Question
Backyard Paradise makes backyard bird feeders. The company sells the bird feeders to home improvement stores for $16 per bird feeder. Each bird feeder requires
Backyard Paradise makes backyard bird feeders. The company sells the bird feeders to home improvement stores for $16 per bird feeder. Each bird feeder requires 3.0 board feet of wood, which the company obtains at a cost of $3 per board foot. The company would like to maintain an ending stock of wood equal to 20% of the next month's production requirements.The company would also like to maintain an ending stock of finished bird feeders equal to 15% of the next month's sales. Sales data for the company is as follows:
Requirement 1. Prepare the sales budget for the first three months of the year, as well as a summary budget for the quarter, including a separate section that details the type of sales made (cash versus credit.)
Backyard Paradise | |||||
Sales Budget | |||||
For the Quarter Ended March 31 | |||||
Month |
January | February | March | Quarter | |
Unit sales | ||||
Multiply by: Sales price per unit | ||||
Total sales revenue | ||||
Cash sales | ||||
Credit sales | ||||
Total sales revenue |
Requirement 2. Prepare the production budget for the first three months of the year, as well as a summary budget for the quarter.
Backyard Paradise | ||||||
Production Budget | ||||||
For the Quarter Ended March 31 | ||||||
Month |
January | February | March | Quarter | |
Unit sales | ||||
Plus: Desired ending inventory | ||||
Total needed | ||||
Less: Beginning inventory | ||||
Units to produce |
Requirement 3. Prepare the direct materials purchases budget for the first three months of the year, as well as a summary budget for the quarter. Assume the company needs 125,000
board feet of wood for production in April. (Round your answers to the nearest whole dollar.)
Backyard Paradise | |||||
Direct Materials Budget | |||||
For the Quarter Ended March 31 | |||||
Month |
January | February | March | Quarter | |
Units to be produced | ||||
Multiply by: Quantity (board feet) of DM needed per unit | ||||
Quantity (board feet) needed for production | ||||
Plus: Desired ending inventory of DM | ||||
Total quantity (board feet) needed | ||||
Less: Beginning inventory of DM | ||||
Quantity (board feet) to purchase | ||||
Multiply by: Cost per board foot | ||||
Total cost of DM purchases |
Requirement 4. Prepare the cash collections budget for January, February, and March, as well as a summary for the first quarter. (Round your answers to the nearest whole dollar.)
Review the sales budget prepared in Requirement 1.
Backyard Paradise | |||||
Cash Collections Budget | |||||
For the Quarter Ended March 31 | |||||
Month |
January | February | March | Quarter | |
Cash sales in current month | ||||
Collections on credit sales: | ||||
70% of credit sales made one month ago | ||||
20% of credit sales made two months ago | ||||
6% of credit sales made three months ago | ||||
Total cash collections |
Requirement 5. Prepare the cash payments budget for direct materials purchases for the months of January, February, andMarch, as well as a summary for the first quarter.
Review the direct materials budget prepared in Requirement 3.
Backyard Paradise | ||||||
Cash Payments for Direct Materials Budget | ||||||
For the Quarter Ended March 31 | ||||||
Month |
January | February | March | Quarter | |
55% of current month DM purchases | ||||
45% of last month's DM purchases | ||||
Total cash payments |
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