Reference no: EM132594645

Falcon Corporation manufactures and sells a seasonal product that has peak sales in the third quarter. The following information concerns operations for Year 2-the coming year-and for the first two quarters of Year 3:

1. The company's single product sells for $9 per unit. Budgeted unit sales for the next six quarters are as follows (all sales are on credit):

                                        Year 2 Quarter                     Year 3 Quarter

                                       1            2                3                  4                   1                 2

Budgeted unit sales           40,000     60,000    100,000    50,000     70,000        80,000

2. Sales are collected in the following pattern: 70% in the quarter the sales are made, and the remaining 30% in the following quarter. On January 1, Year 2, the company's balance sheet showed $56,000 in accounts receivable, all of which will be collected in the first quarter of the year. Bad debts are negligible and can be ignored.

3. The company desires an ending finished goods inventory at the end of each quarter equal to 40% of the budgeted unit sales for the next quarter. On December 31, Year 1, the company had 12,000 units on hand.

4. Five pounds of raw materials are 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 23,000 pounds of raw materials on hand.

5. The raw material costs $0.90 per pound.

Instructions:

Question i: Prepare the following budgets and schedules for the year, showing both quarterly and total figures:

(a). A sales budget and a schedule of expected cash collections.

(b). A production budget.

(c). A direct materials budget.