Operational information Part 2 The Penticton Region was so happy with the expertise that you provided to them last year that they have contacted yen to assist them with their budgeting for the upcoming scal year. Below is the information that they have provided respecting their sales forecast for the upcoming fiscal year: Budeted sales units Bud : eted sales revenue $474,000 $420,000 $360,000 $420,000 0 The region has $19,000 cash on hand at the beginning of the lst quarter. 0 A minimum cash balance of $10,000 is required. The region has an Open line of credit to support operational needs. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month, borrowings must be in multiples of $1,000. The annual interest rate is 12%. Interest is paid only at the time of repayment of principal. 0 Accounts receivable at the beginning of the 1't quarter is Sszmo all of which Is from sales the previous month. The entire amount will be received in the 1" quarter. 0 Typically, sales are 40% for cash and 60% on credit. Seventy percent (70%) of credit sales are collecting in the quarter that the sale occurs, 30% is collected in the following quarter. 0 The beginning nished goods inventory for the rst quarter is expected to be 1,580 units. Management desires an ending nished goods inventory in each quarter equal to 20% of the next quarter's budgeted sales. The desired ending nished goods inventory for the fourth quarter is 1,740 units. 0 The beginning raw materials inventory for the first quarter is budgeted to be 3,520 kilograms. 0 Each unit requires two kilograms of raw material that costs $8 per kilogram. Management desires to end each quarter with an inventory of raw materials equaling 20% of the following quarter's production needs. The desired ending inventory for the fourth quarter is 3,100 kilograms. 0 Management plans to pay for 65% of raw material purchases in the quarter acquired and 35% In the following quarter. The beginning accounts payable related to raw material purchases of 515,220 will be paid in the first quarter. 0 Each unit requires 1.2 direct labour-hours. The hourly rate budgeted is $22 per hour. 0 Variable manufacturing overhead rate is $1.40 per direct labour-hour. o Fixed manufacturing overhead is $170,000 per quarter which Includes depreciation of $54,000 per quarter. 0 Dynamadlcs expects to purchase and pay for new equipment in the 1'1 quarter at a price of $25,000. Management has also identified and plans to sell equipment that no longer supports operations In the 2"" quarter for a price of $100,000. There are no depreciation considerations for this equipment. 0 Monthly operating expenses incurred include: 0 Salaries $12,000 0 Due to timing of payroll for the first quarter, 2/3 of the 1'\"l quarter salary costs will be paid in the first quarter, the remaining 1/3 will paid the next quarter. There Is no payable for salaries outstanding at the beginning of the first quarter. 0 Rent 54,000 0 Amortization of pre-pald insurance $1,200 0 Depreciation ofce equipment $1,500 Pale d. of 11
