted cash disbursements for Clay Corporation. b. (3 points) Prepare a schedule for each month showing budgeted cash receipts for Clay Corporation. 2) (0 points) A sales budget is given below for one of the products manufactured by January 25.000 units February ...... 40.000 units March ........ 65.000 units April.... 45.000 units May 35.000 units 30.000 units June The inventory of finished goods at the end of each month must equal 20% of the next month's sales. However, on December 31 the finished goods inventory totaled only 4,000 units. Each unit of product requires three pounds of specialized material. Since the production of this specialized material by OMI's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs. This requirement had been met on January 1 of the current year. a. (3 points) Prepare a budget showing the required production each month for January, February, and March. b. (3 points) Prepare a budget showing the quantity of switches to be purchased each month for January, February, and March