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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 S15 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 layoff" 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 of2,000 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 S25 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, S155,200 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 - Sx "This Retained earnings figure will be the amount needed to balance off your balance sheet on June 30 i.e the closing balances on June 30h before you step into the third quarter. Required: 8. Ending Finished Goods Inventory Budget 9. Selling & Administration Expenses Budget 10. Cash Budget 11. Budgeted Income Statement 12. Budgeted Balance Sheet 1) Sales Budget Donahue Company. Sales Budget For the Quarter Ending September 30 July August September Quarter Units sold (a) Sales price per unit (b) 20,670 50,313 30,807 101,790 15 $ 15 $ $ 15 $ 15 Total Sales (ax b) 310,050 $ 462,105 1,526,850 754,695 2. Company's Expected Cash Collection July September August Quarter From Accounts receivable July Sale August Sale 50,000 124,020 186,030 452,817 301,878 277,263 September Sale Total Cash Collection 576,837 236,030 579,141 1,392,008 Working Notes July September August Collection in July July Sale (310,050x 60 %) Collection in August July Sale (310,050x 40 %) August sales (754,695 x 60 %) Collection in September August sales (754,695 x40 %) September sales (462,105 x 60 % ) 186,030 X 124,020 X 452,817 301,878 277,263 X 3) Production Budget Donahue Company Production Budget For the Quarter September Ending Particular July August September Quarter 20,670.00 50,313.00 Estimated Sales 30,807.00 1,01,790.00 Add:Desired Closing stock(25% of following months sale) 12,578.25 7,701.75 6,459.00 26,739.00 1,28,529.00 33,248.25 58,014.75 37,266.00 5,167.50 12,578.25 less: opening stock 7,701.75 25,447.50 Estimated Production 28,080.75 45,436.50 29,564.25 1,03,081.50 4) Material Budget Donahue Company Direct Material Budget For the Quarter September Ending Particular September July August Quarter Budgeted Production 1,03,081.50 28,080.75 45,436.50 29,564.25 Raw material per unit needed 5.00 5.00 5.00 1,40,403.75 2,27,182.50 1,47,821.25 5,15,407.50 Add:Desired Closing Inventory 34,077.38 22,173.19 17,345.25 73,595.81 2,49,355.69 5,89,003.31 Total needs 1,74,481.13 1,65,166.50 Less: opening stock 21,060.56 34,077.38 22,173.19 77,311.13 Raw material to be purchased 2,15,278.31 1,53,420.56 1,42,993.31 5,11,692.19 cost of raw material (per pound) $ 0.50 0.50 0.50 cost of raw material to be purchased 76,710.28 1,07,639.16 71,496.66 2,55,846.09 5) Donahue Company Expected cash disbursement For the Quarter September Ending September Quarter July August Cost of raw material to be purchased 76710.28 107639.16 71496.66 255846.09 Cash (30%) 23013.08 32291.75 21449.00 76753.83 75347.41 Credit(70%) 53697.20 50047.66 179092.27 Payment for earlier month purchase 53697.20 75347.41 20,000 149044.61 Payment for current month purchase 23013.08 32291.75 21449.00 76753.83 43,013.08 85,988.94 96,796.41 Payments 225798.43 (9 Donahue Company Direct Labour Budget For the Quarter September Ending September Particular July August Quarter Budgeted Production 28,080.75 45,436.50 29,564.25 1,03,081.50 Direct labour hour per unit 0.06 0.06 0.06 0.06 2,726.19 1,773.86 Total direct labour hour needed 1,684.85 6,184.89 Direct labour cost per hour $ 15 15 15 Total direct labour cost $ 25,272.68 40,892.85 26,607.83 92,773.35 7) Donahue Company Manufacturing overhead budget For the Quarter September Ending Particular July August September Quarter Budgeted Direct Labour hour 6,184.89 1,684.85 2,726.19 1,773.86 Variable manufacturing overhead rate 25 25 25 Total Variable manufacturing overhead cost 42,121.13 68,154.75 44,346.38 1,54,622.25 Fixed Manufacturing overhead 40000 40000 40000 less: Non cash fixed manufacturing overhead 10,000 10,000 10,000 Cash disbursement for manufacturing overhead 72,121.13 