[The following information applies to the questions displayed below.] Iguana, In

Question

[The following information applies to the questions displayed below.]

Iguana, Inc., manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $3.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $15 per hour. Iguana has the following inventory policies:

Ending finished goods inventory should be 40 percent of next month’s sales.
Ending raw materials inventory should be 30 percent of next month’s production.

Expected unit sales (frames) for the upcoming months follow:   

March 375
April 450
May 500
June 600
July 575
August 625

Variable manufacturing overhead is incurred at a rate of $0.50 per unit produced. Annual fixed manufacturing overhead is estimated to be $6,000 ($500 per month) for expected production of 5,000 units for the year. Selling and administrative expenses are estimated at $550 per month plus $0.70 per unit sold.

     Iguana, Inc., had $11,100 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the credit sales, 50 percent is collected during the month of the sale, and 50 percent is collected during the month following the sale.

     Of raw materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Raw materials purchases for March 1 totaled $5,500. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $350 in depreciation. During April, Iguana plans to pay $2,000 for a piece of equipment.

5.


Required information

Required:
1. Compute the budgeted cash receipts for Iguana. (Do not round your intermediate calculations. Round final answers to 2 decimal places.)



2. Compute the budgeted cash payments for Iguana. (Do not round your intermediate calculations. Round final answers to 2 decimal places.)

    

3. Prepare the cash budget for Iguana. Assume the company can borrow in increments of $1,000 to maintain a $10,000 minimum cash balance. (Leave no cell blank enter "0" wherever required. Round your answers to 2 decimal places.)

(Please explain steps)

The following nformation apples to the questions displayed below lguana, Inc, maufactures bamboo picture raes hat sell for 525 eachi. Eachi Trame requires 4 lirnear feet of bamboo, which costs $3.00 per foo. Each fraie lakes approximately 30 miutes to build, and the labor rate averages $15 per hour. lguana has the following inventory policies Ending finlshed goods Inventary should he 40 percent of next month's sales Ending raw materials inventory should be 30 percent of next month's praductian Expected unit sales (frames) for the upcoming months follow 375 450 500 March Aprl May June July August 575 625 Variable manutacturing overhead is incurred at a rate of $0:50 per unit produced. Annual Tixed manufacturing overhcad is estimated to be 56,000 (5500 per month] tor expected production of 5,000 units tor thc yoar. Sclling and administrative expenses are cstimated at $550 per month plus $00 per unit sold. lcuana Inc. had $11 100 cash on hand on April ? O its sales, 80 percent is in cash the credit sales 50 percent ls collected during the month ofthe sale and 50 percent is collected during the month oll ing the sale Of raw materlals purchases, 80 percent is pald for cluring the month purchased and 20 percent is pald In the following month Raw materials purchases for March 1 totaled $5,500 All other onerating costs are pald during the month incurred. Manthly fixed manufacturing overhead Includes $350 in depreclation. During April, Iguana plans to pay $2,000 for a plece of equipment

Explanation / Answer

Solution:

Part 1 --- Budgeted Cash Receipts

Budgeted Cash Receipts

April

May

June

2nd Quarter total

Budgeted Sales in Units

450

500

600

Unit Selling Price

$25

$25

$25

Budgeted Sales in dollars

$11,250

$12,500

$15,000

Cash Sales (Total Sales x 80%) (A)

$9,000

$10,000

$12,000

Credit Sales (Total Sales x 20%)

$2,250

$2,500

$3,000

Schedule of Collection from Sales:

Cash Sales (Total Sales x 80%)

$9,000

$10,000

$12,000

March Credit Sales (375 units x $25*20%*50%) Collected in April

$937.50

April Credit Sales

$1,125.00

(2250*50%)

$1,125.00

(2250*50%)

May Credit Sales

$1,250.00

(2500*50%)

$1,250.00

(2500*50%)

June Credit Sale

$1,500.00

(3000*50%)

Budgeted Cash Receipts

$11,062.50

$12,375.00

$14,750.00

$38,187.50

Part 2 – Budgeted Cash Payments

Budgeted Cash Payments

April

May

June

2nd Quarter Total

Budgeted Cash Payment for Materials Purchases (Refer Note 1)

$5,813.60

$6,506.40

$7,010.40

$19,330.40

Cash Payment for Labor (Refer Note 2)

$3,525.00

$4,050.00

$4,425.00

$12,000.00

Payment for Variable Manufacturing Overhead (Refer note 3)

$235.00

$270.00

$295.00

$800.00

Fixed Manufacturing Overhead (excluding depreciation since depreciation is a non cash item and does not involve any cash outflow) ($500 - 350)

