Donahue Company is preparing budgets for the third quarter ending Sept 30, 2017. Budgeted sales for the next five months are: July 20,AAA units Aug 50,BBB units Sept 30,CCC units Oct 25,DDD units Nov 15,000 units See instructions in table below: July 20,AAA units becomes 20,670 units. Aug 50,BBB units becomes 50,313 units. Sept 30,CCC units becomes 30,807 units. Oct 25,DDD units become 25,836 units. Nov remains at 15,000 units. The selling price is $15 per unit. All sales are on account. Donahue's collection pattern is 60% collected in the month of sale and remaining amount in the month following sale. The June 30 Accounts Receivable balance of $50,000 will be collected in full. The management at Donahue Company wants ending Finished Goods Inventory to be equal to 25% of the following month's budgeted sales in units. At Donahue Company, five pounds of material are required per unit of product. Management wants materials on hand at the end of each month equal to 15% of the following month's production. Material cost is $0.50 per pound. 30% of a month's purchases is paid for in the month of purchase and the remainder is paid in the following month. The June 30 Accounts Payable balance is $20,000. At Donahue, each unit of product requires 0.06 hours (3.6 minutes) of direct labor. The company has a "no layoft" policy and in exchange for the "no layoff" policy, workers agree to a wage rate of $15 per hour regardless of the hours worked (no overtime pay). For the next three months, the direct labor workforce will be paid for a minimum of 2,000 hours per month. At Donahue, manufacturing overhead is applied to units of product on the basis of direct labor hours. The variable manufacturing overhead rate is $25 per direct labor hour. Fixed manufacturing overhead is $40,000 per month and includes $10,000 of non-cash costs. At Donahue, the selling and administrative expenses budget is divided into variable and fixed components. The variable selling and administrative expenses are $0.55 per unit sold. Fixed selling and administrative expenses are $60,000 per month. The fixed selling and administrative expenses include $15,000 in costs that are not cash outflows of the current month. The company: Has an July 1 cash balance of $55,000 Maintains a minimum cash balance of $35,000 Borrows on the first day of the month and repays loans on the last day of the quarter Maintains a 12% open line of credit for $95,000 Pays a cash dividend of $45,000 in Aug Cash purchases of equipment, $155,200 in July and $54,800 in Sept, respectively Donahue reported the following account balances prior to preparing its budgeted financial statements Land - $65,000 Equipment - $180,000 Ordinary shares - $195,000 Retained eamings - $X *This Retained earnings figure will be the amount needed to balance off your balance sheet on June 30th i.e. the closing balances on June 30" before you step into the third quarter. Required: 10. Cash Budget 11. Budgeted Income Statement 12. Budgeted Balance Sheet *For the balance sheet as at Sept 30h, there will be a difference between the final totals. This is due to calculations based on rounded off units. To balance the totals, simply close off this difference to the Retained Eamings account. 3. Production Budget Units sold Add: Desired Ending finished goods Total Units Needed Less: Beginning finished goods Required production Donahue Company. Production Budget For the Quarter Ending September 30 July August 20,670 50,313 12,578 7,702 33,248 58,015 5,168 12,578 28,080 45,437 September 30,807 6,459 37,266 7,702 29,564 Quarter 101,790 6,459 108,249 5,168 103,081 Working Notes: Calculation of Desired Ending finished Goods (Next Month Sales x 25%) June (20,670 x 25%) July (50,313 x 25%) August (30,807 x 25%) September (25,836 x 25%) October (15,000 x 25%) 5,168 12,578 7,702 6,459 3,750 Quarter 4. Direct Materials Budget Donahue Company. Direct Materials Budget For the Quarter Ending September 30 July August Required Productions (a) 28,080 45,437 Direct Material required per unit (b) Total Production of Required (a xb) 140,400 227,185 Add: Desired Ending Raw Material Inventory 34,078 22,173 Total Units available for production 174,477 249,359 Less: Estimate Beginning Raw material Inventory 21,060 34,078 Requried Purchases (units) (c) 153,417 215,281 Price per unit (d) $ 0.50 $ 0.50 Budgeted Purchase (cxd) $ 76,709 $ 107,640 September 29,564 5 147.820 17,345 165,165 22,173 142,992 $ 0.50 $ 71,496 515,405 17,345 532,750 21,060 511,690 0.50 255,845 $ $ Working Notes: Total Units of Production required in October October Sales Add: Desired Ending Inventory Less: Beginning Inventory Required Production (a) Direct Material required per unit (b) Total