Vaughan Company makes AMAZING SUPER DUPER Widgets. Management is now preparing detailed budgets for the third quarter, July through September, and has assembled the following information to assist in budget preparation:

1. Sales Budget

The marketing department has estimated sales as follows for the remainder of the year: (Actual sales in June were 6,000 units)

July	4,000		October	4,000
August	20,000		November	6,000
September	12,000		December	8,000

The selling price of a SUPER DUPER widget is $80 and all sales are on account.

Based on past experience, sales are collected in the following pattern:

• 20% in the month of sale
• 75% in month following the sale
• 5% are never collected (uncollectible)

Vaughan Company

Sales Budget

3rd Quarter	July	August	September	3rd Quarter
Sales in Units	4000	20000	12000	36000
Selling Price per Unit	x80	x80	x80	x80
Total Sales in $	320000	1600000	960000	2880000
				3
Cash Collections
June's Cash Collections	360000			360000
July's Cash Collections	64000	240000		304000
August's Cash Collections		320000	1200000	152000
September's Cash Collections			192000	192000
Total Cash Collections	424000	560000	1392000	2376000

1. Production Budget

The company maintains a finished goods inventory equal to 10% of the following month's sales. The inventory of finished goods on July 1 is as it should be.

Vaughan Company
Production Budget				Total
3rd Quarter	July	August	September	3rd Quarter
Budgeted Sales in Units	4000	20000	12000	36000
Add: Desired Ending Inventory	2000	1200	400	400
Total Needs	6000	21200	12400	36400
Less: Beginning Inventory	-400	-2000	-1200	-400
Required Production	5600	19200	11200	36000

1. Raw Materials Purchasing Budget

Each unit of SUPER DUPER widget requires 0.6 pounds of WHAM compound. To prevent shortages, the company would like the inventory of WHAM compound on hand at the end of each month to equal 40% of the following month's production needs.

The inventory on July 1 is 1,344 pounds.

WHAM compound costs $12.00 per pound and Vaughan pays for 80% of its purchases in the month of purchase; the remainder is paid in the following month. $41,184 of WHAM compound was purchased in June and 80% was paid for in June.

Vaughan Company

RM Purchasing Budget

	3rd Quarter	July	August	September	3rd Quarter
	Required Production
	RM per Unit
	Production Needs
	Add: Desired Ending Inventory
	Total Needs
	Less: Beginning Inventory
	RM to be Purchased
	Cost of RM per pound
	Cost of RM to be Purchased
	Cash Disbursements for RM
	June's RM Purchases
	July's RM Purchases
	August's RM Purchases
	September's RM Purchases
	Total Disbursements