ABC Company requests you to prepare a budget for the third quarter ending September 30 2020. You are required to prepare the following budgets:

Sales

Sales receipt schedule

Production

Purchases

Materials payment schedule

Labor

Overheads

General admin and selling

Capital

Cash

Sales Budget

Budgeted sales of the company's product for the month of June was 28,000 units at $5/unit:

It is anticipated that sales units will grow by 5% monthly from the previous month's level, to end August 2020 then stay unchanged for the rest of the calendar year. There will be a single unit price increase of 20% from 7/01/2020 to December 2020. Sales will be 10% cash and 90% credit.

Schedule of Cash Collection for Sales

The company collects 70% of credit sales in the month of sale; 25% in the month following sale; and the remaining 5% is uncollectible, written off at point of sale. The accounts receivable balance on 6/30 was $35,000. All of this balance was collectible.

Production Budget

The company desires to have a monthly ending inventory of finished goods of 20% of the following month's budgeted sales. On 6/30, the inventory of finished goods was 5,500 units.

Direct Materials Budget

5 pounds of material is required per unit of product. Management desires to have month ending materials inventory of 10% of following month's production needs. The beginning materials inventory for the quarter was 13,000 pounds. The material cost is $0.40 per pound.

Schedule of Cash Disbursement for Materials

50% of materials monthly purchases is paid for in the month of purchase; the balance is paid for in the following month. The accounts payable balance on June 30 was $12,000.

Direct Labor Budget

Each unit of product requires 0.05 hour of direct labor at the rate of $12 per hour. There will be no overtime budgeted.

Manufacturing Overhead Budget

Variable manufacturing overhead is $8 per direct labor hour. Fixed manufacturing overhead is $25,500 per month; which includes $4,500 depreciation.

Selling and Admin Expenses Budget

Variable selling and administrative expenses are $0.50 per unit sold. Fixed selling and administrative expenses are $15,000 per month and include $5,000 in depreciation.

Cash Budget

The available line of credit up to $50,000, in multiples of $10,000. All borrowings will be at beginning of the month and repayments at end of the calendar quarter. Interest paid for short term funding is 3% per month. The company desires a minimum monthly cash balance of $30,000. Ending cash balance 6/30 was $36,500 Cash dividends of $40,000 are to be paid to stockholders in July. The company plans equipment purchase of $70,000 during the period, to be paid $30,000 in July, $40,000 in August, The equipment will not become operational until October when depreciation expense will kick in.

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Answer rating: 100% (QA)

Sales budget July Aug Sep Oct JulSep Units 29400 30870 30870 30870 91140 Unit Price512 6 6 6 6 6 Sales Revenue 176400 185220 185220 185220 546840 Cash ... View the full answer