Freese, Inc. is in the process of preparing the fourth quarter budget for 2013,
ID: 2582665 • Letter: F
Question
Freese, Inc. is in the process of preparing the fourth quarter budget for 2013, and the following data have been assembled:
-->The company sells a single product at a selling price of $60 per unit. The estimated sales volume for the six months is as following
September October November December January February
Units 13,000 12,000 14,000 20,000 9,000 10,000
-->All sales are on account. The company's collection expereience has been that 32% of a month's sales are collected in the month of sale, 64% in the month following the sale, and 4% are uncollectible. According to the budget, the net realizable value of accounts receivable (i.e, accounts receivable less allowance for uncollectible accounts) is expected to be $499,200 on September 30, 2013.
--> Management's policy is to maintain ending finished goods inventory each month at a level equal to 40% of hte next month's budgeted sales. The finished goods inventory on September 30, 2013, is expected to be 4,800 units.
--> To make one unit of finsihed product, 5 pounds of raw material are required. management's policy is to have enough materials on hand at the end of each monthy to equal 30% of the next month's estimated usage. the raw materials inventory is expected to be 19,200 pound s on September 30, 2013.
--> The cost per pound of material is $4 and 70% of all purchases are paid for in the month of purchase; the remainder is paid in the following month. the accounts payable for raw material purchases is expected to be $75,960 on September 30, 2013.
in the "Analysis worksheet" complete the basic problem requirements. complete by entering appropriate amounts or formulas in shaded worksheet cells:
a: prepare a sales budget in units and dollars by month and in total for the fourth quarter (october, november, and december) of 2013
b. prepare a schedule of cash collections from sales by month and in total for the fourth quarter of 2013
c. prepare a production budget in units, by month and in total for the fourth quarter of 2013
d prepare a materials purchase budget in pounds by month and in total for the fourth quarter of 2013
e. prepare a schedule of cash payments for materials, by month and in total for the fourth quarter of 2013
Complete the Modeling a. Sales Budget Quarter Ended December 31, 2013 September October November December Total January February Expected sales in units Selling price per unit Total Sales b. Cash Collections from: Quarter Ended December 31, 2013 Sales %Collected October November December Total September sales: $ October sales:$ October sales: $ November sales: $ November sales: $ December Sales: $ Total cash collections c. Production Budget Quarter Ended December 31, 2013 Finished Goods %Budgeted October November December Total Janua Beginning Inventory: Units to be produced: Goods available for sale Desired ending inventory Quantity of goods sold: 4,800 148001 d. Materials Purchases Budget October November December Total January Units to be produced: Pounds required for each unit Total pounds used in production (4,800) Quarter Ended December 31, 2013 %Budgeted | October November December Total Beginning Inventory: Purchases of materials Materials available for use: Desired ending inventory Total pounds used in production 19,200 19,200 e. Cash Payments for October Novemberecember Total Purchases of materials Cost per pound of raw material: Total cost of raw material purchases: (19,200) Quarter Ended December 31, 2013 Purchases % Paid | October November , December Total 75,960 September Net AP. October purchases: October purchases: $ November purchases: S November purchases: $ December purchases s $75,960 Total cash payments 75,960Explanation / Answer
Solution:
a) Sales Budget
Quarter Ended December 31, 2013
September
October
November
December
Total
January
February
Expected Sales in Units
13000
12000
14000
20000
59000
9000
10000
Selling Price per unit
$60
$60
$60
$60
$60
$60
$60
Total Sales
$780,000
$720,000
$840,000
$1,200,000
$3,540,000
$540,000
$600,000
Part b --- a schedule of cash collections from sales by month and in total for the fourth quarter of 2013
b) Cash Collection From:
Quarter Ended December 31, 2013
Sales
% Collected
October
November
December
Total
September Sales
$780,000
64%
$499,200
$499,200
October Sales
$720,000
32%
$230,400
$230,400
October Sales
$720,000
64%
$460,800
$460,800
November Sales
$840,000
32%
$268,800
$268,800
November Sales
$840,000
64%
$537,600
$537,600
December sales
$1,200,000
32%
$384,000
$384,000
Total cash collections
$729,600
$729,600
$921,600
$2,380,800
Part c--- production budget in units, by month and in total for the fourth quarter of 2013
C) Production Budget
Quarter Ended December 31, 2013
Finished Goods
% Budgeted
October
November
December
Total
January
Beginning Inventory (ending inventory of last month) (D)
4800
5600
8000
4800
3600
Units to be produced (C-D)
12800
16400
15600
44800
9400
Goods Available for sale (C =A+B)
17600
22000
23600
49600
13000
Desired ending inventory (B)
40% of next month sale
5600
(Nov Sale 14,000*40%)
8000
(Dec Sale 20,000*40%)
3600
(Jan Sale 9,000*40%)
3600
4000
(Feb Sale 10,000*40%)
Quantity of goods sold (A)
12000
14000
20000
46000
9000
Part d --- materials purchase budget in pounds by month and in total for the fourth quarter of 2013
d. Materials Purchases Budget
Quarter Ended December 31, 2013
Finished Goods
October
November
December
Total
January
Units to be produced (from part c)
12800
16400
15600
9400
Pounds required for each unit
5
Total pounds used in production
64000
82000
78000
224000
47000
Quarter Ended December 31, 2013
Raw materials
% Budgeted
October
November
December
Total
Beginning Inventory (D)
19200
24600
23400
19200
Purchases of materials (C-D)
69400
80800
68700
218900
Material available for use (C = A+B)
88600
105400
92100
238100
Desired ending inventory (B)
30% of next month's estimated use
24600
23400
14100
14100
Total pounds used in production (from above calculation) (A)
64000
82000
78000
224000
47000
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Pls ask separate question for remaining parts.
a) Sales Budget
Quarter Ended December 31, 2013
September
October
November
December
Total
January
February
Expected Sales in Units
13000
12000
14000
20000
59000
9000
10000
Selling Price per unit
$60
$60
$60
$60
$60
$60
$60
Total Sales
$780,000
$720,000
$840,000
$1,200,000
$3,540,000
$540,000
$600,000
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