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

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[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 $2.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12.00 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:

Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.60 per unit sold.

     Iguana, Inc., had $10,800 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 $2,000. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $150 in depreciation. During April, Iguana plans to pay $3,000 for a piece of equipment.

Required information

Required:

Compute the following for Iguana, Inc., for the second quarter (April, May, and June). (Do not round your intermediate calculations.)

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 $1,000.00 to maintain a $10,000.00 minimum cash balance. (Leave no cell blank enter "0" wherever required. Round your answers to 2 decimal places.)

March 275 April 250 May 300 June 400 July 375 August 425

Explanation / Answer

Note:

1 Budgeted production units

2. Budgeted raw material to be purchase

1. Budgeted Cash receipts

Total Sales of March=275*25=6,875

Credit Sales=6,875*20=1,375

Collection of credit sales of March in April=1,375*50%=687.5

2. Budgeted cash payments

Total purchases in March =2000

Credit purchases for which payment is made in April=2000*.2=400

3. Cash Budget

April May June 2nd Quarter Total 1 Budgetes Sales Revenue 250*25=6,250 300*25=7,500 400*25=10,000 23,750 2 Budgeted production in unit (Note 1) 270 340 390 1,000 3 Budgeted cost of raw materials purchases (Note 2) 2,328 2,840 3,132 8,300 4 Budgeted direct labour cost 270*30/60*12=1,620 340*30/60*12=2,040 390*30/60*12=2,340 6,000 5 Budgeted manufacturing overheads 0.3*270+600=681 0.3*340+600=702 0.3*390+600=717 2,100 6 Budgeted cost of goods sold (3+4+5) 4,629 5,582 6,189 16,400 7 Total budgeted selling and administrative expenses 0.6*250+650=800 0.6*300+650=830 0.6*400+650=890 2,520

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