Business Decision Case The sales department of Donovan Manufacturing, Inc. has completed the following sales forccast for the months of January through March 20X1 for its only two products: 50,000 units of J to be sold at $90 each and 30,000 units of K to be sold at $70 each. The desired unit inventories at March 31, 20X1, are 10% of the next quarter's unit sales forecast, which are 60,000 units of J and 30,000 units of K. The January 1, 20X1, unit inventories were 5,000 units of J and 2,000 units of K. Each unit of J requires 3 pounds of material A and 2 pounds of material B for its manufacturc: K requires 2 pounds of A and 4 pounds of B. The purchase cost of A is $9 per pound and the purchase cost of B is $5 per pound. Materials A and B on hand at January 1, 20X1, were 19,000 pounds of A and 7,000 pounds of B. Desired inventories at March 31, 20X1, are 14,000 pounds of A and 8,000 pounds of B. Each unit of J requires 0.5 hours of direct labor in the factory, cach unit of K requires 1.0 hour of direct labor. The average hourly rate for direct labor is $12 per hour. Estimated manufacturing overhead cost is $6 per direct labor hour plus $90,000 per month. Selling and administrative expenses are estimated to be 10% of sales revenue plus $180,000 per month Cash sales for the first quarter are estimated to be $300,000 per month. It is forecast that 30% of the credit sales for the quarter ended March 31, 20X1, will occur in January, 30% in February, and 40% in March. Of credit sales (December through March), 40% will be collected as cash in the month of sale and 55% will be collected in the following month. The remainder will be uncollectible. Cash collected in January 20X1 from December 20X0 sales will be $1,050,000. The January 1, 20X1, cash balance was $70,000. The minimum acceptable cash balance at the end of each month is $60,000. Short-term borrowings (6-month term) are made in multiples of $10,000. Interest is charged at the rate of 1% per month on short-term borrowings. The first interest payment is made the month following the borrowing. Cash disbursements (excluding interest on short-term borrowings) are estimated as follows: January February March Manufacturing costs ....... Selling and administrative expenses ....... Interest expense...... Income tax payment.......... $1,500,000 390,000 90,000 $1,300,000 410,000 90,000 $1,400,000 400,000 90,000 210,000 Capital expenditures................ 124,000 110,000 50,000 Cash dividends. 300,000 0 Required a. Prepare the sales budget for the quarter ended March 31, 20X1. b. Prepare the production budget for the quarter ended March 31, 20X1. c. Prepare the direct materials budget for the quarter ended March 31, 20X1. d. Prepare the direct labor budget for the quarter ended March 31, 20X1. e. Prepare the manufacturing overhead budget for the quarter ended March 31, 20X1. f. Prepare the selling and administrative expense budget for the quarter ended March 31, 20X1. 8. Prepare a schedule of cash collected from customers for the quarter ended March 31, 20X1. h. Prepare the cash budget for the quarter ended March 31, 20X1. Sales budget For the Quarter Ended March 31, 20X1 Product Unit) Unit K Total sales revenue Forcasted sales volume Planned unit sales price 50,000 $ 90.00 30,000 $ 70.00 $ Budgeted total sales 4,500,000 2,100,000 6,600,000 Production budget For the Quarter Ended March 31, 20X1 Units of finished product Product 50,000 Product K 30,000 Forcast unit sales Desired ending inventory 10% of next quarter sales 6,000 Quantities to be available Opening Inventory Total production to be scheduled 56,000 5,000 51,000 3,000 33,000 2,000 31,000 Direct materials budget For the Quarter Ended March 31, 20X1 Material A Material B Direct material required: Desired ending material inventory Total pounds of material to be available Total pounds of material to be purchased Unit purchase price Total materials purchases Direct labor budget For the Quarter Ended March 31, 20X1 Direct labor hours required for production: Total direct labor hours Total direct labor cost Manufacturing overhead budget For the Quarter Ended March 31, 20x1 Total direct labor hours Fixed manufacturing overhead costs Total manufacturing overhead cost Selling and administrative expense budget For the Quarter Ended March 31, 20X1 Total sales revenue Fixed selling and administrative expenses Total selling and administrative expenses Schedule of cash collected from customers For the Quarter Ended March 31, 20X1 January February March Cash sales Credit sales December $ 1,050,000 Total credit sales Total sales 1,050,000 1,050,000 $ $ Cash budget For the Quarter Ended March 31, 2019 January February March Beginning cash balance Cash receipts: Cash available - $ Cash disbursements: Total disbursements Ending cash balance