Reference no: EM13949440
Iguana, Inc., manufactures bamboo picture frames that sell for $35 each. Each frame requires 4 linear feet of bamboo, which costs $3.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $14.00 per hour. Iguana has the following inventory policies:
Ending finished goods inventory should be 40 percent of next month's sales.
Ending raw materials inventory should be 30 percent of next month's production.
Expected unit sales (frames) for the upcoming months follow:
March 325
April 300
May 350
June 450
July 425
August 475
Variable manufacturing overhead is incurred at a rate of $0.40 per unit produced. Annual fixed manufacturing overhead is estimated to be $8,500 ($850 per month) for expected production of 5,000 units for the year. Selling and administrative expenses are estimated at $700 per month plus $0.70 per unit sold.
Iguana, Inc., had $11,300 cash on hand on April 1... Of its sales, 80 percent is in cash. Of the credit sales, 50% is collected during the month of the sale, and 50% is collected during the month following the sale.
Of raw materials purchases, 70 percent is paid for during the month purchased and 30 percent is paid in the following month. Raw materials purchases for March 1 totaled $2,500. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $200 in depreciation. During April, Iguana plans to pay $3,500 for a piece of equipment.
***Prepare the cash budget for Iguana. Assume the company can borrow in increments of $1,000.00 to maintain a $11,000.00 minimum cash balance.****
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