$150.00

$150.00

$150.00

$450.00

Selling and Administrative Expense (Refer Note 4)

$879.00

$928.00

$963.00

$2,770.00

Payment for Equipment

$2,000.00

$2,000.00

Total Budgeted Cash Payments

$12,602.60

$11,904.40

$12,843.40

$37,350.40

Note 1 –

Working for Budgeted Cash Payment for Merchandise Purchase

April

May

June

July

Next Month's Sales Unit

500

600

575

625

Desired Ending Inventory Ratio

40%

40%

40%

40%

Desired Ending Inventory

200

240

230

250

Plus: Budgeted Sales Unit

450

500

600

575

Total Needs

650

740

830

825

Less: Beginning Finished Goods Inventory (ending inventory of last month)

180

200

240

230

Budgeted Production in Units

470

540

590

595

Required Raw material per unit (linear feet)

4

4

4

4

Total Required Raw Material for Production (pounds)

1880

2160

2360

2380

Add: Desired Ending Raw Material Inventory (30% of next month's production need)

648

708

714

Less: Estimated Beginning Raw material inventory (ending inventory of last month)

564

648

708

Total Budgeted Purchases Raw Material (linear feet)

1964

2220

2366

Cost per foot

$3.00

$3.00

$3.00

Budgeted Cost of Raw materials purchases

$5,892

$6,660

$7,098

Cash Payment Schedule for Merchandise Purchases:

April

May

June

2nd Quarter Total

March Purchases ($5,500*20%)

$1,100.00

April Purchases

$4,713.60

$1,178.40

May Purchases

$5,328.00

$1,332.00

June Purchases

$5,678.40

Total Cash Payment for Purchases

$5,813.60

$6,506.40

$7,010.40

$19,330.40

Note 2 --

Budgeted Direct Labor Cost

April

May

June

2nd Quarter Total

Budgeted Production Units (Frames) (Refer Note 1)

470

540

590

Required Labor Hour per frame

0.50

0.50

0.50

Total Required Labor Hours

235.00

270.00

295.00

Labor Rate per hour

$15.00

$15.00

$15.00

Labor Cost Budget

$3,525.00

$4,050.00

$4,425.00

$12,000.00

Note 3 –

Variable Manufacturing Overhead

April

May

June

2nd Quarter Total

Budgeted Production Units (Frames) (Refer Note 1)

470

540

590

Variable Manufacturing Expense per unit produced

$0.50

$0.50

$0.50

Total Budgeted Variable Manufacturing Overhead

235.00

270.00

295.00

800.00

Note 4 –

Selling and Administrative Expenses

April

May

June

2nd Quarter Total

Units Sold

470

540

590

Variable Selling & Admin Expenses per unit sold

$0.70

$0.70

$0.70

Total Variable S&A Expense

$329

$378

$413

Add: Fixed S&A Exp

$550

$550

$550

Total S&A Exp

$879

$928

$963

$2,770

Part 3 --- Cash Budget

Cash Budget

April

May

June

2nd Quarter Total

Beginning Cash Balance

$11,100.00

$10,559.90

$10,030.50

$11,100.00

Plus: Budgeted Cash Receipt (Refer Part 1)

$11,062.50

$12,375.00

$14,750.00

$38,187.50

Less: Budgeted Cash Payments (Refer Part 2)

$12,602.60

$11,904.40

$12,843.40

$37,350.40

Preliminary Cash Balance

$9,559.90

$11,030.50

$11,937.10

$11,937.10

Cash Borrowed / Repaid

$1,000.00

-$1,000.00

$0.00

$0.00

Ending Cash Balance

$10,559.90

$10,030.50

$11,937.10

$11,937.10

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Budgeted Cash Receipts

April

May

June

2nd Quarter total

Budgeted Sales in Units

450

500

600

Unit Selling Price

$25

$25

$25

Budgeted Sales in dollars

$11,250

$12,500

$15,000

Cash Sales (Total Sales x 80%) (A)

$9,000

$10,000

$12,000

Credit Sales (Total Sales x 20%)

$2,250

$2,500

$3,000

Schedule of Collection from Sales:

Cash Sales (Total Sales x 80%)

$9,000

$10,000

$12,000

March Credit Sales (375 units x $25*20%*50%) Collected in April

$937.50

April Credit Sales

$1,125.00

(2250*50%)

$1,125.00

(2250*50%)

May Credit Sales

$1,250.00

(2500*50%)

$1,250.00

(2500*50%)

June Credit Sale

$1,500.00

(3000*50%)

Budgeted Cash Receipts

$11,062.50

$12,375.00

$14,750.00

$38,187.50

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