Question 1 Franklin Products Limited manufacturers and distributes a number of products to retailers. One of these products, SuperStick, requires four kilograms of material D236 in the manufacture of each unit. The company is now planning raw materials needs for the third quarter -July, August, and September. Peak sales of SuperStick occur in the third quarter of each year. To keep production and shipments moving smoothly, the company has the following inventory requirements: a. The finished goods inventory on hand at the end of each month must be equal to 8,100 units plus 20% of next month's sales. The finished goods inventory on June 30 is budgeted to be 22,120 units. b. The raw materials inventory on hand at the end of each month must be equal to 40% of the following month's production needs for raw materials. The raw materials inventory on June 30 for material D236 is budgeted to be 129,400 kilograms. c. The company maintains no work in process inventories. A sales budget for SuperStick for the last six months of the year follows: Budgeted Sales in Units July 60,200 August 75,100 September 105,200 October 53,100 November 30,100 December 15,040 Required: 1. Prepare a production budget for SuperStick for July, August, September, and October 2. Prepare a direct materials purchases budget showing the quantity of material D236 to be purchased for July, August, September and for the quarter in total. Question 2 Colerain Corporation is a merchandising company that is preparing a budget for the third quarter of the calendar year. The company's balance sheet as of June 30th is shown below: COLERAIN CORPORATION Balance Sheet June 30 Assets Cash Accounts receivable Inventory Plant and equipment, net of depreciation Total assets $ 90,000 136,000 62,000 300,000 $ 588,000 Liabilities and Stockholders' Equity Accounts payable $ 71,000 Common shares 400,000 Retained earnings 117,000 Total liabilities and stockholders' equity $ 588,000 Colerain's managers have made the following additional assumptions and estimates: a. Estimated sales for July, August, September, and October will be $270,000, $290,000, $280,000, and $300,000 respectively. b. All sales are on credit and all credit sales are collected. Each month's credit sales are collected 30% in the month of sale and 70% in the month following the sale. All of the accounts receivable at June 30 will be collected in July. C. Each month's ending inventory must equal 30% of the cost of next month's sales. The cost of goods sold is 70% of sales. The company pays for 50% of its merchandise purchases in the month of the purchase and the remaining 50% in the month following the purchase. All of the accounts payable at June 30 will be paid in July. d. Monthly selling and administrative expenses are always $75,000. Each month, $10,000 of this total amount is depreciation expense and the remaining $65,000 relates to expenses that are paid in the month they are incurred. e. The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common shares or repurchase its own shares during the quarter ended September 30. Required: 1. Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30. 2. Prepare a merchandise purchases budget for July, August and September. Also compute total merchandise purchases for the quarter ended September 30. 3. Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30th. 4. Prepare an income statement for the quarter ended September 30. 5. Prepare a balance sheet as of September 30
