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The East Division of Kensic Company manufactures a vital component that isused in one of Kensic?s major product lines. The East Division has beenexperiencing some difficulty in coordinating activities between its variousdepartments, which has resulted in some shortages of the component at criticaltimes. To overcome the shortages, the manager of East Division has decided toinitiate a monthly budgeting system that is integrated between departments.The first budget is to be for the second quarter of the current year (April, Mayand June). To assist in developing the budget figures, the divisional controllerhas accumulated the following information.Sales: Sales through the first three months of the current year were 30,000units. Actual sales in units for January, February, and March, and planned salesin units over the next five months, are given below:January (actual) 6,000February (actual) 10,000March (actual) 14,000April (planned) 20,000May (planned) 35,000June (planned) 50,000July (planned) 45,000August (planned) 30,000In total, the East Division expects to produce and sell 250,000 units during thecurrent year.Direct Material:Two different materials are used in production of thecomponent. Data regarding these materials are given below:

Units of Direct CostDirect Materials per per Inventory atMaterial Finished Component lb/ft March 31

No. 208 4 pounds $5.00 46,000 poundsNo. 311 9 feet 2.00 69,000 feet

Material No. 208 is sometimes in short supply. Therefore, the East Divisionrequires that enough of the material be on hand at the end of each month toprovide for 50% of the following month?s production needs. Material No. 311 iseasier to get, so only one-third of the following month?s production needs mustbe on hand at the end of each month.Direct Labor: The East Division has three department through which thecomponents must past before they are completed. Information relating to directlabor in these departments is given below:

Direct Labor-Hours Cost perPer Finished DirectDepartment Component Labor-HourShaping .25 $18.00Assembly .70 16.00Finishing .10 20.00Direct labor is adjusted to the workload each month.Manufacturing Overhead: East Division manufactured 32,000 componentsduring the first three months of the current year. The actual variable overheadcosts incurred during this three-month period are shown below. Each Division?scontroller believes that the variable overhead costs incurred during the last ninemonths of the year will be at the same rate per component as experiencedduring the first three months.Utilities $ 57,000Indirect Labor 31,000Supplies 16,000Other 8,000Total variable overhead $112,000The actual fixed manufacturing overhead costs incurred during the first threemonths amounted to $1,170,000. The East Division has planned fixedmanufacturing overhead costs for the entire year as follows:

Supervision $ 872,000Property Taxes 143,000Depreciation 2,910,000Insurance 631,000Other 72,000Total fixed manufacturingOverhead $4,628,000Finished Goods Inventory:The desired monthly ending inventory ofcompleted components is 20% of the next month?s estimated sales. The EastDivision has 4,000 units in the finished goods inventory on March 31.Selling and Administrative Expenses: Selling and Administrative Expensesare budgeted at $400,000 per month plus 1% of total credit sales for the month.

REQUIRED:

1.Prepare a production budget for the East Division for the second quarterending June 30. Show computations by month and in total for the quarter.

(5 pts.) _____2.Prepare a direct materials purchases budget in units and dollars for eachtype of material for the second quarter ending June 30. Again showcomputations by month and in total for the quarter.(5 pts.) _____3.Prepare a schedule of cash payments for direct materials for the secondquarter. Assume that all direct materials are purchased on account andthe East Division pays for of the amount purchased in the month ofpurchase and the other in the month following the purchase. Thebalance in the Accounts Payable account at 3/31 was $351,200.(5 pts.) _____4.Prepare a direct labor budget in hours and in dollars for the secondquarter ending June 30. Again show computations by month in total forthe quarter.(5 pts.) _____

5.Prepare a manufacturing overhead budget for the second quarter. Showcomputations by month and in total for the quarter.(5 pts.) _____6.Compute a new ?selling price per unit? for the East Division that willenable them to accumulate a balance of $100,000 in their cash account bythe end of the second quarter. Assume that the cash balance at March 31was $10,000.(5 pts.) _____7.Using the selling price per unit computed in #6 prepare a sales budget forthe second quarter. Show computations by month and in total for thequarter.(5 pts.) _____8.Prepare a schedule of expected cash collections for the second quarterusing the selling price per unit calculated in question #6. Assume that theEast Division collects on its credit sales as follows; 70% in the month ofsale, 20% in the month following the credit sale, 10% in the secondmonth following the credit sale. To compute the balance in AccountsReceivable at 3/31 assume that the selling price per unit prior to 3/31 was$75.00.(5 pts.) _____9.Prepare a cash budget for the second quarter in month and in total for theEast Division.(10 pts.)

