Hershel$$s Chocolate produces chocolate bars and sells them by the case $(1$ unit $=1$ case$).$ Information to be used for the operating budget this coming year follows:

Average sales price for each case is estimated to be $$25.$ Unit sales for this coming year, ending December $31,$ are expected to be as follows:

First quarter $80,000$

Second quarter $84,000$

Third quarter $88,000$

Fourth quarter $97,000$

Finished goods inventory is maintained at a level equal to $15$ percent of the next quarter$$s sales. Finished goods inventory at the end of the fourth quarter budget period is estimated to be $13,000$ units.

Each unit of product requires $5$ pounds of cocoa beans for direct materials, at a cost of $$3$ per pound. Management prefers to maintain ending raw materials inventory equal to $10$ percent of next quarter$$s materials needed in production. Raw materials inventory at the end of the fourth quarter budget period is estimated to be $43,000$ pounds.

Each unit of product requires $0\mathrm{.}10$ direct labor hours at a cost of $$14$ per hour.

Variable manufacturing overhead costs are

Indirect materials $$0\mathrm{.}20$ per unit

Indirect labor $$0\mathrm{.}15$ per unit

Other $$0\mathrm{.}10$ per unit

Fixed manufacturing overhead costs per quarter are

Salaries $$80,000$

Other $$70,000$

Depreciation $$55,625$

Required:

Prepare a sales budget

Prepare a production budget

Prepare a direct materials purchases budget

Prepare a direct labor budget

Prepare a manufacturing overhead budget

As the production manager, what concerns, if any, do you have about production requirements for each of the four quarters?

$33.$ Selling and Administrative Budget and Budgeted Income Statement. $($The previous problem must be completed before working this problem.$)$ Hershel$$s Chocolate produces chocolate bars. Management estimates all selling and administrative costs are fixed. Quarterly selling and administrative cost estimates for the coming year follow.

Salaries $$170,000$

Rent $ $65,000$

Advertising $$120,000$

Depreciation $ $75,000$

Other $ $36,000$

Required:

Use the information presented previously to prepare a selling and administrative budget. R

Use the information from the previous problem and from requirement a of this problem to prepare a budgeted income statement.

How will management use the information presented in the budgeted income statement?

$34.$ Budgeting for Cash Collections and Cash Payments. Hershel$$s Chocolate produces chocolate bars. The treasurer at Hershel$$s Chocolate is preparing the cash budget and would like to know when cash collections from sales and cash payments for materials will occur. The dollar amount of the company$$s quarterly sales and direct materials purchases are projected to be as follows $($this information is the result of working the previous problems for Hershel$$s Chocolate$)$:

$1$st $2$nd $3$rd $4$th

Sales $$2,000,000$ $$2,100,000$ $$2,200,000$ $$2,425,000$

Direct materials purchases $$1,215,000$ $$1,276,125$ $$1,349,400$ $$1,417,575$

All sales are made on credit. The company expects to collect $60$ percent of sales in the quarter of sale and $40$ percent the quarter following the sale. Accounts receivable at the end of last year totaled $$770,000,$ all of which will be collected during the first quarter of this coming year.

All direct materials purchases are on credit. The company expects to pay $80$ percent of purchases in the quarter of purchase and $20$ percent the following quarter. Accounts payable at the end of last year totaled $$257,000,$ all of which will be paid during the first quarter of this coming year.

Required:

Prepare a budget for cash collections from sales.

Prepare a budget for cash payments for purchases of materials.

How will the treasurer use this information?