| Cryon Corporation manufactures and sells a seasonal product that has a peak in sales in the third quarter. The following information reflects projections for Year 2 – the coming year – and the first quarter of Year 3. |
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| 1. Units sell at $10 each. Budgeted sales for the next 5 quarters are outlined below. |
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| Year 2 Quarter | Year 3 | ||||
| 1 | 2 | 3 | 4 | 1 | |
| Budgeted unit sales |
50,000 | 70,000 | 120,000 | 70,000 | 60,000 |
| 2. Sales are collected in the following pattern: 75% are collected in the quarter the sales are made, and the remaining 25% are collected in the following quarter. On January 1, Year 2, the company had accounts receivable of $65,000, all of which will be collected in the first quarter of Year 2. Bad debts are negligible and can be ignored. |
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| 3. The company desires finished goods inventory at the end of each quarter equal to 30% of the budgeted unit sales for the next quarter. On December 31, Year 1, the company had 15,000 completed units on hand. |
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| 4. Five pounds of raw materials inventory is required to complete one unit of product. The company requires ending raw materials inventory at the end of each quarter equal to 10% of the following quarter’s production needs. On December 31, Year 1, the company had 38,000 pounds of raw material on hand. |
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| 5. Raw material cost is $0.80 per pound. | |||||
| Required: | |||||
| Prepare the following budgets and schedules for Year 2, showing quarterly figures: |
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| 1. Sales budget | |||||
| 2. Schedule of expected cash collections | |||||
| 3. Production budget | |||||
| 4. Direct materials budget that summarizes both pounds and dollars. |
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| You should use an Excel spreadsheet for your answers. |
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