Sales, Production, Direct Materials Purchases, and Direct Labor Cost Budgets

The budget director of Gourmet Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for March is summarized as follows:

a. Estimated sales for March by sales territory:

Maine:
Backyard Chef	350 units at $800 per unit
Master Chef	200 units at $1,400 per unit
Vermont:
Backyard Chef	400 units at $825 per unit
Master Chef	240 units at $1,500 per unit
New Hampshire:
Backyard Chef	320 units at $850 per unit
Master Chef	200 units at $1,600 per unit

b. Estimated inventories at March 1:

Direct materials:
Grates	320 units
Stainless steel	1,700 lb.
Burner subassemblies	190 units
Shelves	350 units
Finished products:
Backyard Chef	30 units
Master Chef	36 units

c. Desired inventories at March 31:

Direct materials:
Grates	300 units
Stainless steel	1,500 lb.
Burner subassemblies	210 units
Shelves	400 units
Finished products:
Backyard Chef	40 units
Master Chef	26 units

d. Direct materials used in production:

In manufacture of Backyard Chef:
Grates	3 units per unit of product
Stainless steel	24 lb. per unit of product
Burner subassemblies	2 units per unit of product
Shelves	4 units per unit of product
In manufacture of Master Chef:
Grates	6 units per unit of product
Stainless steel	42 lb. per unit of product
Burner subassemblies	4 units per unit of product
Shelves	5 units per unit of product

e. Anticipated purchase price for direct materials:

Grates	$16 per unit
Stainless steel	$8 per lb.
Burner subassemblies	$120 per unit
Shelves	$12 per unit

f. Direct labor requirements:

Backyard Chef:
Stamping Department	0.50 hr. at $18 per hr.
Forming Department	0.60 hr. at $16 per hr.
Assembly Department	1.00 hr. at $15 per hr.
Master Chef:
Stamping Department	0.60 hr. at $18 per hr.
Forming Department	0.80 hr. at $16 per hr.
Assembly Department	1.50 hrs. at $15 per hr.

Cash Budget

The controller of Sonoma Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information:

	May		June		July
Sales	$106,000		$137,000		$181,000
Manufacturing costs	45,000		59,000		65,000
Selling and administrative expenses	31,000		37,000		40,000
Capital expenditures	_		_		43,000

The company expects to sell about 15% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month following the sale and the remainder the following month (second month following sale). Depreciation, insurance, and property tax expense represent $10,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in September, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 75% are expected to be paid in the month in which they are incurred and the balance in the following month.

Current assets as of May 1 include cash of $40,000, marketable securities of $57,000, and accounts receivable of $118,500 ($93,000 from April sales and $25,500 from March sales). Sales on account for March and April were $85,000 and $93,000, respectively. Current liabilities as of May 1 include $14,000 of accounts payable incurred in April for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of $16,000 will be made in June. Sonomas regular quarterly dividend of $10,000 is expected to be declared in June and paid in July. Management wants to maintain a minimum cash balance of $31,000.

Required:

Question Content Area

1. Prepare a monthly cash budget and supporting schedules for May, June, and July. Input all amounts as positive values except overall cash decrease and deficiency which should be indicated with a minus sign.