Reference no: EM13488661
Comprehensive budgeting
The balance sheet of Watson Company as of December 31, 20X1, follows.
|
WATSON COMPANY
|
|
Balance Sheet
|
|
December 31, 12X1
|
|
Assets
|
|
|
|
Cash
|
|
$4,595
|
|
Accounts receivable
|
|
10,000
|
|
Finished goods (575 units x $7.00)
|
|
4,025
|
|
Direct materials (2,760 units x $0.50)
|
|
1,380
|
|
Plant & equipment
|
$50,000
|
|
|
Less: Accumulated depreciation
|
10,000
|
40,000
|
|
Total assets
|
|
$60,000
|
|
Liabilities & Stockholders' Equity
|
|
|
|
Accounts payable to suppliers
|
|
$14,000
|
|
Common stock
|
$25,000
|
|
|
Retained earnings
|
21,000
|
46,000
|
|
Total liabilities &. stockholders' equity
|
|
$60,000
|
The following information has been extracted from the firm's accounting records:
1. All sales are made on account at $20 per unit. Sixty percent of the sales are collected in the month of sale; the remaining 40% are collected in the following month. Forecasted sales for the first five months of 20X2 are: January, 1,500 units,- February, 1,600 units; March, 1,800 units; April, 2,000 units; May, 2,100 units.
2. Management wants to maintain the finished goods inventory at 30% of the following month's sales.
3. Watson uses four units of direct material in each finished unit. The direct material price has been stable and is expected to remain so over the next six months. Management wants to maintain the ending direct materials inventory at 60% of the following month's production needs.
4. Seventy percent of all purchases are paid in the month of purchase; the remaining 30% are paid in the subsequent month.
5. Watson's product requires 30 minutes of direct labor time. Each hour of direct labor costs $7.
Instructions:
a. Rounding computations to the nearest dollar, prepare the following for January through March:
1) Sales budget
2) Schedule of cash collections
3) Production budget
4) Direct material purchases budget
5) Schedule of cash disbursements for material purchases
6) Direct labor budget
b. Determine the balances in the following accounts as of March 31:
1) Accounts Receivable
2) Direct Materials
3) Accounts Payable
|
Explain the benefit of using flexible budgets
: The company normally manufactures between 20,000 and 25,000 units each quarter. Should output exceed 25,000 units, maintenance and other fixed costs are expected to increase by $6,000 and $4,500, respectively.
|
|
Compute the materials price variance
: Banner Company manufactures flags of various countries. Each flag has a standard of eight square feet of fabric and three hours of direct labor time. Information about recent production activity follows.
|
|
Prepare a forecasted balance sheet for the months
: Prepare a budgeted income statement, under absorption costing for Mile-High for the months of April, May and June assuming that Mile High opts to use the variable delivery service.
|
|
Find direction of the final velocity of the composite object
: An object with a mass of 3.00 kg, moving with an initial velocity of 5.00i m/s, find the direction of the final velocity of the composite object
|
|
Define comprehensive budgeting
: Watson uses four units of direct material in each finished unit. The direct material price has been stable and is expected to remain so over the next six months. Management wants to maintain the ending direct materials inventory at 60% of the f..
|
|
Find the average power generated by the horn
: A train sounds its horn as it approaches an intersection. The horn can just be heard at a level of 56 dB by an observer 10 km away. What is the average power generated by the horn
|
|
Find the unknowns in big chucks abbreviated cash budget
: Determine the outstanding loan balance as of September 30, after any repayments have been made.
|
|
Determine the intensity level of the infrasound
: There is evidence that elephants communicate via infrasound, generating rumbling vocalizations as low as 14 Hz that can travel up to 10 km. Determine the intensity level of the infrasound
|
|
Prepare a schedule of cash collections
: Sugarland Company sells a single product and anticipates opening a new facility in Charlotte on May 1 of the current year. Expected sales during the first three months of activity are: May, $60,000; June, $80,000; and July, $85,000.
|