Page 1 of 3 2 TBA, Inc., manufactures and sells concrete block for residential and commercial building. TBA expects the following unit sales, unit selling price and desired ending inventory in 2020: Quarter Sales Selling Price Ending Inventory (Units) (per unit) (units) 1 2,000,000 $.70 500,000 6,000.000 $.70 500,000 3 6,000,000 5.80 100,000 4 2.000.000 $.80 100,000 Inventory on both January 1, 2020, and December 31, 2020, is expected to be 500,000 blocks. Each block requires 26 pounds of raw materials (a mixture of cement, sand, gravel, shale, pumice, and water). TBA's raw materials inventory policy is to have 5 million pounds in ending inventory for the third and fourth quarters and 8 million pounds in ending inventory for the first and second quarters. Thus, desired direct materials inventory on both January 1, 2020, and December 31, 2020, is 5,000,000 pounds of materials. Each pound of raw materials costs $0.01. Each block requires 0.015 direct labor hour, direct laboris paid $14 per direct labor hour. Variable overhead is $8 per direct labor hour. Fixed overhead is budgeted at $320,000 per quarter ($100,000 for supervision, $200,000 for depreciation, and $20,000 for rent). TBA also provided the information that beginning finished goods inventory is $55,000; and the ending finished goods inventory budget for TBA for the year $67.000. TBA's only variable marketing expense is a $0.05 commission per unit (block) sold. Fixed marketing expenses for each quarter include the following: Salaries = $20,000 Depreciation = 5.000 Travel = $3,000 . ARRAL od their Page 1 of 3 Advertising expense is $10,000 in Quarters 1, 3, and 4. However, at the beginning of the summer building season. TBA increases advertising; in Quarter 2. advertising expense is $15,000. TBA has no variable administrative expense. Fixed administrative expenses for each quarter include the following: Salaries = $35,000 Insurance = $4,000 Depreciation = $12,000 Travel = $2,000 Income tax rate is 30% of operating income. of the sales on account, 70 percent are collected in the quarter of sale; the remaining 30 percent are collected in the quarter following the sale. Total sales for the fourth quarter of 2019 totaled $2,000,000, All materials are purchased on account: 80 percent of purchases are paid for in the quarter of purchase. The remaining 20 percent are paid in the following quarter. The purchases for the fourth quarter of 2019 were $500,000 TBA requires a $100.000 minimum cash balance for the end of each quarter. On December 31, 2019, the cash balance was $120,000 2 > of 3 Page
