Tyva makes a very popular undyed cloth sandal in one style, but in Regular and Deluxe. The

Question:

Tyva makes a very popular undyed cloth sandal in one style, but in Regular and Deluxe. The Regular sandals have cloth soles and the Deluxe sandals have cloth-covered wooden soles. Tyva is preparing its budget for June 2013 and has estimated sales based on past experience. Other information for the month of June follows:
Input Prices
Direct materials
Cloth ............................................................ $5.25 per yard
Wood .................................................... $7.50 per board foot
Direct manufacturing labor .... $15 per direct manufacturing labor-hour

Input Quantities per Unit of Output (per pair of sandals) Regular Deluxe Direct materials Cloth 1.3 yards 1.5 yards 2 b.

Inventory Information, Direct Materials Cloth Wood Beginning inventory 610 yards 800 b.f. Target ending inventory 386 ya

Tyva accounts for direct materials using a FIFO cost flow assumption.

Tyva uses a FIFO cost flow assumption for finished goods inventory.
All the sandals are made in batches of 50 pairs of sandals. Tyva incurs manufacturing overhead costs, marketing and general administration, and shipping costs. Besides materials and labor, manufacturing costs include setup, processing, and inspection costs. Tyva ships 40 pairs of sandals per shipment. Tyva uses activity-based costing and has classified all overhead costs for the month of June as shown in the following chart:

Required
1. Prepare each of the following for June:
a. Revenues budget
b. Production budget in units
c. Direct material usage budget and direct material purchases budget in both units and dollars; round to dollars
d. Direct manufacturing labor cost budget
e. Manufacturing overhead cost budgets for processing and setup activities
f. Budgeted unit cost of ending finished goods inventory and ending inventories budget
g. Cost of goods sold budget
h. Marketing and general administration costs budget
2. Tyva's balance sheet for May 31 follows.

Use the balance sheet and the following information to prepare a cash budget for Tyva for June. Round to dollars.
€¢ All sales are on account; 60% are collected in the month of the sale, 38% are collected the following month, and 2% are never collected and written off as bad debts.
€¢ All purchases of materials are on account. Tyva pays for 80% of purchases in the month of purchase and 20% in the following month.
€¢ All other costs are paid in the month incurred, including the declaration and payment of a $15,000 cash dividend in June.
€¢ Tyva is making monthly interest payments of 0.5% (6% per year) on a $150,000 long-term loan.
€¢ Tyva plans to pay the $10,800 of taxes owed as of May 31 in the month of June. Income tax expense for June is zero.
€¢ 30% of processing, setup, and inspection costs and 10% of marketing and general administration and shipping costs are depreciation.
3. Prepare a budgeted income statement for June.
4. What questions might the CEO ask the management team when reviewing the budget?
5. How does preparing the budget help Tyva's management team better manage the company?

Balance Sheet
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