Question
Soprano Co. is in the process of preparing the second quarter budget for 2019, and the following data have been assembled: The company sells a
Soprano Co. is in the process of preparing the second quarter budget for 2019, and the following data have been assembled:
- The company sells a single product at a selling price of $41 per unit. The estimated sales volume for the next six months is as follows:
March 6,300 units June 8,400 units April 7,300 units July 9,100 units May 10,300 units August 6,500 units - All sales are on account. The company's collection experience has been that 42% of a month's sales are collected in the month of sale, 51% are collected in the month following the sale, and 7% are uncollectible. It is expected that the net realizable value of accounts receivable (i.e., accounts receivable less allowance for uncollectible accounts) will be $131,733 on March 31, 2019.
- Management's policy is to maintain ending finished goods inventory each month at a level equal to 52% of the next month's budgeted sales. The finished goods inventory on March 31, 2019, is expected to be 3,796 units.
- To make one unit of finished product, 5 pounds of materials are required. Management's policy is to have enough materials on hand at the end of each month to equal 41% of the next month's estimated usage. The raw materials inventory is expected to be 18,163 pounds on March 31, 2019.
- The cost per pound of raw material is $4.00, and 73% of all purchases are paid for in the month of purchase; the remainder is paid in the following month. The accounts payable balance for raw material purchases is expected to be $41,345 on March 31, 2019.
a. Prepare a sales budget in units and dollars, by month and in total, for the second quarter (April, May, and June) of 2019.
April, May, June, Total
Expected Sales in Units
Selling Price per Unit
Total Sales
b. Prepare a schedule of cash collections from sales, by month and in total, for the second quarter of 2019. April, May, June, Total
March Sales
April Sales
May Sales
June Sales
Total Cash Collections
c. Prepare a production budget in units, by month and in total, for the second quarter of 2019.
April, May, June, Total
Beginning inventory of finished goods
Units to be produced
Good available for sale
Desired ending inventory of finished goods
Quantity of goods
d. Prepare a materials purchases budget in pounds, by month and in total, for the second quarter of 2019. (Do not round intermediate calculations.)
April, May, June, Total
Beginning inventory of raw materials
purchases of raw materials
raw materials available for use
desired ending inventory of raw materials
Quantity of raw materials to be used in production
e. Prepare a schedule of cash payments for materials, by month and in total, for the second quarter of 2019. (Do not round intermediate calculations.)
April, May, June, Total
March Purchases
April purchases
May purchases
June purchases
Total Cash Payment
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