Question 1:(Marks) A cash budget, by quarters, is given below for a retail company. The company requires a minimum cash balance of at least $5,000 to start each quarter. (CLO 5) S? 1 2 3 4 Total Cash, beg $6,000 S?S? S? Add: Cash ? ? 96,000 ? 323,000 collections Total Cash 71,000 ? ? ? ? Available Disbursements Purchase of 35,000 45,000? 35,000 ? inventory Operating ? 30,000 30,000 113,000 expenses Equipment 8,000 8,000 10,000? 36,000 purchases Dividends 2,000 2,000 2,000 2,000? Total ? 85,000? ? ? disbursements Excess (2,000)? 11,000? (deficiency) Financing Borrowing ? 15,000 Repayments (17,000)? (including interest) Total financing ? ? Cash, ending? ? Required: Fill in the missing amounts in the above table (use BLUE color for the missing amounts). Question 2 (7 marks):(CLO5) Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture each unit of Supermix, one of the company's products. The company is now planning raw materials needs for the third quarter, the quarter in which peak sales of Supermix occur. To keep production and sales 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 3,000 units of Supermix plus 20% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 10,000 units. b. The raw materials inventory on hand at the end of each month must be equal to one-half of the following month's production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 54.000 cc of solvent H300 c. The company maintains no work in process inventories. A sales budget for Supermix for the last six months of the year follows. Budgeted Sales in Units July 35,000 August. 40,000 September 50,000 October 30,000 November 20,000 December 10,000 Required: 1. Prepare a production budget for Supermix for the months July, August, September, and October. 2. Examine the production budget that you prepared in (1) above. Why will the company produce more units than it sells in July and August, and fewer units than it sells in September and October? 3. Prepare a direct materials budget showing the quantity of solvent H300 to be purchased for July, August, and September, and for the quarter in total. one of its products. The unit product cost of the part is $33, computed as follows: Direct materials.. Direct labor........ Variable manufacturing overhead... Fixed manufacturing overhead Unit product cost. $12 8 3 10 An outside supplier has offered to provide the annual requirement of 10,000 of the parts for only $27 each. The company estimates that 30% of the fixed manufacturing overhead costs above will continue if the parts are purchased from the outside supplier. Assume that direct labor is an avoidable cost in this decision. Instructions: What will be your decision: to purchase from outsider or not? (Show your computations)
