The East Division of Kensic Company manufactures a vital component that is used

Question

The East Division of Kensic Company manufactures a vital component that is used in one of Kensic's major product lines. The East Division has been experiencing some difficulty in coordinating activities between its various departments, which has resulted in some shortages of the component at critical times. To overcome the shortages, the manager of East Division has decided to initiate a monthly budgeting system that is integrated between departments The first budget is to be for the second quarter of the current and June). To assist in developing the budget figures, the divisionalcontrole has accumulated the following information. year (April, May Sales: Sales through the first three months of the current year were 30,000 units. Actual sales in units for January, February, and March, and planned sales in units over the next five months, are given below: January (actual) February (actual) March (actual) April (planned) May (planned) June (planned) July (planned) August (planned) 6,000 10,000 14,000 20,000 34,000 51,000 45,000 30,000 In total, the East Division expects to produce and sell 250,000 units during the current year. Direct Material: Two different materials are used in production of the component. Data regarding these materials are given below Cost per Material Finished Component lb/ft Units of Direct Materials per Inventory at Direct March 31 No. 208 No. 311 4 pounds 9 feet $5.00 2.00 46,000 pounds 69,000 feet

Explanation / Answer

Sales Budget February March April May June Quarter Units 10000 14000 20000 34000 51000 105000 Sales Price per unit 75 75 86.09853 86.098534 86.09853 86.098534 Total sales 750000 1050000 1721971 2927350.2 4391025 9040346.1 Note You have to solve the equation in order to arrive at price of $86.09853 Schedule of expected cash collection April May June Total Month of sale 1205379 2049145.1 3073718 6328242.2 Month following the sale 210000 344394.14 585470 1139864.2 2nd month following the sale 75000 105000 172197.1 352197.07 Total 1490379 2498539.2 3831385 7820303.5 Cash Budget April May June Total Beginning Balance 10000 -400500.23 -531914 10000 Add : Receipt from customer Month of sale 1205379 2049145.1 3073718 6328242.2 Month following the sale 210000 344394.14 585470 1139864.2 2nd month following the sale 75000 105000 172197.1 352197.07 Total 1490379 2498539.2 3831385 7820303.5 Total Cash available 1500379 2098039 3299470 7830303.5 Less : Payments for purchases In the month of purchase 548400 809800 883800 2242000 Month following the purchase 351200 548400 809800 1709400 for direct labor 403560 661980 881460 1947000 for overhead 180500.00 180500.00 180500.00 541500 Selling & Administrative expenses Fixed 400000.00 400000.00 400000.00 1200000 Variable 17219.71 29273.50 43910.25 90403.461 Total payments 1900880 2629953.5 3199470 7730303.5 Ending Balance -400500 -531914.49 100000 100000.02

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