Question: 1. Royal Company is preparing budgets for the quarter ending June 30".
Budgeted sales for the next six months are:
Jan 20,000 units
Feb 50,000 units
Mar 30,000 units
Apr 25,000 units
May 15,000 units
June 32,000 units
The selling price is $10 per unit.
2. All sales are on account.
• Royal's collection pattern is:
70% collected in the month of sale,
25% collected in the month following sale, 5% uncollectible.
• In April, the March 31st accounts receivable balance of $30,000 will be collected in full.
3. The management at Royal Company wants ending inventory to be equal to 20%* of the following month's budgeted sales in units.
• On March 31s1. 4,000 units were on hand. Let's prepare the production budget.
* this meets customer service level of 98% order shipment in 2 days
4. At Royal Company, five pounds of material are required per unit of product.
• Management wants materials on hand at the end of each month equal to 10% of the following month's production.
• On March 31, 13,000 pounds of material are on hand. Material cost is $0.40 per pound.
Let's prepare the direct materials budget.
5. Royal pays SO 40 per pound for its materials.
• One-half of a month's purchases is paid for in the month of purchase; the other half is paid in the following month.
• The March 31 accounts payable balance relating to materials is $12,000.
Let's calculate expected cash disbursements.
6. At Royal, each unit of product requires 0.05 hours (3 minutes) of direct labor
• The Company has a "no layoff' policy so all employees will be paid for 40 hours of work each week.
• For purposes of our illustration assume that Royal has a "no layoff" policy, workers are paid at the rate of $10 per hour regardless of the hours worked.
• For the next three months, the direct labor workforce will be paid for a minimum of 1,500 hours per month.
Let's prepare the direct labor budget.
7. At Royal, manufacturing overhead is applied to units of product on the basis of direct labor hours.
• The variable manufacturing overhead rate is $20 per direct labor hour.
• Fixed manufacturing overhead is $50,000 per month, which includes S20.000 of noncash costs (primarily depreciation of plant assets).
Let's prepare the manufacturing overhead budget.
8. At Royal, the selling and administrative expense budget is divided into variable and fixed components.
• The variable selling and administrative expenses are $0.50 per unit sold.
• Fixed selling and administrative expenses are $70,000 per month.
• The fixed selling and administrative expenses include 510,000 in costs - primarily depreciation - that are not cash outflows of the current month.
Let's prepare the company's selling and administrative expense budget.
9. Royal reported the following account balances prior to preparing its budgeted financial statements:
• Land - $50,000
• Common stock - $200.000
• Retained earnings - $86575 (April 1)
• Equipment - 5125.000
Information related to above question is enclosed below:
Attachment:- 81554_1407744_Ch.8ExcelwithHWCanvas.rar