The East Division of Kensic Company manufactures a vital component that isused in one of Kensics major product lines. The East Division has beenexperiencing some difficulty in coordinating activities between its variousdepartments, which has resulted in some shortages of the component at criticaltimes. To overcome the shortages, the manager of East Division has decided toinitiate a monthly budgeting system that is integrated between departments.The first budget is to be for the second quarter of the current year (April, Mayand June). To assist in developing the budget figures, the divisional controllerhas accumulated the following information.

Sales: Sales through the first three months of the current year were 30,000units. Actual sales in units for January, February, and March, and planned salesin units over the next five months, are given below:

January (actual) 6,000

February (actual) 10,000

March (actual) 14,000

April (planned) 20,000

May (planned) 34,000

June (planned) 51,000

July (planned) 45,000

August (planned) 30,000

In total, the East Division expects to produce and sell 250,000 units during thecurrent year.

Direct Material: Two different materials are used in production of thecomponent. Data regarding these materials are given below:

direct material units of direct materials per finished component cost per lb/ft Inventory at March 31

No.208 4 pounds $5.00 46,000 pounds

No.311 9 feet 2.00 69,000 feet

Material No. 208 is sometimes in short supply. Therefore, the East Divisionrequires that enough of the material be on hand at the end of each month toprovide for 50% of the following months production needs. Material No. 311 iseasier to get, so only one-third of the following months production needs mustbe on hand at the end of each month.

Direct Labor: The East Division has three department through which thecomponents must past before they are completed. Information relating to directlabor in these departments is given below:

Department direct labor-hours per finished component cost per direct-labor hour

Shaping .25 $18.00

Assembly .70 16.00

Finishing .10 20.00

Direct labor is adjusted to the workload each month.

Manufacturing Overhead: East Division manufactured 32,000 componentsduring the first three months of the current year. The actual variable overheadcosts incurred during this three-month period are shown below. Each Divisionscontroller believes that the variable overhead costs incurred during the last ninemonths of the year will be at the same rate per component as experiencedduring the first three months.

Utilities $ 57,000

Indirect Labor 31,000

Supplies 16,000

Other 8,000

Total variable overhead $112,000

The East Division has planned fixed manufacturing overhead costs for the entireyear as follows:

Supervision $ 872,000

Property Taxes 143,000

Depreciation 2,910,000

Insurance 631,000

Other 72,000

Total fixed manufacturing overhead $4,628,000

Finished Goods Inventory: The desired monthly ending inventory ofcompleted components is 20% of the next months estimated sales. The EastDivision has 4,000 units in the finished goods inventory on March 31.

Selling and Administrative Expenses: Selling and Administrative Expensesare budgeted at $400,000 per month plus 1% of total credit sales for the month.

REQUIRED: 1. Prepare a production budget for the East Division for the second quarterending June 30. Show computations by month and in total for the quarter.(5 pts.) _____

2. Prepare a direct materials purchases budget in units and dollars for eachtype of material for the second quarter ending June 30. Again showcomputations by month and in total for the quarter.(5 pts.) _____

3. Prepare a schedule of cash payments for direct materials for the secondquarter. Assume that all direct materials are purchased on account andthe East Division pays for of the amount purchased in the month ofpurchase and the other in the month following the purchase. Thebalance in the Accounts Payable account at 3/31 was $351,200.(5 pts.) _____

4. Prepare a direct labor budget in hours and in dollars for the secondquarter ending June 30. Again show computations by month in total forthe quarter.(5 pts.) _____

5. Prepare a manufacturing overhead budget for the second quarter. Showcomputations by month and in total for the quarter.(5 pts.) _____

6. Compute a new selling price per unit for the East Division that willenable them to accumulate a balance of $100,000 in their cash account bythe end of the second quarter. Assume that the cash balance at March 31was $10,000.(5 pts.) _____

7. Using the selling price per unit computed in #6 prepare a sales budget forthe second quarter. Show computations by month and in total for thequarter.(5 pts.) _____

8. Prepare a schedule of expected cash collections for the second quarterusing the selling price per unit calculated in question #6. Assume that theEast Division collects on its credit sales as follows; 70% in the month ofsale, 20% in the month following the credit sale, 10% in the secondmonth following the credit sale. To compute the balance in AccountsReceivable at 3/31 assume that the selling price per unit prior to 3/31 was$75.00.(5 pts.) _____

9. Prepare a cash budget for the second quarter in month and in total for theEast Division.(10 pts.)

****Only need answers 6-9 with explanations*** Please do not do the ones before them because I have them already solved. :) Thanks.

#6 East Division of Kensic Co. For the Second Quarter Ended June 30 Month May March April June Quarter 14000 20000 34000 105000 1000000 10000 90000 Unit sale per quarter Cash amount required to maintain ending balance Opening cash balance Cash to be earned by sale of 105000 units Unit of direct cost No. 208 Direct materials 208 per inventory Unit of direct cost No. 311 Direct materials 311 per inventory Material 208 finished componenet March 31 Material 311 finished componenet March 31 51000 4 (pounds) 9 (feet) 46000 (pounds) 69000 (feet) #6 East Division of Kensic Co. For the Second Quarter Ended June 30 Month May March April June Quarter 14000 20000 34000 105000 1000000 10000 90000 Unit sale per quarter Cash amount required to maintain ending balance Opening cash balance Cash to be earned by sale of 105000 units Unit of direct cost No. 208 Direct materials 208 per inventory Unit of direct cost No. 311 Direct materials 311 per inventory Material 208 finished componenet March 31 Material 311 finished componenet March 31 51000 4 (pounds) 9 (feet) 46000 (pounds) 69000 (feet)