Use the information above to fill in the blanks for the direct labor budget. The $59,631 is given and is correct.

a. Budgeted monthly absorption costing income statements for April-July are: April May June July $ 510,000 $ 710,000 $ 410,000 $ 310,000 357,000 497,000 287,000 217,000 153,000 213,000 123,000 93,000 Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expense Administrative expense* Total selling and administrative expenses Net operating income 71,000 91,000 40,500 53,600 111,500 144,600 $ 41,500 $ 68,400 52,000 32,600 84,600 38,400 $ 31,000 29,000 60,000 33,000 $ *Includes $13,000 of depreciation each month. non Prepare a schedule of expected cash collections for April, May, and June, and for the quarter in total. Schedule of Expected Cash Collections April May June $ 102,000 $ 142,000 $ 82,000 Quarter Cash sales $ 326,000 Sales on account: February 11,600 131,200 11,600 147,600 March 16,400 April 40,800 326,400 40,800 408,000 May 56,800 454,400 32,800 511,200 32,800 June Total cash collections $ 285,600 $ 541,600 $ 610,000 $ 1,437,200 Prepare the following for merchandise inventory, a merchandise purchases budget for April, May, and June. Merchandise Purchases Budget April May June Budgeted cost of goods sold $ 357,000 $ 497,000 $ 287,000 Add: Desired ending merchandise inventory 99,400 57,400 43,400 Total needs 456,400 554,400 330,400 Less: Beginning merchandise inventory 71,400 99,400 57,400 Required inventory purchases $ 385,000 $ 455,000 $ 273,000 Prepare the following for merchandise inventory, a schedule of expected cash disbursements for merchandise purchases for April, May, and June, and for the quarter in total. Quarter $ 93,100 Schedule of Expected Cash Disbursements for Merchandise Purchases April May June Beginning accounts payable $ 93,100 April purchases 192,500 192,500 May purchases 227,500 227,500 June purchases 136,500 Total cash disbursements $ 285,600 $ 420,000 $ 364,000 385,000 455,000 136,500 1,069,600 $ Garden Sales, Inc. Cash Budget For the Quarter Ended June 30 April $ 43,000 $ 285,600 328,600 June Quarter May 40,500 $ Beginning cash balance Add collections from customers Total cash available 541,600 40,500 $ 610,000 650,500 43,000 1,437,200 1,480,200 582, 100 Less cash disbursements: 285,600 71,000 420,000 91,000 364,000 52.000 1,069,600 214,000 27,500 40,600 19,600 87,700 29,000 21,000 Purchases for inventory Selling expenses Administrative expenses Land purchases Dividends paid Total cash disbursements Excess (deficiency) of cash available over disbursements Financing Borrowings Repayment 29,000 21,000 1,421,300 58,900 435,600 405,100 (76,500) 580,600 1,500 214,900 117,000 39,000 156,000 (156,000) (4,290) Interest (156,000) (4,290) (160,290) 54,610 39,000 (4.290) Total financing Ending cash balance 117,000 40,500 $ $ 40,500 $ $ 54,610 been made but payment is expected in the future. What would the accounts receivable c) Include the "total asset amount in the "total liability & SH Equity box. Include the accounts payable amount from CONNECT and calculate the amount of retained earnings such that the Remember the accounts receivable as of March 31? b) Complete the asset side of the balance sheet including total assets. balance sheet will balance. $43.000 193,00 Cash Accounts Receivable Inventory Total current assets Plant Assets, net Total Assets Garden Sales, Inc Balance Sheet March 31 Accounts Payable 3159,200 71.400 Common Stock 273, bou Retained Earnings 350,000 Total SH Equity 100,000 430,500 530,500 $623,600 Total liabilities & SH Equity $62,60 ompany's president is concerned about its ability to borrow money on its line of credit. The bank Hicated they will reduce the total loan balance limit to $100,000. Because of this, the president o know how increased collection efforts and reduced inventory levels will impact the cash budget. non hond 80% on credit However credit sales Next, the president suggests the company tighten the inventory level requirements such that ending inventory levels for April, May, and June would be only 15% of the cost of merchandise to be sold in the following month. The merchandise inventory and accounts payable at March 31 remains unchanged from the amount given in your CONNECT problem. Note - This will not change the March 31 inventory 3) Using the