Chapter 2 Homework -- Forecasting Centereld Turf Tools manufactures and sells a tool (the Turf Monster) used to install and maintain real grass turfs used in sports stadiums around the world. Centereld is preparing forecasts for the rst quarter of next year ending on March 31, 2300:. Centereld uses the following information to create their forecast. Forecasted Sales In Units Selling price per unit $850 January 1,500 February 1,250 March 2,650 April 2,450 May 2,500 Sales and Revenue Information All sales are on account. Centereld's collection pattern is as follows: 40% collected in the month of sale 45% collected in the month following sale 10% collected in the second month following sale 5% uncollectible The following accounts receiveable balance on January lst, 2xxx will be collected in full in January. $385,000 Centereld's standard practice is to maintain a nished goods ending inventory balance each month equal to 25% of the following month's forecasted unit sales. They had 375 units on hand on January 1, 2xxx. Production and Direct Materials Information Centereld has the following standard quantities and costs of direct materials to produce one Turf Monster: 20 pounds of direct materials $6 per pound Management desires ending inventory at the end of each month equal to 15% of the following month's production needs. The cost of direct materials purchased in a month is paid according to the following terms: 30% in the month of purchase 50% in the month following purchase 20% in the second month following purchase The January lst accounts payable balance is $31,500 and will be paid according to the terms above. Direct labor Information The following standard quantity and cost information has been developed by Centereld: ? hours of direct labor $18 wage rate per direct labor hour Centereld guarantees 40 hours of work each week for their production employees. Centereld has also agreed to pay for a minimum of 8,500 hours per month. Manufacturing Overhead Information Centereld applies manufacturing overhead to it's product based on direct labor hours. The following amounts are the variable and xed amounts of manufacturing overhead expected for 23:30:: 515 variable manufacturing overhead per direct labor hour $425,000 xed manfuacturing overhead each month, excluding depreciation $275,000 depreciation per month Selling and Administrative Expense Information The following amounts are the variable and xed selling and administrative expense expected for 2xxx: $8 varaible selling and adminstrative expenses per direct labor hour $140,000 xed manufacturing overhead each month, exlcuding depreciation $60,000 depreciation per month Page 1 Chapter 2 Homework -- Forecasting Centereld uses the following information to prepare cash forecasts for 2xxx: $750,000 open line of credit 14% annual interest rate for the line of credit $25,000 minimum required cash balance at the end of each month Interest on antllr balance on the line of credit will be paid when the principal is repaid The bank requires any amounts drawn on the line of credit in $1,000 increments The following transactions must be included in the cash forecasts for Centereld: $125,000 dividend paid to shareholders in January $5,000 dividend paid to shareholders in March $160,000 equipment purchased in February' $30,000 opening cash balance on January 1, 2:00: 1} Create a sales forecast 2} Prepare a schedule of cash collections 3} Create a production forecast 4} Create a direct materials forecast 5} Prepare a schedule of cash pawnents 6} Create a direct labor forecast 'f} Create a manufacturing overhead forecast 8} Create a selling and adminstrative forecast 9} Prepare a cash forecast Page 2
