Questions -
Q1. Donnegal Company makes and sells artistic frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2014.
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January
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February
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March
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April
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May
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Estimated unit sales
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10,700
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11,900
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8,100
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8,200
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8,100
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Sales price per unit
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$50.3
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$47.8
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$47.8
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$47.8
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$47.8
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Direct labor hours per unit
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2.3
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2.3
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1.8
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1.8
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1.8
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Wage per direct labor hour
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$7
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$7
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$7
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$8
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$8
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Donnegal has a labor contract that calls for a wage increase to $8 per hour on April 1. New labor-saving machinery has been installed and will be fully operational by March 1.
Donnegal expects to begin the year with 17,840 frames on hand and has a policy of carrying an end-of-month inventory of 100% of the following month's sales, plus 60% of the second following month's sales.
Prepare a production budget for Donnegal Company by month and for the first quarter of the year.
Q2. Dalby Company has accumulated the following budget data for the year 2014.
1. Sales: 31,260 units, unit selling price $87.
2. Cost of one unit of finished goods: Direct materials 2 pounds at $5 per pound, direct labor 3 hours at $13 per hour, and manufacturing overhead $6 per direct labor hour.
3. Inventories (raw materials only): Beginning, 10,330 pounds; ending, 15,430 pounds.
4. Selling and administrative expenses: $202,530.
5. Income taxes: 30% of income before income taxes.
Prepare a schedule showing the computation of cost of goods sold for 2014.
Q3. Danner Company expects to have a cash balance of $53,774 on January 1, 2014. Relevant monthly budget data for the first 2 months of 2014 are as follows.
Collections from customers: January $99,365, February $175,350.
Payments for direct materials: January $58,450, February $81,830.
Direct labor: January $35,070, February $52,605. Wages are paid in the month they are incurred.
Manufacturing overhead: January $24,549, February $29,225. These costs include depreciation of $1,169 per month. All other overhead costs are paid as incurred.
Selling and administrative expenses: January $17,535, February $23,380. These costs are exclusive of depreciation. They are paid as incurred.
Sales of marketable securities in January are expected to realize $11,690 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $29,225. The company wants to maintain a minimum monthly cash balance of $23,380.
Prepare a cash budget for January and February.