Question
This question has multiple parts: Part 1. Martin Clothing Company is a retail company that sells hiking and other outdoor gear specially made for the
This question has multiple parts:
Part 1. Martin Clothing Company is a retail company that sells hiking and other outdoor gear specially made for the desert heat. It sells to individuals as well as local companies that coordinate adventure getaways in the desert for tourists. The following information is available for several months of the current year:
Month | Sales | Purchases | Cash Expenses Paid | |||
May | $ | 95,000 | $ | 69,000 | $ | 21,000 |
June | 115,000 | 90,000 | 28,500 | |||
July | 131,000 | 111,000 | 33,000 | |||
August | 130,000 | 74,000 | 32,900 | |||
The majority of Martins sales (75 percent) are cash, but a few of the excursion companies purchase on credit. Of the credit sales, 40 percent are collected in the month of sale and 60 percent are collected in the following month. All of Martins purchases are on account with 50 percent paid in the month of purchase and 50 percent paid the following month.
Required:
Determine budgeted cash collections for July and August.
Determine budgeted cash payments for July and August.
Part 2.
Iguana, Inc., manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $2.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12.00 per hour. Iguana has the following inventory policies:
- Ending finished goods inventory should be 40 percent of next months sales.
- Ending direct materials inventory should be 30 percent of next months production.
Expected unit sales (frames) for the upcoming months follow:
March | 275 |
April | 250 |
May | 300 |
June | 400 |
July | 375 |
August | 425 |
Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.60 per unit sold. Iguana, Inc., had $10,800 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the credit sales, 50 percent is collected during the month of the sale, and 50 percent is collected during the month following the sale. Of direct materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Direct materials purchases for March 1 totaled $2,000. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $150 in depreciation. During April, Iguana plans to pay $3,000 for a piece of equipment.
Compute the budgeted cash receipts for Iguana.
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Compute the budgeted cash payments for Iguana.
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Prepare the cash budget for Iguana. Assume the company can borrow in increments of $1,000 to maintain a $10,000 minimum cash balance.
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Part 3.
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Options for part 3:
- Budgeted Balance Sheet
- Budgeted Cost of Goods Sold
- Cash Budget
- Financial Budgets
- Short-Term Objective
- Strategic Plan
- None of These are Correct
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