Do it by order.
PARTI (55 possible marks) Sunflower Company manufactures and sells Sports Shoes. Information on budgeted sales in units is given below. Use this information to answer all parts of question one. Month Sales in Units | May 10,000 June 9,000 July 10,200 13,000 August September 11,000 October 7,000 November 8,500 a. The selling price of the sports shoe is AED 145 b. All sales are on account. Based on past experience, sales are collected in the following pattern: Month of sale Month following sale Second month following sale 55% 35% 10% c. The company maintains finished goods inventories equal to 25% of the following month's sales. The beginning inventory of finished goods on July 1st was 2,800 units d. Each Bag requires 6 pounds of raw materials. e. The company requires that the ending inventory of raw materials be equal to 20% of the following month's production needs. The beginning inventory of raw materials inventory was on July 1st was 3,150 units f. The raw material costs $10.50 per pound. g. 80% of a month's purchases of raw materials is paid for in the month of purchase; the remaining is paid for in the following month. h. The accounts payable on Julyst will be $85,000. 2 Required: Prepare: 1. Prepare a sales budget, by month and in total, for the Third quarter. (3 marks) 2. Prepare a schedule of expected cash collections, by month and in total, for the Third quarter. (15 marks) 3. Prepare a production budget for each of the months July, August, September, October. (10 marks) 4. Prepare a direct materials budget, by month and in total, for the Third quarter (12 marks) 5. Prepare a schedule of expected cash disbursements, by month and in total, for the Third quarter. (15 marks) 3 PART II Question 1 (15 marks) Galaxy Inc. is a wholesale distributor of Apple laptop bags. Thus, peak sales occur in May of each year as shown in the company's sales budget for the second quarter, given below: April May June Budgeted Sales (All on account) $ 82,000 $ 86,000 $87,000 From past experience, the company has learned that 50% of a month's sales are collected in the month of sale, 40% are collected in the month following sale, and the remaining 10% are collected in the second month following sale. February sales totaled $82,000, and March sales totaled $84,000. Required: Prepare a schedule of expected cash collections from sales for each month (April, May, and June) and the quarter total. 4 Question 2 (25 marks) Montieth manufactures and sells formal coats. It is ready to begin its fourth quarter, in which they have their highest sales. The company has approached the Bank for a 90-day loan of $24,000. The Bank has asked the corporation to submit a cash budget for the 90 days period. The following data has provided to you: a. At the beginning of the fourth quarter the cash balance will be $21,000 b. Sales figures is given below Month Total Cash collection from Sales October 2019 $62,000 November 2019 $85,000 December 2019 $95,000 C. Budgeted raw materials purchase and expenses is given below October November December Materials Purchase 62,000 60,000 58,000 Salary Expense 18,000 18,000 18,000 Utilities Expense 1,800 1,600 1,900 Depreciation 3,000 3,000 3,000 Expense Rent Expense 2,400 2,400 2,400 d. Rent is always paid in the following month. e. Rent due for the month of September to be paid in October is 2,200 $ f. The company paid a dividend of $1,800 in December g. They bought a computer for $2,800 and paid in cash in October h. In preparing the cash budget, assume that the $24,000 loan will be taken in the beginning of October and repaid in December with interest of $240. Required: Prepare 1. Prepare a cash budget for the fourth quarter. 5