Production of Required (axb) 25,836 3,750 (6,459) 23,127 115,635 Calculation of Desired Ending Inventory (Next Month Production x 15%) June (140,404 x 15%) July (227,183 x 15%) August (147,821 x 15%) September (115,635 x 15%) 21,060 34,078 22,173 17,345 5. Company's Expected Cash Payment July August September Quarter 20,000 23,013 From Accounts payable July Purchase (76,709 x 30%, 76,709 x 70%) August Purchase (107,640 x 30%, 107,640 x 70%) September Purchase (71,496 x 30%) Total Cash Payment 53,696 32,292 75,348 21,449 96,797 43,013 8 5,988 225,798 Answer With Working note given below Finished goods inventory is valued at - Direct material, Direct labor and Variable overheads Budgeted Production July Aug Budgeted Sales (Units) 20,670 50,313 Add: Closing inventory (25% of next month produciton) 12,578 7,702 33,248 58,015 Less: Opening Inventory 5,168 12,578 Budgeted Production 28,081 45,437 Closing inventory of current period will be opening inventory of next period Sep 30,807 6,459 37,266 7,702 29,564 Quarter 101,790 6,459 108,249 5,168 103,082 Budgeted material for Production July Aug For production 140,404 227,183 Add: Closing inventory (15% of next month produciton) 34,077 22,173 174,481 249,356 Less: Opening Inventory 21,061 3 4,077 Budget- Purchase unit for production 153,421 215,278 Closing inventory of current period will be opening inventory of next period Sep 147,821 17,345 165,167 22,173 142,993 Quarter 515,408 17,345 532,753 21,061 511,692 Quarter 6,185 Direct labor budget Direct labor hours-0.06 hours/unit Direct labor budget in $ minimum payment (2000 hours x $15) Actual payment (higher of two) July 1,685 25,273 30,000 30,000 Aug 2,726 40,893 30,000 40,893 Sep 1,774 26,608 30,000 30,000 100,893 Manfacturing overhead budget variable manufacturing cost-$25/hour Fixed manufacturing cost (Excluding non cash cost) Total July 42,121 30,000 Aug 68,155 30,000 Sep 44,346 30,000 Quarter 154,622 90,000 72,121 98,155 74,346 244,622 SUIJUNJU 2022 6,459 Ending Finished Goods inventory budget Units Direct Material Direct labour Varibale manufactuing overheads 16,148 5,813 9,689 31,649 Selling and administrative overheads Selling and admin overheads Fixed Selling and admin OH (Excluding non cash cost) Total July 11,369 45,000 Aug 1 27,672 45,000 Sep 16,944 45,000 Quarter 55,985 135,000 56,369 72,672 61,944 190,985 Donahue Company is preparing budgets for the third quarter ending Sept 30, 2017. Budgeted sales for the next five months are: July 20,AAA units Aug 50,BBB units Sept 30,CCC units Oct 25,DDD units Nov 15,000 units See instructions in table below: July 20,AAA units becomes 20,670 units. Aug 50,BBB units becomes 50,313 units. Sept 30,CCC units becomes 30,807 units. Oct 25,DDD units become 25,836 units. Nov remains at 15,000 units. The selling price is $15 per unit. All sales are on account. Donahue's collection pattern is 60% collected in the month of sale and remaining amount in the month following sale. The June 30 Accounts Receivable balance of $50,000 will be collected in full. The management at Donahue Company wants ending Finished Goods Inventory to be equal to 25% of the following month's budgeted sales in units. At Donahue Company, five pounds of material are required per unit of product. Management wants materials on hand at the end of each month equal to 15% of the following month's production. Material cost is $0.50 per pound. 30% of a month's purchases is paid for in the month of purchase and the remainder is paid in the following month. The June 30 Accounts Payable balance is $20,000. At Donahue, each unit of product requires 0.06 hours (3.6 minutes) of direct labor. The company has a "no layoft" policy and in exchange for the "no layoff" policy, workers agree to a wage rate of $15 per hour regardless of the hours worked (no overtime pay). For the next three months, the direct labor workforce will be paid for a minimum of 2,000 hours per month. At Donahue, manufacturing overhead is applied to units of product on the basis of direct labor hours. The variable manufacturing overhead rate is $25 per direct labor hour. Fixed manufacturing overhead is $40,000 per month and includes $10,000 of non-cash costs. At Donahue, the selling and administrative expenses budget is divided into variable and fixed components. The variable selling and administrative expenses are $0.55 per unit sold. Fixed selling and administrative expenses are $60,000 per month. The fixed selling and administrative expenses include $15,000 in costs that are not cash outflows of the current month. The company: Has an July 1 cash balance of $55,000 Maintains a minimum cash balance of $35,000 Borrows on the first day of the month and repays loans