Business Decision Case The sales department of Donovan Manufacturing, Inc. has completed the following sales forccast for the months of January through March 20X1 for its only two products: 50,000 units of J to be sold at $90 each and 30,000 units of K to be sold at $70 each. The desired unit inventories at March 31, 20X1, are 10% of the next quarter's unit sales forecast, which are 60,000 units of J and 30,000 units of K. The January 1, 20X1, unit inventories were 5,000 units of J and 2,000 units of K. Each unit of J requires 3 pounds of material A and 2 pounds of material B for its manufacturc: K requires 2 pounds of A and 4 pounds of B. The purchase cost of A is $9 per pound and the purchase cost of B is $5 per pound. Materials A and B on hand at January 1, 20X1, were 19,000 pounds of A and 7,000 pounds of B. Desired inventories at March 31, 20X1, are 14,000 pounds of A and 8,000 pounds of B. Each unit of J requires 0.5 hours of direct labor in the factory, cach unit of K requires 1.0 hour of direct labor. The average hourly rate for direct labor is $12 per hour. Estimated manufacturing overhead cost is $6 per direct labor hour plus $90,000 per month. Selling and administrative expenses are estimated to be 10% of sales revenue plus $180,000 per month Cash sales for the first quarter are estimated to be $300,000 per month. It is forecast that 30% of the credit sales for the quarter ended March 31, 20X1, will occur in January, 30% in February, and 40% in March. Of credit sales (December through March), 40% will be collected as cash in the month of sale and 55% will be collected in the following month. The remainder will be uncollectible. Cash collected in January 20X1 from December 20X0 sales will be $1,050,000. The January 1, 20X1, cash balance was $70,000. The minimum acceptable cash balance at the end of each month is $60,000. Short-term borrowings (6-month term) are made in multiples of $10,000. Interest is charged at the rate of 1% per month on short-term borrowings. The first interest payment is made the month following the borrowing. Cash disbursements (excluding interest on short-term borrowings) are estimated as follows: January February March Manufacturing costs ....... Selling and administrative expenses ....... Interest expense...... Income tax payment.......... $1,500,000 390,000 90,000 $1,300,000 410,000 90,000 $1,400,000 400,000 90,000 210,000 Capital expenditures................ 124,000 110,000 50,000 Cash dividends. 300,000 0 Required a. Prepare the sales budget for the quarter ended March 31, 20X1. b. Prepare the production budget for the quarter ended March 31, 20X1. c. Prepare the direct materials budget for the quarter ended March 31, 20X1. d. Prepare the direct labor budget for the quarter ended March 31, 20X1. e. Prepare the manufacturing overhead budget for the quarter ended March 31, 20X1. f. Prepare the selling and administrative expense budget for the quarter ended March 31, 20X1. 8. Prepare a schedule of cash collected from customers for the quarter ended March 31, 20X1. h. Prepare the cash budget for the quarter ended March 31, 20X1. Sales budget For the Quarter Ended March 31, 20X1 Product Unit) Unit K Total sales revenue Forcasted sales volume Planned unit sales price 50,000 $ 90.00 30,000 $ 70.00 $ Budgeted total sales 4,500,000 2,100,000 6,600,000 Production budget For the Quarter Ended March 31, 20X1 Units of finished product Product 50,000 Product K 30,000 Forcast unit sales Desired ending inventory 10% of next quarter sales 6,000 Quantities to be available Opening Inventory Total production to be scheduled 56,000 5,000 51,000 3,000 33,000 2,000 31,000 Direct materials budget For the Quarter Ended March 31, 20X1 Material A Material B Direct material required: Desired ending material inventory Total pounds of material to be available Total pounds of material to be purchased Unit purchase price Total materials purchases Direct labor budget For the Quarter Ended March 31, 20X1 Direct labor hours required for production: Total direct labor hours Total direct labor cost Manufacturing overhead budget For the Quarter Ended March 31, 20x1 Total direct labor hours Fixed manufacturing overhead costs Total manufacturing overhead cost Selling and administrative expense budget For the Quarter Ended March 31, 20X1 Total sales revenue Fixed selling and administrative expenses Total selling and administrative expenses Schedule of cash collected from customers For the Quarter Ended March 31, 20X1 January February March Cash sales Credit sales December $ 1,050,000 Total credit sales Total sales 1,050,000 1,050,000 $ $ Cash budget For the Quarter Ended March 31, 2019 January February March Beginning cash balance Cash receipts: Cash available - $ Cash disbursements: Total disbursements Ending cash balance