KENSIC COMPANY SALES BUDGET April May June Total Units 20,000 35,000 50,000 105,000 X Sales price per unit 75.00 75.00 75.00 75.00 1,500,000 2,625,000 3,750,000 105,075 Total Sales PRODUCTION BUDGET April Sales in Units May June Total 20,000 35,000 50,000 105,000 Desired units of ending inventory 7,000 10,000 9,000 9,000 Desired Total Units 27,000 45,000 59,000 114,000 Less: desired units of beginning inventory 4,000 7,000 10,000 4,000 Total production units 23,000 38,000 49,000 110,000 DIRECT MATERIALS BUDGET (No. 208) April Units to be produced May June Quarter 23,000 38,000 49,000 110,000 4 4 4 4 92,000 152,000 196,000 440,000 Add: desired end. Inv. Subtotal Less: Beginning Inventory Total materals to be purchased x $5.00 76000 168,000 46000 122,000 $5.00 98000 250,000 76000 174,000 $5.00 84000 280,000 98000 182,000 $5.00 84000 524,000 46000 478,000 $5.00 Total cost of purchases 610,000 870,000 910,000 2,390,000 x 4 lbs. Total material needs DIRECT MATERIALS BUDGET (No. 311) April May June Quarter Units to be produced x 9 feet Total material needs Add: Desired end. Inv. Subtotal Less: Beginning Inventory Total materials to be purchased x $2.00 23000 9 207,000 114,000 321,000 69,000 252,000 $2.00 38000 9 342,000 147,000 489,000 114,000 375,000 $2.00 49000 9 441,000 126,000 567,000 147,000 420,000 $2.00 110000 9 990,000 126,000 1,116,000 69,000 1,047,000 $2.00 Total cost of purchased 504,000 750,000 840,000 2,094,000 SCHEDULE OF CASH PAYMENTS FOR DIRECT MATERIALS April May June Quarter Accounts Payable 3/31 April May June Total DIRECT LABOR BUDGET April May June Quarter Units to be produced x .25 (Shaping) Hrs. Shaping Dept. x $18.00 Labor cost Shaping dept. x .70 (Assembly) Hrs. Assembly Dept. x $16.00 Labor cost for Assembly dept. x .10 (Finishing) Hrs. Finishing Dept. x $20.00 Labor cost Finishing dept. 23,000 0.25 5,750 $18.00 103,500 0.7 16,100 $16.00 257,600 0.1 2,300 $20.00 46,000 38,000 0.25 9,500 $18.00 171,000 0.7 26,600 $16.00 425,600 0.1 3,800 $20.00 76,000 49,000 0.25 12,250 $18.00 220,500 0.7 34,300 $16.00 548,800 0.1 4,900 $20.00 98,000 110,000 0.25 27,500 $18.00 495,000 0.7 77,000 $16.00 1,232,000 0.1 11,000 $20.00 220,000 Total Labor Cost 407,100 672,600 867,300 1,947,000 MANUFACTURING OVERHEAD BUDGET April Variable Overhead: Utilities Indirect Labor Supplies Other Total Variable Overhead Fixed Overhead Total Overhead less: depreciation May June Quarter Rate 1.78 0.97 0.5 0.25 385,667 385,667 385,667 1,157,001 2,910,000 2,910,000 2,910,000 8,730,000 Total Overhead paid in CASH BUDGET April May June Quarter Total Cash Receipts Cash Payments: Material Purchases Direct Labor Overhead Fixed Sell. & Admin. Variable Sell. & Admin. Total Cash Payments Excess (deficiency) of cash Beg. Balance of cash Endng Balance of cash SALES BUDGET (Repeated) February Units Sales price per unit March April May 14,000 $75.00 20,000 75.00 35,000 75.00 105,000 75.00 $750,000 Total Sales $1,050,000 $20,075 $35,075 $105,075 SCHEDULE OF EXPECTED CASH COLLECTIONS April February (.10) March (.20; .10) April (.70;.20;.10) May (.70;.20) June (.70) Totals Quarter 10,000 $75.00 May 75,000 June 105,000 Quarter