• All sales are made on account at $20 per unit. Sixty percent of the sales are collected in the month of sale; the remaining 40% are collected in the following month. Forecasted sales for the first five months of 20X2 are: January, 1,500 units,- February, 1,600 units; March, 1,800 units; April, 2,000 units; May, 2,100 units.
• Management wants to maintain the finished goods inventory at 30% of the following month's sales.
• Watson uses four units of direct material in each finished unit. The direct material price has been stable and is expected to remain so over the next six months. Management wants to maintain the ending direct materials inventory at 60% of the following month's production needs.
• Seventy percent of all purchases are paid in the month of purchase; the remaining 30% are paid in the subsequent month.
• Watson's product requires 30 minutes of direct labor time. Each hour of direct labor costs $7.

Instructions:

• Rounding computations to the nearest dollar, prepare the following for January through March:

1) Sales budget

2) Schedule of cash collections

3) Production budget

4) Direct material purchases budget

5) Schedule of cash disbursements for material purchases 6) Direct labor budget

• Determine the balances in the following accounts as of March 31:

1) Accounts Receivable

2) Direct Materials

3) Accounts Payable

Prepare a flexible budget for 20,000, 22,500, and 25,000 units of activity. Was Centron's experience in the quarter cited better or worse than anticipated? Prepare an appropriate performance report and explain your answer. Explain the benefit of using flexible budgets (as opposed to static budgets) in the measurement of performance. Direct materials acquired during the month amounted to 26,350 units at $6.40 per unit. All materials were consumed in operations.

Arrow incurred an average wage rate of $8.75 for 51,400 hours of activity.

Total overhead incurred amounted to $508,400. Budgeted fixed overhead totals $1.8 million and is spread evenly throughout the year. Actual production amounted to 6,500 completed units. Compute Arrow's direct material variances. Compute Arrow's direct labor variances. Compute Arrow's variances for factory overhead.