Budgeting prob 1 - Solution PDF

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Summary

Sales, Production and Materials Purchases BudgetSales forecast : 80,000 units at P30 per unitThe seasonal variation index based on prior year’s operation is as follows :1 st quarter 80 3rd quarter 1102 nd quarter 100 4 th quarter 110A unit of product requires 3 units of raw materials which are purch...

Description

Sales, Production and Materials Purchases Budget Sales forecast : 80,000 units at P30 per unit The seasonal variation index based on prior year’s operation is as follows : 1st quarter 80 3rd quarter 110 2nd quarter 100 4th quarter 110 A unit of product requires 3 units of raw materials which are purchased at P5.00 per unit. Inventories at the beginning and end of year are : Beginning End Finished goods 3,000 units 5,000 units Raw materials 12,500 units 15,000 units Which are to be maintained at 20% of the succeeding quarter’s estimated sales and production requirements. Purchases of raw materials are to be made to correspond with budgeted monthly production. Required : 1. Budget of anticipated sales 2. Statement of production required 3. Statement of raw materials purchase requirements (Sales, Production and Materials Purchases Budget) Requirement 1 Sales Budget For the year ending December 31, 20x4 Units 16,000 20,000 22,000 22,000 80,000

First quarter Second quarter Third quarter Fourth quarter Total

Requirement 2

Amount P 480,000 600,000 660,000 660,000 P2,400,000

Statement of Production Required For 20x4

Units to be sold Add: Desired ending inventory (20%) Total units required Less: Beginning inventory Units to be produced

1st 16,000 4,000 20,000 3,000 17,000

Quarter 2nd 3rd 20,000 22,000 4,400 4,400 24,400 26,400 4,000 4,400 20,400 22,000

4th 22,000 5,000 27,000 4,400 22,600

Total 80,000 5,000 85,000 3,000 82,000

Requirement 3 Statement of Raw Materials Purchase Requirements For 20x4

Units required for production Add: Desired ending inventory Total units Less: Beginning inventory Raw Materials to be Purchased

1st 51,000 12,240 63,240 12,500 50,740

Quarter 2nd 3rd 61,200 66,000 13,200 13,560 74,400 79,560 12,240 13,200 62,160 66,360

4th Total 67,800 246,000 15,000 15,000 82,800 261,000 13,560 12,500 69,240 248,500

Cash Budget 2020 January February March April

Purchases 42,000 48,000 36,000 54,000

Sales 72,000 66,000 60,000 78.000

Collections from customers are normally 70% in the month of sale, 20% in the month following the sale, and 9% in the second month following the sale and the balance is uncollectible. The company takes advantage of the 2% cash discount allowed on purchases paid for by the tenth of the following month. Purchases for May are budgeted at P60,000 while Sales for May are forecasted at P66,000. Cash disbursements for expenses are expected to be P14,400 for the month of May. Cash balance at May 1 was P22,000. Required : 1. Expected cash collections for May . 2. Expected cash disbursements for May. 3. Expected cash balance at May 31. 1. Expected cash collections for May March 60,000 x .09 P5,400 April 78,000 x .2 15,600 May 66,000 x .7 46,200 Total 67,200 1. Expected cash disbursements for May April purchases (54,000 x.98 ) 52,920 Expenses 14,400 Total 67,320 2. Cash balance, May 1 22,000 Add: Expected collections 67,200 Total cash available 89,200 Less : Cash disbursements 67,320 Cash balance, May 31 21,880...