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Question 4 - Master budgeting ( 2 5 marks ) Healthy Ltd . is a surgical mask producer in Hung Hom. It produces surgical masks
Question Master budgeting marks Healthy Ltd is a surgical mask producer in Hung Hom. It produces surgical masks for government and other nonforprofit organizations. To provide advance notice of financial position for the first quarter, ie January, February, and March, in the following information is obtained: i Selected account balances as of December were extracted: Cash....... Trade receivables. ii Actual sales data: December $ $ units The growth rate of sales is projected to be per month in The selling price of surgical masks is $ per mask. iii All the sales are made on credit. of a month's credit sales are collected in the month of sales and the remaining is collected in the month following sales. All of the December trade receivables will be collected in January iv The company desires an ending finished goods inventory at the end of each month equal to of the budgeted unit sales for the next month. v grams of raw materials are required to complete one unit of surgical mask. The company requires ending raw materials inventory at the end of each month equal to of the following month's production needs. The raw materials costs $ per gram. vi All the materials purchases are made in cash. vii The production is fully automated and no direct labor costs are expected to be incurred. viii The predetermined overhead rate is $ per machine hour. The machine hours incurred for the next quarter are budgeted as follow: Machine hours January hours February hours March hours The only noncash element of overhead cost is depreciation, which is $ per month. ix No selling and administrative expenses are incurred for the first quarter in x New equipment costing $ will be purchased for cash during January Depreciation expense for this equipment has been included in viii xi Management of Healthy Ltd wants to maintain a minimum cash balance of $ The company has an agreement with the bank that allows the company to borrow in increments of $ on the first day of a month and repaid the loan and interest on the last day of the quarter. The interest rate on this revolving line of credit is per month and interest is not compounded. Question Cont Required: Round all the calculation to the nearest integer a Prepare the following for the first quarter in : a sales budget and a schedule of expected cash collections, by month and in quarter total a production budget, by month and in quarter total a direct materials budget and the expected cash disbursements, by month and in quarter total a manufacturing overhead budget, by month and in quarter total b Prepare a cash budget for the first quarter in marks marks
Question Master budgeting
marks
Healthy Ltd is a surgical mask producer in Hung Hom. It produces surgical masks for government and other nonforprofit organizations. To provide advance notice of financial position for the first quarter, ie January, February, and March, in the following information is obtained:
i
Selected account balances as of December were extracted:
Cash.......
Trade receivables.
ii Actual sales data:
December
$ $
units
The growth rate of sales is projected to be per month in The selling price of surgical masks is $ per mask.
iii All the sales are made on credit. of a month's credit sales are collected in the month of sales and the remaining is collected in the month following sales. All of the December trade receivables will be collected in January
iv The company desires an ending finished goods inventory at the end of each month equal to of the budgeted unit sales for the next month.
v
grams of raw materials are required to complete one unit of surgical mask. The company requires ending raw materials inventory at the end of each month equal to of the following month's production needs. The raw materials costs $ per gram.
vi All the materials purchases are made in cash.
vii The production is fully automated and no direct labor costs are expected to be incurred.
viii The predetermined overhead rate is $ per machine hour. The machine hours incurred for the next quarter are budgeted as follow:
Machine hours
January hours
February hours
March hours
The only noncash element of overhead cost is depreciation, which is $ per month.
ix
No selling and administrative expenses are incurred for the first quarter in
x
New equipment costing $ will be purchased for cash during January Depreciation expense for this equipment has been included in viii
xi Management of Healthy Ltd wants to maintain a minimum cash balance of $ The company has an agreement with the bank that allows the company to borrow in increments of $ on the first day of a month and repaid the loan and interest on the last day of the quarter. The interest rate on this revolving line of credit is per month and interest is not compounded.
Question Cont
Required:
Round all the calculation to the nearest integer
a Prepare the following for the first quarter in :
a sales budget and a schedule of expected cash collections, by month and in quarter total a production budget, by month and in quarter total
a direct materials budget and the expected cash disbursements, by month and in quarter total
a manufacturing overhead budget, by month and in quarter total
b Prepare a cash budget for the first quarter in
marks
marks
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