on the last day of the quarter Maintains a 12% open line of credit for $95,000 Pays a cash dividend of $45,000 in Aug Cash purchases of equipment, $155,200 in July and $54,800 in Sept, respectively Donahue reported the following account balances prior to preparing its budgeted financial statements Land - $65,000 Equipment - $180,000 Ordinary shares - $195,000 Retained eamings - $X *This Retained earnings figure will be the amount needed to balance off your balance sheet on June 30th i.e. the closing balances on June 30" before you step into the third quarter. Required: 10. Cash Budget 11. Budgeted Income Statement 12. Budgeted Balance Sheet *For the balance sheet as at Sept 30h, there will be a difference between the final totals. This is due to calculations based on rounded off units. To balance the totals, simply close off this difference to the Retained Eamings account. 3. Production Budget Units sold Add: Desired Ending finished goods Total Units Needed Less: Beginning finished goods Required production Donahue Company. Production Budget For the Quarter Ending September 30 July August 20,670 50,313 12,578 7,702 33,248 58,015 5,168 12,578 28,080 45,437 September 30,807 6,459 37,266 7,702 29,564 Quarter 101,790 6,459 108,249 5,168 103,081 Working Notes: Calculation of Desired Ending finished Goods (Next Month Sales x 25%) June (20,670 x 25%) July (50,313 x 25%) August (30,807 x 25%) September (25,836 x 25%) October (15,000 x 25%) 5,168 12,578 7,702 6,459 3,750 Quarter 4. Direct Materials Budget Donahue Company. Direct Materials Budget For the Quarter Ending September 30 July August Required Productions (a) 28,080 45,437 Direct Material required per unit (b) Total Production of Required (a xb) 140,400 227,185 Add: Desired Ending Raw Material Inventory 34,078 22,173 Total Units available for production 174,477 249,359 Less: Estimate Beginning Raw material Inventory 21,060 34,078 Requried Purchases (units) (c) 153,417 215,281 Price per unit (d) $ 0.50 $ 0.50 Budgeted Purchase (cxd) $ 76,709 $ 107,640 September 29,564 5 147.820 17,345 165,165 22,173 142,992 $ 0.50 $ 71,496 515,405 17,345 532,750 21,060 511,690 0.50 255,845 $ $ Working Notes: Total Units of Production required in October October Sales Add: Desired Ending Inventory Less: Beginning Inventory Required Production (a) Direct Material required per unit (b) Total Production of Required (axb) 25,836 3,750 (6,459) 23,127 115,635 Calculation of Desired Ending Inventory (Next Month Production x 15%) June (140,404 x 15%) July (227,183 x 15%) August (147,821 x 15%) September (115,635 x 15%) 21,060 34,078 22,173 17,345 5. Company's Expected Cash Payment July August September Quarter 20,000 23,013 From Accounts payable July Purchase (76,709 x 30%, 76,709 x 70%) August Purchase (107,640 x 30%, 107,640 x 70%) September Purchase (71,496 x 30%) Total Cash Payment 53,696 32,292 75,348 21,449 96,797 43,013 8 5,988 225,798 Answer With Working note given below Finished goods inventory is valued at - Direct material, Direct labor and Variable overheads Budgeted Production July Aug Budgeted Sales (Units) 20,670 50,313 Add: Closing inventory (25% of next month produciton) 12,578 7,702 33,248 58,015 Less: Opening Inventory 5,168 12,578 Budgeted Production 28,081 45,437 Closing inventory of current period will be opening inventory of next period Sep 30,807 6,459 37,266 7,702 29,564 Quarter 101,790 6,459 108,249 5,168 103,082 Budgeted material for Production July Aug For production 140,404 227,183 Add: Closing inventory (15% of next month produciton) 34,077 22,173 174,481 249,356 Less: Opening Inventory 21,061 3 4,077 Budget- Purchase unit for production 153,421 215,278 Closing inventory of current period will be opening inventory of next period Sep 147,821 17,345 165,167 22,173 142,993 Quarter 515,408 17,345 532,753 21,061 511,692 Quarter 6,185 Direct labor budget Direct labor hours-0.06 hours/unit Direct labor budget in $ minimum payment (2000 hours x $15) Actual payment (higher of two) July 1,685 25,273 30,000 30,000 Aug 2,726 40,893 30,000 40,893 Sep 1,774 26,608 30,000 30,000 100,893 Manfacturing overhead budget variable manufacturing cost-$25/hour Fixed manufacturing cost (Excluding non cash cost) Total July 42,121 30,000 Aug 68,155 30,000 Sep 44,346 30,000 Quarter 154,622 90,000 72,121 98,155 74,346 244,622 SUIJUNJU 2022 6,459 Ending Finished Goods inventory budget Units Direct Material Direct labour Varibale manufactuing overheads 16,148 5,813 9,689 31,649 Selling and administrative overheads Selling and admin overheads Fixed Selling and admin OH (Excluding non cash cost) Total July 11,369 45,000 Aug 1 27,672 45,000 Sep 16,944 45,000 Quarter 55,985 135,000 56,369 72,672 61,944 190,985