Week 9B

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SE2 Windsor Lock Company’s controller is preparing a production budget for the year. The company’s policy is to maintain a finished goods inventory equal to half of the following monthly sales. Sales of 5,000 locks are budgeted for April. Complete the monthly production budget for the first quarter

                                                                                                                     January         February              March

Sales in unit                                                                                                5,000                  4,000                 6,000

Add desired units of ending finished goods inventory                      2,000                        ?                      ?

Desired total units                                                                                   7,000                         ?                      ?

Less desired units of beginning finished good inventory                        ?                           ?                      ?

Total production units                                                                             4,500                        ?                      ?

SE3 Preparing an Operating Budget

Hartford Company expects to sell 50,000 units of its product in the coming year. Each unit sells for $50. Sales brochures and supplies for the year are expected to cost $9.000. Two sales representatives cover the southeast region. Each representative’s base salary is $20,000 and each earns a sales commission of 5 percent of the selling price of the units he or she sells. The sales representatives supply their own transportation, they are reimbursed for travel at a rate of $.60 per mile. The company estimates that the sales representatives will drive a total of 70,000 miles next year. Calculate Hartford’s budgeted selling expenses for the coming year.

SE4 Budgeted Gross Margin

Eastport Company’s operating budgets reveal the following information: net sales. $400,000; beginning materials inventory, $23,000; materials purchased, $185,000; beginning work in process inventory, $64,000; beginning finished goods inventory, $21,600; direct labor costs, $34,000; overhead applied, $67,000; ending work in process inventory, $61,200; ending materials inventory, $20,000; and ending finished goods inventory, $18,000. Compute Eastport’s budgeted gross margin.

SE5 Estimating Cash Collections

Standard Insurance Company specializes in term life insurance contracts. Cash collection experience shows that 40 percent of billed premiums are collected in the month in which they are billed, 50 percent are paid in the first month after they are billed, and 6 percent are paid in the second month after they are billed. Four percent of the billed premiums are paid late (in the third month after they are billed) and include a 10 percent penalty payment. Total billing notices in January were $58,000; in February, $62,000; in March, $66,000; in April, $65,000; in May, $60,000; and in June, $62,000. How much cash does the company expect to collect in May

    • 6 years ago
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