president's new assumptions regarding inventory levels, complete the revised Inventory 2) Using the president's revised assumptions, complete the revised cash collection schedule below. Because these changes will take effect April 1, all previous months' sales will be collected in accordance with the old policies. (Same as on CONNET) Revised Cash Collection Schedule Collections on Sales: April May June Quarter Cash sales 102,000 142,000 82000 376,002 February credit sales: 12 600 IL 660 March credit sales: 131,200 L 16,400 1147,000 [102,000 265,200 40.00 LOS 000 April credit sales: 1142,000 1269200 11,200 82.000 2,000 1346600 SS,60 5 14,000 1,486,4001 May credit sales: June credit sales: Total cash collections balance. Purchasing Budget Budgeted cost of goods sold Add desired ending Inventory Total needs Less beginning merchandise inventory Required inventory purchases Revised Inventory Purchasing Budget April May June July 351.000 197.000 287.000 27.000 14.STO UBOSO 3253 MUSSOIS 16.050 312550 (11 700 7150 LEOSU $360,156 465.500 216,500 View 4) The company has been postponing payments to supplier for quite some time such that the president does not believe they can change their payment policies. (Percentages used in CONNECT will not change). The president is hoping the reduced inventory amounts will be enough to conserve cash. Using the same payment policy from CONNECT, complete the Revised Cash Disbursements Schedule below. Quarter Revised Cash Disbursements for Inventory April May June Beginning accounts payable 393,00 April purchases 180,015 180,075 May purchases 1232, 750 232,150 June purchases Total cash disbursements for Inventory (273,175 112,825 371,000 300 ISO LS.12 ,057,000 5) The president does, however, believe that can deferred 20% of their selling and administrative cash costs into the month following the expense. This would create an increase to accounts payable at the end of each month equal to 20% of the current month's selling and administrative cash expenses (without depreciation). Complete the table below for the Cash Disbursements for Selling and Administrative expenses. 3 Cash Disbursements for Selling & Administrative Expenses April May June Quarter -0- Beginning accounts payable April expenses 16800 19.700 May expenses 105 280 263 June expenses SNSO 57,250 Total cash disbursements 178,800 for S&A expenses T31,600 1124,950 83, 6000 1287,380 (111,500-13,000):8-76,50 (111,500-13,000); 2=19,700 (84,600-13,000), 8257,250 511,000 percentage for the collection policy to calculate the amount of each month's sales that will be View photos 6) Using all the information from the tables above, complete the revised cash budget below. Garden Sales, Inc. Cash Budget For the Quarter Ended June 30 April May June Quarter Beginning cash balance B43.000 190,825 190,670 12.000 Add collections from customers [346,500 1565600 WEMO Total cash available 1389,800 1601425 614620 Less cash disbursements: Purchases for inventory 213.175 LI 2,825 511,000 1,057,000 Selling Administrative expenses & 18.800 1124,950 1287,380 03.600 Land purchases 21,000 129.000 Dividends paid Z1,000 21,000 1372,975 Total cash disbursements IS bb, SOS US$100 13958 Excess (deficiency) of cash available 16,825 139,620 160,020 135,020 over disbursements Financing: Borrowings 24,000 L 000 Repayments 25,000 25,000 740 740 Interest 24,000 Total financing (1.000 (25110) C7405 Ending cash balance 70,82 10,620 134,280 134,250 7) If the company can meet the president's new assumptions, how will it affect the cash budget? Will the company be able to keep its borrowing below the new limit? Explain in 30 to 50 words. our cash balance has been increased for June compared to the original June month balance by implementing the Presidents assumption. The company is able to keep its borrowing linit below the new limit of $ 100,000, we only need to borrow $29,000 in april and $1,000 8) Complete the following steps to complete the Budgeted Balance Sheet for June 30 below, a) Cash should equal the ending cash balance from the Revised Cash Budget. b) Determine accounts receivable balance in one of two ways; one - use a T-account and the beginning accounts receivable balance (March 31), post the sales and collection information from the Revised Cash Collections Schedule, and determine the ending balance. Or two - Use the uncollected in accounts receivable) as of June 30. 