Perfect Manufacturing is preparing a master budget for the quarter ending 30 September 2025, and has compiled

Question:

Perfect Manufacturing is preparing a master budget for the quarter ending 30 September 2025, and has compiled the data shown below.

1. The firm sells a single product at a price of $70 per unit. The sales forecast (in units) prepared by the marketing department for the quarter ending 30 June 2025 and the first 7 months of the next financial year is as follows.

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2. 40% of the sales are collected in the month of sale, 40% are collected in the following month, and 20% are collected in the second month following the sale.
3. The beginning inventories on 1 July 2025 will be 10 800 units of finished goods and no raw materials. The ending finished goods inventory should equal 20% of the sales requirements for the next 3 months, and the raw materials ending inventory should equal 40% of the next month’s production.
4. 80% of the materials purchases are paid in the quarter of purchase and 20% are paid in the following quarter. The amount owing for purchases at 1 July 2025 is $196 800.
5. Variable selling expenses are 5% of sales. Administrative expenses are $126 000 per quarter, of which $20 000 represents depreciation expense and $96 000 is wages. Fixed selling expenses are $36 000 each quarter. All selling and administrative expenses are paid in the quarter in which they are incurred.
6. The production requirements are below.
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The direct materials are purchased for $7.50 a kilogram. The direct labour wage rate is $24 an hour. The factory overhead cost is $154 000 per month, and is paid in the month incurred (except for depreciation of $28 000).
7. The 1 July 2025 cash balance is expected to be $40 320.
Required

(a) Prepare a sales budget by month for the period May to September 2025.

(b) Determine estimated cash collections from receivables for the quarter of the financial year starting 1 July 2025.

(c) Calculate the number of units to be produced in the quarter of the financial year starting 1 July 2025.

(d) Prepare a direct materials budget for the quarter of the financial year starting 1 July 2025.

(e) Prepare a cash budget for the quarter of the financial year starting 1 July 2025, including any necessary schedules.

(f) Prepare a budgeted statement of financial performance for the quarter of the financial year starting 1 July 2025.

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Accounting

ISBN: 9780730382737

11th Edition

Authors: John Hoggett, John Medlin, Keryn Chalmers, Claire Beattie

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