06 Aug Sales Budget:
Johnson Inc. sells high-tech staplers. Johnson is preparing budgets for the quarter ending September 30,
2017. The sales price is $35 per stapler. Johnson expects the following number of units to be sold in the
coming year:
July
12,000
August
14,000
September
14,500
October
Required:
Prepare a sales budget for the third quarter of the coming year, showing units and sales revenue by month
and in total for the quarter.
Check Figure: Total projected sales revenue for the quarter – $1,417,500
15,000
2. Production Budget:
Johnson wants ending inventory to be 25 percent of the next month’s budgeted sales in units. 3,000 units
were on hand June 30.
Required:
Prepare a production budget for the third quarter of the year. Show the number of staplers that should be
produced each month as well as for the quarter in total.
Check Figure: Total budgeted product units to produce for the quarter – 41,250
3. Materials Purchases Budget:
Two sheets of metal are required to produce a single stapler. Johnson wants to have materials on hand at
the end of each month equal to 10 percent of the following month’s production needs. The materials
inventory on June 30 is 2,500 sheets of metal. October production is budgeted for 15,125 units.
Required:
Prepare a direct materials purchases budget for metal sheets for the quarter ending September 30. Show
how many sheets of metal should be purchased each month as well as for the quarter in total.
Check Figure: Total budgeted units of material to purchase for the quarter – 83,025
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4. Cash Payments of Materials Purchases:
Johnson Inc. purchases raw materials on account for use in production. Sheets of metal used in production
cost $3.00 each. Forty percent of a month’s purchases are paid for in the month of purchase; the other 60
percent is paid for in the following month. No discount terms are available. The accounts payable balance
on June 30 is $43,200.
Required:
Prepare a cash payment for materials purchases budget and highlight your answer for the following
questions:
1. How much cash is required for payments made on account, payable in the month of July?
2. How much cash is required for payments made on account, payable in the month of August?
3. How much cash is required for payments made on account, payable in the month of September?
4. What is the expected accounts payable balance on September 30, 2017?
Check Figure: Total budgeted cash payments made for materials purchases for the quarter – $239,445
5. Cash Payments for Direct Labor:
Each unit produced requires 120 minutes (2.0 hours) of direct labor. Employees are paid at a rate of $7.00
per hour.
Required:
Prepare a cash payments for direct labor budget, showing total labor cost by month and in total for the
quarter.
Check Figure: Total budgeted cash payments made for direct labor for the quarter – $577,500
6. Cash Payments for Manufacturing Overhead:
Variable manufacturing overhead is $2.00 per unit produced and fixed manufacturing overhead is $25,000
per month. Fixed manufacturing overhead includes $5,000 in depreciation which does not require a cash
outflow.
Required:
Prepare a cash payments for manufacturing overhead budget, showing total manufacturing overhead cost
by month and in total for the quarter.
Check Figure: Total budgeted cash payments made for manufacturing overhead for the quarter –
$142,500
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7. Cash Payments for Selling and Administrative (S&A) Expenses Budget:
Variable selling and administrative expenses are $2.50 per unit sold and fixed selling and administrative
expenses are $30,000 per month. Fixed selling and administrative expenses include $2,000 in depreciation
which does not require a cash outflow.
Required:
Prepare a cash payments for S&A expenses budget, showing total S&A expense by month and in total for
the quarter.
Check Figure: Total budgeted cash payments made for S&A expenses for the quarter – $185,250
8. Cash Receipts Budget:
All sales are on account. Johnson’s collection pattern is:
• 50 percent collected in month of sale
• 30 percent collected in month after sale
• 20 percent collected in the second month after sale
June sales were $350,000. Accounts receivable on June 30 is $175,000, all of which is collectible.
Required:
Prepare a cash receipts budget (schedule of cash receipts) and highlight your answer for the following
questions:
1. How much total cash is Johnson Inc. expecting to receive in the month of July?
2. How much total cash is Johnson Inc. expecting to receive in the month of August?
3. How much total cash is Johnson Inc. expecting to receive in the month of September?
4. What is the expected accounts receivable balance on September 30, 2017?
Check Figure: Total budgeted cash receipts for the quarter – $1,240,750
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9. Comprehensive Cash Budget:
Johnson Inc. – Additional Information:
– Pays a $60,000 cash dividend in August.
– Purchases equipment costing $65,000 in July and $50,000 in September.
– Has a $125,000 cash balance on June 30.
– Maintains a $20,000 minimum cash balance.
– Principal repayments occur at the end of each quarter.
– Pays annual interest at 10 percent when a principal payment is made.
Required:
Prepare a comprehensive cash budget by month and in total for the quarter.
Check Figure: Ending cash balance for the quarter – $46,020
10. Budgeted Income Statement:
Johnson Inc. applies manufacturing overhead on the basis of direct labor hours.
Required:
Prepare a budgeted income statement.
Check Figures: PDOHR – $1.91 (cut off trailing decimals in your spreadsheet); Net Income – $261,505
11. Budgeted Balance Sheet
Johnson Inc. reports the following account balances on September 30 prior to preparing its budgeted
financial statements: Land – $10,000; Building (net) – $100,000; Common stock – $200,000; Equipment
(net) – $165,000; Retained earnings – $316,835.
Required:
Prepare a budgeted balance sheet.
Check Figure: Total Assets – $771,170
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