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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.
Units sell at $10 each. Budgeted sales for the next 5 quarters are outlined below.
Year 2 Quarter Year 3
1 2 3 4 1
50,000 70,000 120,000 70,000 60,000
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.
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.
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.
Raw material cost is $0.80 per pound.
Prepare the following budgets and schedules for Year 2, showing quarterly figures:
Schedule of expected cash collections
Direct materials budget that summarizes both pounds and dollars.