98,154.75 74,346.38 2,44,622.25 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 S15 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 layoff" 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 of2,000 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 S25 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, S155,200 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 - Sx "This Retained earnings figure will be the amount needed to balance off your balance sheet on June 30 i.e the closing balances on June 30h before you step into the third quarter. Required: 8. Ending Finished Goods Inventory Budget 9. Selling & Administration Expenses Budget 10. Cash Budget 11. Budgeted Income Statement 12. Budgeted Balance Sheet 1) Sales Budget Donahue Company. Sales Budget For the Quarter Ending September 30 July August September Quarter Units sold (a) Sales price per unit (b) 20,670 50,313 30,807 101,790 15 $ 15 $ $ 15 $ 15 Total Sales (ax b) 310,050 $ 462,105 1,526,850 754,695 2. Company's Expected Cash Collection July September August Quarter From Accounts receivable July Sale August Sale 50,000 124,020 186,030 452,817 301,878 277,263 September Sale Total Cash Collection 576,837 236,030 579,141 1,392,008 Working Notes July September August Collection in July July Sale (310,050x 60 %) Collection in August July Sale (310,050x 40 %) August sales (754,695 x 60 %) Collection in September August sales (754,695 x40 %) September sales (462,105 x 60 % ) 186,030 X 124,020 X 452,817 301,878 277,263 X 3) Production Budget Donahue Company Production Budget For the Quarter September Ending Particular July August September Quarter 20,670.00 50,313.00 Estimated Sales 30,807.00 1,01,790.00 Add:Desired Closing stock(25% of following months sale) 12,578.25 7,701.75 6,459.00 26,739.00 1,28,529.00 33,248.25 58,014.75 37,266.00 5,167.50 12,578.25 less: opening stock 7,701.75 25,447.50 Estimated Production 28,080.75 45,436.50 29,564.25 1,03,081.50 4) Material Budget Donahue Company Direct Material Budget For the Quarter September Ending Particular September July August Quarter Budgeted Production 1,03,081.50 28,080.75 45,436.50 29,564.25 Raw material per unit needed 5.00 5.00 5.00 1,40,403.75 2,27,182.50 1,47,821.25 5,15,407.50 Add:Desired Closing Inventory 34,077.38 22,173.19 17,345.25 73,595.81 2,49,355.69 5,89,003.31 Total needs 1,74,481.13 1,65,166.50 Less: opening stock 21,060.56 34,077.38 22,173.19 77,311.13 Raw material to be purchased 2,15,278.31 1,53,420.56 1,42,993.31 5,11,692.19 cost of raw material (per pound) $ 0.50 0.50 0.50 cost of raw material to be purchased 76,710.28 1,07,639.16 71,496.66 2,55,846.09 5) Donahue Company Expected cash disbursement For the Quarter September Ending September Quarter July August Cost of raw material to be purchased 76710.28 107639.16 71496.66 255846.09 Cash (30%) 23013.08 32291.75 21449.00 76753.83 75347.41 Credit(70%) 53697.20 50047.66 179092.27 Payment for earlier month purchase 53697.20 75347.41 20,000 149044.61 Payment for current month purchase 23013.08 32291.75 21449.00 76753.83 43,013.08 85,988.94 96,796.41 Payments 225798.43 (9 Donahue Company Direct Labour Budget For the Quarter September Ending September Particular July August Quarter Budgeted Production 28,080.75 45,436.50 29,564.25 1,03,081.50 Direct labour hour per unit 0.06 0.06 0.06 0.06 2,726.19 1,773.86 Total direct labour hour needed 1,684.85 6,184.89 Direct labour cost per hour $ 15 15 15 Total direct labour cost $ 25,272.68 40,892.85 26,607.83 92,773.35 7) Donahue Company Manufacturing overhead budget For the Quarter September Ending Particular July August September Quarter Budgeted Direct Labour hour 6,184.89 1,684.85 2,726.19 1,773.86 Variable manufacturing overhead rate 25 25 25 Total Variable manufacturing overhead cost 42,121.13 68,154.75 44,346.38 1,54,622.25 Fixed Manufacturing overhead 40000 40000 40000 less: Non cash fixed manufacturing overhead 10,000 10,000 10,000 Cash disbursement for manufacturing overhead 72,121.13 98,154.75 74,346.38 2,44,622.25