Rolen, Inc., is in the process of preparing

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Rolen, Inc., is in the process of preparing the fourth quarter budget for 2010, and the following data have been assembled:

The company sells a single product at a price of $25 per unit. The estimated sales volume for the next six months is as follows:

September 13,000 units
October 12,000 units
November 14,000 units
December 20,000 units
January 9,000 units
February 10,000 units

All sales are on account. The company's collection experience has been that 30% of a month's sales are collected in the month of sale, 68% are collected in the month following the sale, and 2% are uncollectible. It is expected that the net realizable value of accounts receivable (i.e., accounts receivable less allowance for uncollectible accounts) will be $211,000 on September 30, 2010.
Management's policy is to maintain ending finished goods inventory each month at a level equal to 30% of the next month's budgeted sales. The finished goods inventory on September 30, 2010, is expected to be 3,600 units.
To make one unit of finished product, 5 pounds of materials are required. Management's policy is to have enough materials on hand at the end of each month to equal 40% of the next month's estimated usage. The raw materials inventory is expected to be 25,200 pounds on September 30, 2010.
The cost per pound of raw material is $2, and 70% of all purchases are paid for in the month of purchase; the remainder is paid in the following month. The accounts payable for raw material purchases is expected to be $37,980 on September 30, 2010.

Required:
(a)Prepare a sales budget in units and dollars, by month and in total, for the fourth quarter (October, November, and December) of 2010. (Omit the "$" sign in your response.)

October November December Total
Expected sales in units
Selling price per unit $ $ $ $

Total sales $ $ $ $


(b)Prepare a schedule of cash collections from sales, by month and in total, for the fourth quarter of 2010. (Omit the "$" sign in your response.)

Cash collections from: October November December Total
September sales $ $
October sales $
November sales $
December sales

Total cash collections $ $ $ $


(c)Prepare a production budget in units, by month and in total, for the fourth quarter of 2010. (Amounts to be deducted should be indicated with minus sign.)

October November December Total
Beginning inventory of finished goods
Units to be produced

Goods available for sale
Desired ending inventory of finished
goods (30% of next month's
budgeted sales)

Quantity of goods sold


(d)Prepare a materials purchases budget in pounds, by month and in total, for the fourth quarter of 2010. (Amounts to be deducted should be indicated with minus sign.)

October November December Total
Beginning inventory of raw materials
Purchases of raw materials

Raw materials available for use
Desired ending inventory of raw
materials (40% of next month's
estimated usage)

Quantity of raw materials to be
used in production


(e) Prepare a schedule of cash payments for materials, by month and in total, for the fourth quarter of 2010. (Omit the "$" sign in your response.)

Cash payments for: October November December Total
September purchases $ $
October purchases $
November purchases $
December purchases

Total cash payments $ $ $ $
Question 7
A.
12000 14000 20000 46000 25 25 25 25
300000 350000 500000 11500000
B.
221000 221000 90000 204000 294000 105000 105000 238000 343000
150000 150000 311000 309000 388000 1008000
C.
3600 4200 6000 3600
12600 15800 16700 45100
16200 20000 22700 48700
(4200) (6000) (2700) (2700)
12000 14000 20000 46000
D.
25200 31600 33400 25200
69400 80800 68700 218900
94600 112400 102100 244100
(31600) (33400) (18600) (18600)
63000 79000 83500 225500

    • 8 years ago
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