Problem #$1$ Budgeting

Dixon Corporation has the following sales budget for September$-$January:

Sept Oct Nov Dec Jan

Sales Revenue $$80,000$ $$100,000$ $$120,000$ $$90,000$ $$110,000$

Required:

A$)$ The company$$s inventory policy is to keep sufficient ending inventory on hand to cover $40\%$ of next month's sales. Selling price per unit is $$10.$

Complete the following production budget for September, October, November and December.

September October November December

Unit Sales

End.

Inventory

Beg.

Inventory $($given for September$)3,200$

Units to

Produce

B$.$ Four pounds of materials are required for each unit produced. Ending inventory levels for raw materials are $25\%$ of next month's production needs. Cost of one pound of material is $$1\mathrm{.}50.$ Based on this information and your production schedule from above, complete the following material purchase budget for September and October.

September October

Pounds of Material Needed for Production

End. Inv.

Beg.Inv. $($given for September$)8,800$

Pounds to Purchase

Cost per Pound

Total Purchase Cost

$$

The sales forecasts from the previous page has been reproduced below:

Sept Oct Nov Dec Jan

Sales Rev. $$80,000$ $$100,000$ $$120,000$ $$90,000$ $$110,000$

$20\%$ sales are cash sales. Approximately $10\%$ of credit sales are never collected. The collectible portion of credit sales are collected as follows:

$70\%$ in the month of the sale

$30\%$ in the month following the sale

Credit sale from sept: $0\mathrm{.}8*80,000=64,000$

$64,000*\mathrm{.}9=$ collected

$64,000*\mathrm{.}9*\mathrm{.}3=$ cash collected in Oct

$100,000.*\mathrm{.}2=16,000$ collected

$100,000*\mathrm{.}8*\mathrm{.}9*\mathrm{.}7=$ collected in Oct

Dixon pays for $60\%$ of direct material purchases during the month of purchase and the remainder the following month $($use purchases budget from previous page$).$

All other cash payments are paid during the month incurred, as follows:

Direct Labor costs $$3$ per unit produced

Fixed manufacturing overhead $$25,000($including $$15,000$ in depreciation$)$

Sales commissions $10\%$ of sales revenue

Fixed administrative salaries $ $4,000$

The company will borrow any funds necessary to maintain a minimum cash balance of $$10,000.$ If the firm develops cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage.

C$.$ In the space provided below, complete Dixon$$s cash budget for the month of October and indicate how much $($if any$)$ financing is required.

Beginning Cash $(9/30)40,000$

Cash Collections:

Cash Payments:

Preliminary Cash Balance

Financing Required

Ending Cash Balance