Problem 5-1: Your Company, Inc. has determined that its planned production for the upcoming fiscal year is: Units to be produced

Problem 5-1:
Your Company, Inc. has determined that its planned production for the upcoming fiscal year is:
            Units to be produced;             First Quarter = 6,000
                                                            Second Quarter = 7,000
                                                            Third Quarter = 5,000
                                                            Fourth Quarter = 4,000
Beginning raw materials inventory for the first quarter is 2,400 pounds. Beginning accounts payable for the first quarter is $2,520. Each unit requires 4 pounds of raw material that costs $0.70 per pound. Management desires to end each quarter with an inventory equal to 10% of the following quarter’s production needs. The desired ending inventory for the fourth is 2,600 pounds. Management plans to pay 80% of the raw material purchases in the quarter acquired and 20% in the following quarter. Each unit requires 0.70 direct labor hours and the labor rate is $16.00 per hour.

Required:
   1] Prepare the company’s direct materials budget and schedule of expected cash disbursements for purchases of raw materials for the upcoming fiscal year.
   2] Prepare the company’s direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.

Problem 5-2:
My Company, Inc. has determined that its planned production for the upcoming fiscal year is:
            Units to be produced:             First Quarter = 6,000
                                                            Second Quarter = 7,000
                                                            Third Quarter = 6,500
                                                            Fourth Quarter = 5,500
Each unit requires 1.4 direct labor hours and workers are paid $12.50 per hour. The variable manufacturing overhead rate is $0.75 per direct labor hour. The fixed manufacturing overhead is $90,000 per quarter. The only non-cash element of manufacturing overhead is depreciation, which is $20,000 per quarter. All labor costs and manufacturing overhead is paid in the quarter incurred.

Required:
   1] Prepare the company’s direct labor budget for the upcoming fiscal year, assuming that the direct labor work force is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.
   2] Prepare the company’s manufacturing overhead budget.

Problem 5-3:
You will be required to prepare a December cash budget. You are provided with the following information:
   a] Cash balance on December 1 is $60,000.
   b] Actual sales for October and November and expected sales for December are as follows:
                                                                        October           November       December
            Cash sales                                           $95,000           $105,000         $125,000
            Sales on account                                 $600,000         $785,000         $900,000
      Sales on account are collected over a three month period as follows:
            Month of sale:                                     15%
            Month following sale:                         60%
            Second month following sale:             20%
      Five percent of sales on account are uncollectible.
   c] Purchases of inventory for December will total $420,000. Forty percent of a month’s inventory purchases are paid in the month of purchase. The accounts payable remaining from November inventory purchases total $205,000, all of which will be paid in December.
   d] Selling and administrative expenses are budgeted at $440,000 for December; of this amount $50,000 is for depreciation.
   e] A new machine will be purchased for cash, in December, at a cost of $205,000; dividends totaling $25,000 will be paid in December.
   f] The company maintains a minimum cash balance of $60,000. An open line of credit is available from the company’s bank to bolster the cash position as needed.

Required:
   1] Prepare a schedule of cash collections for December.
   2] Prepare a schedule of cash disbursements for merchandise purchases for December.
   3] Prepare a cash budget for December. Indicate in the financing section any borrowing that will be needed during the month. Assume that no interest payments are due or will be paid before January.

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