The master budget components for Land Company for the month ended June 30 appear below. Land Company produces and sells rakes for $10 each. Budgeted sales and cash disbursements for the next five months are:
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Budgeted sales
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Budgeted cash disbursements
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April
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20,000 units
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$301,000
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May
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50,000 units
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$362,000
|
|
June
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30,000 units
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$356,000
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|
July
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25,000 units
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$332,000
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August
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15,000 units
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$315,000
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Additional information follows:
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All sales are on account. The company's collection pattern is: 70% collected in the month of sale; 25% collected in the month following sale; and the remaining 5% are collected in the next month.
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The accounts receivable balance on March 31 was $30,000.
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Land's loan arrangement with its bank requires Land to maintain a minimum cash balance of $10,000. The cash balance at the beginning of June was $40,000.
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Land desires to have enough rakes on hand at the end of each month equal to 20 percent of the following month's budgeted rake sales.
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Five pounds of aluminum are required to produce each rake.
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The company desires to have enough aluminum on hand at the end of each month equal to 10 percent of the following month's production needs.
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Aluminum costs $0.40 per pound.
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Each rake produced requires 6 minutes of direct labor.
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Employees are paid $12 per hour. In addition, the cost of fringe benefits is $2.50 per hour.
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MOH is applied at the rate of $0.60 per direct labor dollar.