Freese, Inc., is in the process of preparing the fourth quarter budget for 2016,

Question

Freese, Inc., is in the process of preparing the fourth quarter budget for 2016, and the following data have been assemblesd: . The company sells a singte product at a price of $55 per unit. The estimaled sales volume for the next six months is as follows: September 15,600 units October November 16,800 units December 24,000 units January February 14.400 units 10,800 units 12.000 units A sales are on account The company s colection experience has been that 30% o a month's sales are collected in the month of sale, 68% are o lected in the month following the sale, and 2% are uncollectible it is expected that the net realizable value of accounts receivable (.e., accounts receivable less allowance for uncollectible accounts) will be $583,440 on September 30, 2016 Managements policy is to maintain ending shed goods inventory each month at a level equal to 30% of the next month's budgeted sales. The finished goods inventory on September 30, 2016, is expected to be 4,320 units. . To make one unit of finished product, 6 pounds of materials are required. Management's policy is to have enough materials on hand at the end of each month to equal 40% of the next month's est mo d usage pounds on September 30, 2016 T e o following month. The accounts payable for raw material purchases is expected to be $54,691 on September 30, 2016. he raw materials inventory is expected to be 36288 . t per pound of raw mater al is $2. a 70% of all purchases are paid for in the mort of purchase, he remainder s paid n the Required: a. Prepare a sales budget in units and dollars, by month and in total, for the fourth quarter (October, Nowember, and Decamber) of 2016 November December October Total Expected sales in units Seling price per unit Total sales b. Prepare a schedule of cash collections from sales, by month and in total, for the fourth quarter of 2016. Cash collections from: September sales October sales November sales December sales Total cash collections October November December Total c. Prepare a production budget in units, by month and in total, for the fourth quarter of 2016.

Explanation / Answer

a

b

c

d

e

October November December Total Expected Sales in Units 14400 16800 24000 55200 Selling Price Per Unit 55 55 55 55 Total Sales 792000 924000 1320000 3036000

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