Anderson Hardware Company manufactures and sells lawnmower blades. One such product, the Precision Blade, requires 2 pounds of metal to manufacture a single unit. Now into its 2nd quarter, Anderson is planning raw materials it needs for April, May, and June. Anderson has the following inventory requirements:
- Finished goods inventory on hand at the end of each month must be equal to 1,000 units + 30% of next month's sales. Ending finished goods inventory for March was 10,000 units.
- Raw materials inventory on hand at the end of each month must equal 20% of next month's production needs for raw materials. Ending raw materials inventory for March was 30,000 pounds of metal. Desired ending raw materials inventory for June is 23,000 pounds.
- The company always holds zero work-in-process inventory.
- Selling price of each Precision Blade is $150.
- Anderson purchases metal from its supplier at $5 per pound.
The sales budget for Anderson during various months is as follows:
|
April |
May |
June |
July |
| Budgeted Sales (units) |
45,000 |
50,000 |
55,000 |
47,000 |
1) Prepare a production budget (in units) for Anderson for the months of April, May, and June.
2) Prepare a direct materials budget showing the quantity (in lbs) and cost (in $) of metal.
3) All of Anderson's sales are on credit, and they expect to collect everything from its customers. 70% of sales are collected in the month of sale, and 30% are collected in the month after. Andersons's ending Accounts Receivable balance for March was $2,250,000, all of which will be collected in April. Prepare a schedule of expected cash collections for April, May, and June.