Johnson Corporation

Johnson Corporation manufactures and sells one product. The following information concerns operations for Year 2the coming yearand for the first two quarters of Year 3:

The companys product sells for $10 per unit. Budgeted sales in units for the next six quarters are as follows (all sales are on credit):

Year 2 Quarter: Year 3 Quarter:

50,000 1 70,000

60,000 2 80,000

100,000

40,000

Sales are collected in the following pattern: 75% in the quarter the sales are made, and the remaining 25% in the following quarter. On January 1, Year 2, the companys balance sheet showed $75,000 in accounts receivable, all of which will be collected in the first quarter of the year. Bad debts are negligible and can be ignored.

Johnson desires an ending finished goods inventory at the end of each quarter equal to 30% of the budgeted unit sales for the next quarter. On December 31, Year 1, the company had 15,000 units on hand.

Five pounds of raw materials inventory are required to complete one unit of product. The company requires ending raw materials inventory at the end of each quarter equal to 10% of the following quarters productions needs. On December 31, Year 1, the company had 23,000 pounds of raw materials on hand.

The raw material costs $.90 per pound. Raw material purchases are paid for in the following manner: 60% paid in the quarter the purchases are made, and the remaining 40% paid in the following quarter. On January 1, Year 2, the companys balance sheet showed $89,000 in accounts payable for raw material purchases, all of which will be paid for in the first quarter of the year.

Required:

Prepare the following budgets and schedules for the year, showing both quarterly and total figures:

Sales budget

Schedule of expected cash collections

Production budget

Direct materials budget

Schedule of expected cash payments for purchases of materials