Question #1: A company manufactures widgets. Based on an analysis, we find that each widget needs 3/4 pound of gunk. The following is information on the budgeted production of widgets in units for the following three months:

July August September

Budgeted production 21,000 20,000 24,000

We know that this company desires to maintain monthly ending inventories of gunk amounting to 25% of the following month's budgeted production needs. The cost per pound of gunk is $2.12.

Instructions

Prepare a direct materials purchases budget for the month of August.

Question #3

Stovall Companys management is trying to predict collections from customers for the months of October and November. Management estimates that credit sales for August, September, October, and November will be $270,000, $375,000, $420,000, and $240,000, respectively. Typically, the Company collects from its customers as follows:

In month of sale 25%

In first month after sale 60%

In second month after sale 10%

Instructions

Prepare a schedule to determine the collections from customers in October and November. Be sure that you show your calculations.