25.000 in may, c) Determine the balance in Inventory in one of two ways; One - use a T-account and the beginning inventory balance. Post the purchases from the Revised Purchasing Budget and COGS from CONNECT. Determine the ending balance. Or two - Use the ending Inventory percent of COGS policy to determine the balance at June 30. d) Update the Plant Assets for the purchased Land and depreciation expense for 3 months. e) Determine the accounts payable balance in one of two ways; One - use a T-account and the beginning accounts payable balance. Post the purchases from the Revised Purchases Budget and the incurrence of the Selling & Administrative cash expenses (Remember not to include depreciation). Post the cash payments from the respective schedules and determine the ending balance. Or two-use the percentages for the payment policies (payments to suppliers from CONNECT and payment for S&A expenses from #5) and determine the amounts that would be unpaid as of June 30. f) Include any Loan Payable amount (principal and interest) that would be unpaid at the end of the quarter, June 30. Note - This may be zero. g) Update the Retained Earnings amount using a T-account with the beginning balance from the balance sheet for March 31. Increase Retained Earnings for the budgeted Net Income (from CONNECT) and decrease it for the dividend amount paid during the period. h) Your balance sheet should balance. "Total Assets" = "Total Liabilities and SH Equity" 150000-13.000.3)+29,00 430,500-21,000+ 41,500465,400 +38,4002740 =557060 Cash Accounts Receivable Inventory 340,000 Garden Sales, Inc Balance Sheet June 30 1134,280 Accounts Payable ITS 2,570 202,800 Loan Payable (if necessary) 32 552 Total Liabilities 152,570 469,630 Common Stock 100.000 Retained Earnings 557060 340,000 Total SH Equity 1651,060 809.60 Total liabilities & SH Equity 809,630 110,000-246,000) 76710,000-653,209 = 302,500 Total current assets Plant Assets, net Total Assets 9) The production manager confides to the president that estimating ending inventories in the budget is sometimes difficult and he is concerned about the impact of reduced inventory levels on the company's ability to meet salcs. He explains that the sale manager sometimes adjusts the sales numbers before passing them on. When questioned by the president, the sales manager admits that she doesn't want the company to fall short of its sales projections, so she generally gives a little bit of breathing room" by lowering the initial sales projection anywhere from 5% to 10%. Should the president be concerned about the "budgetary slack" being used by the sales manager? Explain in 30 They should be concerned because the slack (0) to 50 words. 16 10) Let's look at some additional requirements for companies that are manufacturers rather than merchandisers. Assume Garden Sales manufactures hand-held lawn care equipment. Rakes, hoes, shovels etc. out of basic wood stock and metal. The sales budget is provided in dollars. For manufacturing companies, it is best to convert this to Number of units. Report your unit answers as whole units necessary to meet the sales dollars (round up). 310.000/60 - 5,167 dollars, how many units will they expect to sell in July? Solb? a) Assume Garden Sales average sales price per unit is $60. Determine the Sales Budget in unit for the quarter. Complete the first 3 rows of the Production Budget. Based on July's sales budget in b) Beginning Finished Goods Inventory: Remember ending inventory should be 20% of next month's sales. How many units will be in ending inventory for March using the budgeted unit sales for April? 1,700 This will be the beginning inventory for April and should be included in the budget below. c) Ending Finished Goods Inventory: Using the budgeted unit sales for July, how many units will be in June's ending inventory? 