EYK9-1. Business Decision Case The sales department of Donovan Manufacturing, Inc. has completed the

following sales forecast for the months of January through March 2016 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, 2016, are 10% of the next quarters unit sales forecast, which are

60,000 units of J and 30,000 units of K. The January 1, 2016, 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 manufacture; 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, 2016, were 19,000 pounds of A

and 7,000 pounds of B. Desired inventories at March 31, 2016, are 14,000 pounds of A and 8,000

pounds of B.

Each unit of J requires 0.5 hour of direct labor in the factory; each 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, 2016, 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 2016 from December 2015 sales will be $1,050,000.

The January 1, 2016, 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....................$1,500,000 $1,300,000 $1,400,000

Selling and administrative expenses .......390,000 410,000 400,000

Interest expense.......................90,000 90,000 90,000

Income tax payment....................0 0 210,000

Capital expenditures ...................124,000 110,000 50,000

Cash dividends........................300,000 0 0

Required

f . Prepare the selling and administrative expense budget for the quarter ended March 31, 2016.

g. Prepare a schedule of cash collected from customers for the quarter ended March 31, 2016.

h. Prepare the cash budget for the quarter ended March 31, 2016

Please help with f, g and h :)