Version $2$

Section I

The data below pertains to the first quarter of Alpha Company which manufactures toys.

Below is the estimated sales $($in units$)$:

$\backslash$table$[[$January$,60,000],[$February $80,000,],[$March $,90,000,],[$April$,70,000],[$May$,50,000],[$June$,80,000]]$

a$.$ The selling price of the toy is $$12$ per unit.

b$.$ All sales are on account.

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

Month of sale $,40\%$

Month following sale $55\%$

Uncollectible $,5\%$

c$.$ Sales for December of last year totaled $$200,000.$

d$.$ The company maintains finished goods inventories equal to $15\%$ of the following month's sales.

e$.$ Each toy requires $4$ kilos of raw materials.

f$.$ The company requires that the ending inventory of raw materials be equal to $20\%$ of the following month's production needs.

g$.$ The raw material costs $$1\mathrm{.}30$ per kilo.

h$.30\%$ of a month's purchases of raw materials is paid for in the month of purchase; the remainder is paid after two months

i$.$ The accounts payable on December $31$ of last year was $$54,000.$

Required for Part I

Prepare:

a$.$ Prepare a sales budget, by month and in total, for the first quarter.

$(3$ marks$)$

b$.$ Prepare a schedule of expected cash collections, by month and in total, for the first quarter.

$(11$ marks$)$

c$.$ Prepare a production budget for each months of the first quarter. $(10$ marks$)$

d$.$ Prepare a direct materials budget, by month and in total, for the first quarter.

$(12$ marks$)$

e$.$ Prepare a schedule of expected cash disbursements, by month and in total, for the first quarter.

$(12$ marks$)$

Total of Section I $(48$ marks$)$

End of Section I

Section II

Question One

$(12$ marks$)$

Beta Inc. is a wholesale distributor of beach umbrellas. Thus, peak sales occur in May of each year as shown in the company's sales budget for the second quarter, given below:

April

May

June

Budgeted Sales $($All on account$)$ $$700,000$$$500,000$

$$650,000$

From past experience, the company has learned that $40\%$ of a month's sales are collected in the month of sale, $50\%$ are collected in the month following sale, and the remaining $10\%$ are collected in the second month following sale. February sales totaled $$500,000,$ and March sales totaled $$600,000.$

Required:

Prepare a schedule of expected cash collections from sales for each month $($April$,$ May, and June$).$

$(12$ marks$)$

Question Two

$(20$ Marks$).$

Salam company is planning its cash needs for the fourth quarter.

The following information has been assembled to assist in preparing a cash budget for the quarter:

a$.$ The Total cash collections and disbursement for purchases are as follows $($All amounts are in dollars$)$:

c$.$ Land costing $$5,500$ will be purchased in October.

d$.$ Dividends of $$2,000$ will be declared and paid in November.

e$.$ The cash balance on October $1^{st}$ is $$12,000.$

f$.$ The company must maintain a cash balance of at least $$18,000$ at the end of each month.

g$.$ The interest rate on the loans is $10\%$ per year. The company's policy is to repay the loan plus accumulated interest at the end of the quarter.

Required: $($Use rounding if it is needed$).$

Prepare: A cash budget

$(20$ mark$)$

Section $3$

$(20$ marks$).$

Please see grade distribution below.

The Introduction part must include an appropriate definition of budgets and elaborate on the need of organizations to create budgets emphasizing the planning and control perspectives. $(300-500$ words, single spaced$).$

$\backslash$table$[[$Section $1],[$Sales budget,$3],[$Schedule of expected cash collections,$11],[$Production budget,$10],[$Direct materials budget,$12],[$Schedule of expected cash disbursements,$12],[$Total$,48],[$Section $2],[$Schedule of expected cash collections,$12],[$Cash budget,$20],[$Total$,32],[$Section $3],[$Cover page,$2],[$Table of contents,$2],[$Introduction$,10],[$Formatting$,2],[$Referencing$,2],[$Conclusion$,2],[$Total$,20],[$Grand Total,$100]]$