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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 $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: 7. Manufacturing Overhead Budget 8. Ending Finished Goods Inventory Budget 9. Selling & Administration Expenses Budget 10. Cash Budget 1) Sales Budget Donahue Company. Sales Budget For the Quarter Ending September 30 July August 20,670 50,313 $ 15 $ 15 $ 310,050 $ 754,695 Units sold (a) Sales price per unit (b) Total Sales (a xb) September 30,807 $ 15 $ 462,105 Quarter 101,790 $ 15 $ 1,526,850 2. Company's Expected Cash Collection July August September Quarter 50,000 186,030 From Accounts receivable July Sale August Sale September Sale Total Cash Collection 124,020 452,817 301,878 277,263 236,030 576,837 1,392,008 Working Notes July August September 186,030 Collection in July July Sale (310,050 x 60%) Collection in August July Sale (310,050 x 40%) August sales (754,695 x 60%) Collection in September August sales (754,695 x 40%) September sales (462,105 x 60%) 124,020 452,817 301,878 277,263 3) Production Budget Donahue Company Production Budget Particular For the Quarter September Ending July August September 20,670.00 50,313.00 30,807.00 Quarter Estimated Sales 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 33,248.25 58,014.75 37,266.00 1,28,529.00 less: opening stock 5,167.50 12,578.25 1 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 July August September Quarter Budgeted Production 28,080.75 45,436.50 29,564.25 1,03,081.50 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 Total needs 1,74,481.13 2,49,355.69 1,65,166.50 5,89,003.31 Less: opening stock 21,060.56 34,077.38 22,173.19 77,311.13 Raw material to be purchased 1,53,420.56 2,15,278.31 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 Donahue Company Direct Labour Budget For the Quarter September Ending Particular July August September 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 1,684.85 Total direct labour hour needed 2,726.19 1,773.86 6,184.89 Direct labour cost per hour $ 15 15 Total direct labour cost $ 25,272.68 40,892.85 26,607.83 92,773.35 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: 7. Manufacturing Overhead Budget 8. Ending Finished Goods Inventory Budget 9. Selling & Administration Expenses Budget 10. Cash Budget 1) Sales Budget Donahue Company. Sales Budget For the Quarter Ending September 30 July August 20,670 50,313 $ 15 $ 15 $ 310,050 $ 754,695 Units sold (a) Sales price per unit (b) Total Sales (a xb) September 30,807 $ 15 $ 462,105 Quarter 101,790 $ 15 $ 1,526,850 2. Company's Expected Cash Collection July August September Quarter 50,000 186,030 From Accounts receivable July Sale August Sale September Sale Total Cash Collection 124,020 452,817 301,878 277,263 236,030 576,837 1,392,008 Working Notes July August September 186,030 Collection in July July Sale (310,050 x 60%) Collection in August July Sale (310,050 x 40%) August sales (754,695 x 60%) Collection in September August sales (754,695 x 40%) September sales (462,105 x 60%) 124,020 452,817 301,878 277,263 3) Production Budget Donahue Company Production Budget Particular For the Quarter September Ending July August September 20,670.00 50,313.00 30,807.00 Quarter Estimated Sales 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 33,248.25 58,014.75 37,266.00 1,28,529.00 less: opening stock 5,167.50 12,578.25 1 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 July August September Quarter Budgeted Production 28,080.75 45,436.50 29,564.25 1,03,081.50 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 Total needs 1,74,481.13 2,49,355.69 1,65,166.50 5,89,003.31 Less: opening stock 21,060.56 34,077.38 22,173.19 77,311.13 Raw material to be purchased 1,53,420.56 2,15,278.31 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 Donahue Company Direct Labour Budget For the Quarter September Ending Particular July August September 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 1,684.85 Total direct labour hour needed 2,726.19 1,773.86 6,184.89 Direct labour cost per hour $ 15 15 Total direct labour cost $ 25,272.68 40,892.85 26,607.83 92,773.35