Skors,

Inc., manufactures and sells snowboards.

Skors

manufactures a single model, the Pipex. In late

2017,

Skors's

management accountant gathered the following data to prepare budgets for January

2018:

Budgeted balances at January 31, 2018 are as follows:
	Cash	?
	Accounts receivable	?
	Inventory	?
	Property, plant, and equipment (net)	$853,000
	Accounts payable	?
	Long-term liabilities	181,000
	Stockholders' equity	?

Selected budgeted information for December 2017 follows:
	Cash balance, December 31, 2017	$13,000
	Budgeted sales	1,780,000
	Budgeted materials purchases	610,000

Customer invoices are payable within 30 days. From past experience,

Skors's

accountant projects

45%

of invoices will be collected in the month invoiced, and

55%

will be collected in the following month. Accounts payable relates only to the purchase of direct materials. Direct materials are purchased on credit with

35%

of direct materials purchases paid during the month of the purchase, and

65%

paid in the month following purchase.

Fixed manufacturing overhead costs include

$31,000

of depreciation costs and fixed nonmanufacturing overhead costs include

$11,000

of depreciation costs. Direct manufacturing labor and the remaining manufacturing and nonmanufacturing overhead costs are paid monthly.

All property, plant, and equipment acquired during January

2018

were purchased on credit and did not entail any outflow of cash. There were no borrowings or repayments with respect to long-term liabilities in January

2018.

On December 15,

2017,

Skors's

board of directors voted to pay a

$195,000

dividend to stockholders on January 31,

2018.

Variable manufacturing overhead is

$9

per direct manufacturing labor-hour. There are also

$55,000

in fixed manufacturing overhead costs budgeted for January

2018.

Skors

combines both variable and fixed manufacturing overhead into a single rate based on direct manufacturing labor-hours. Variable marketing costs are allocated at the rate of

$280

per sales visit. The marketing plan calls for

37

sales visits during January

2018.

Finally, there are

$34,000

in fixed nonmanufacturing costs budgeted for January

2018.

Materials and Labor Requirements
Direct materials
Wood	10	board feet (b.f.) per snowboard
Fiberglass	8	yards per snowboard
Direct manufacturing labor	5	hours per snowboard

Skors'

CEO expects to sell

2,000

snowboards during January

2018

at an estimated retail price of

$650

per board. Further, the CEO expects

2018

beginning inventory of

300

snowboards and would like to end January

2018

with

500

snowboards in stock.

Direct Materials Inventories
	Beginning Inventory 1/1/2018		Ending Inventory 1/31/2018
Wood	2,030	b.f.	1,530	b.f.
Fiberglass	1,030	yards	2,030	yards

Other data include:

	2017 Unit Price		2018 Unit Price
Wood	$31.00	per b.f.	$33.00	per b.f.
Fiberglass	$7.00	per yard	$8.00	per yard
Direct manufacturing labor	$27.00	per hour	$28.00	per hour

The inventoriable unit cost for ending finished-goods inventory on December 31,

2017,

is

$300.00.

Assume

Skors

uses a FIFO inventory method for both direct materials and finished goods. Ignore work in process in your calculations.

Revenue Budget
For January 2018
	Units	Selling price	Total revenues
Snowboards	2,000	$650	$1,300,000

Direct Materials Purchases Budget
For January 2018
		Materials
		Wood		Fiberglass		Total
Physical Units Budget
To be used in production		22,000	b.f.	17,600	yards
Add target ending inventory		1,530	b.f.	2,030	yards
Total requirement		23,530	b.f.	19,630	yards
Deduct beginning inventory		2,030	b.f.	1,030	yards
Purchases to be made		21,500	b.f.	18,600	yards
Cost Budget
Purchases		$709,500		$148,800		$858,300

Direct Manufacturing Labor Costs Budget
For January 2018
	Output Units		DMLH		Total		Hourly
	Produced		per Unit		Hours		Wage Rate		Total
Snowboards	2,200		5		11,000		$28		$308,000

Total labor hours	x	Variable manufacturing overhead rate	=	Variable manufacturing overhead costs
11,000	x	9	=	$99,000

Ending Inventories Budget
For January 2018
	Quantity		Cost per unit		Total
Direct materials
Wood	1,530		$33		$50,490
Fiberglass	2,030		8		16,240
Finished goods
Snowboard	500		$604		302,000
Total ending inventory					$368,730

1.	Prepare a cash budget for January 2018. Show supporting schedules for the calculation of collection of receivables and payments of accountspayable, and for disbursements for fixed manufacturing and nonmanufacturing overhead.
2.	Skors is interested in maintaining a minimum cash balance of $135,000 at the end of each month. Will Skors be in a position to pay the $195,000 dividend on January 31?
3.	Why do Skors's managers prepare a cash budget in addition to therevenue, expenses, and operating income budget?
4.	Prepare a budgeted balance sheet for January 31, 2018 by calculating the January 31, 2018 balances in (a) cash (b) accounts receivable (c) inventory(d) accounts payable and (e) plugging in the balance for stockholders' equity.