1032 Include this number in the Budget below. d) Complete the table below for the Production Budget for the quarter. Production Budget April May June Quarter Budgeted Sales in $s ISIO000 10,000 0.000 1,050,000 Average price per unit 60 60 Budgeted unit sales Add Desired units of ending 12,367 11,367 Finished Goods Inventory Total needs 27,200 Less: Units of beginning Finished 1700 2,367 1.367 1,700 Goods Inventory Required production in units 26,500 60 510,000/60 -_8500 11,83302 110,867 60 1,033 103) 11) The production process for Garden Sales requires 3 board feet of wood and 0.8 pounds of metal per unit. Garden Sales typically maintains raw material inventory level of 20% of next month's production requirement. Use this information to prepare the Direct Materials Budget for wood and metal. Remember, ending finished goods inventory must equal 20% of next month's sales requirements. a) Beginning Wood Inventory: For wood, based on April production levels, how many board feet of wood will the company have in their April beginning raw material in inventory? $5,500 b) Ending Wood Inventory: Assume Garden Sales wants to end the quarter with 4,800 board feet of wood in their raw material inventory. (This will be your ending inventory number for June). 4.800 Complete the Direct Materials Budget for wood below. Report board feet in whole numbers d) Garden Sale has the opportunity to purchases all the wood they need for the quarter at one time at the beginning of April. This would allow them to purchase wood at a reduced cost of $0.18 per foot if they can purchase more than 60,000 board feet. Garden Sales estimates they would have sufficient cash to pay for all its wood (no borrowing or interest required), should they buy the to pay $400 a month storage to warehouse the entire supply of wood. Assume Garden Sales has quarter's requirement of wood all at once in April? Show your calculations and explain your (round up). Assume Garden Sales can purchase Wood for $0.20 a board foot. Direct Materials Budget - Wood April May Required production in units x 3 board feet per unit Board feet of wood needed to meet 27,498 production Add: Desired ending raw materials inventory - wood. 1916 June Quarter 205 x 3 x 3 x 3 x 3 4,800 4,800 2.400.12 inventory Board feet of wood raw materials to be purchased 0.20 0.20 0.20 0.20 5,700) 15 980 28,499 +29,902420,900 - 78,500 2,902., 2 -5,950 132,502 19,500 179,500 5,999. Total board feet of wood raw 13,900 --5700 Less: Beginning raw materials 33998 136,402 24,300 184,300 15.500 16.500 13,900 15.500 28.999 200 20,400 175.500 4,080 wood purchases in dollars 1 of Isto 3,100.0,05 Beginning accounts payable 2.040 15,840 15,030 18,375 78,800* 0.22$15,760 78,800.0.18 114, 184 60-19, 189251576 yes, they should c) Payments for Wood Purchases: Assume the same payment patterns as used from your connect question and in item 4 above. Calculate the payments necessary for wood purchases for the quarter using the schedule below. Assume 5% of the March 31 accounts payable balance relates to wood purchases. Revised Cash Disbursements for Inventory April May June Quarter [2,850 2,850 5700 April purchases May purchases June purchases Total cash disbursements for Wood = 4,655 ,700.0,5 2.910 2,040 17505 = 2,850 answer. ent-3.400=$1200) 15760- 12) Production process for Garden Sales requires an average of 23 hours per unit. Peterne forte company' direct labor budget for the upcoming quarter. Garden Sales must pay is work forpe id time and a half to a max of 22,000 hours (18,000 regular hours plus 4,000 overhead hours). For any direct labor hours over 22,000 a month, the company must pay for a contract service $26 an hour to use their people. hour for at least 18,000 hours for a month. Any hours worked beyond the 18,000 hours are paid time b) Garden Sales is consider hiring one part-time employee for $15 per hour. To hire this employee, the employee would be guaranteed 80 hours of work each month. This employee could work as 200 hours (80 minimum hours plus 120 additional hours) each month at the same rate of a) Complete the direct labor budget below. Report hours in whole hours (round up) and costs in whole dollars. Direct Labor Budget April May June Quarter 2.25 2.25 2.25 2.25 S1631 nployee's hours would reduce the hours they of overtime and/or contract dan Sales hire the employee? Should Garden Sales Required production in units Direct labor time per unit (hours) Total direct labor-hours needed Hours at base labor rate ($13) Hours at overtime rate ($19.50) Hours at contract rate $26 Labor costs at base rate Labor costs at overtime rate Labor costs at contract rate Total direct labor cost