Royal Company is preparing budgets for the quarter ending June 30. Budgeted sales for the next...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Royal Company is preparing budgets for the quarter ending June 30. Budgeted sales for the next five months are: April June August 20,000 units May 30,000 units July 15,000 units 50,000 units 25,000 units The selling price is $10 per unit. All sales are on account. Royal's collection pattern is: 70% collected in the month of sale, 25% collected in the month following sale, 5% uncollectible. The March 31 accounts receivable balance of $30,000 will be collected in full. The management at Royal Company wants ending inventory to be equal to 20% of the following month's budgeted sales in units. On March 31, 4,000 units were on hand. At Royal Company, five pounds of material are required per unit of product. Management wants materials on hand at the end of each month equal to 10% of the following month's production. On March 31, 13,000 pounds of material are on hand. Material cost is $0.40 per pound. Royal pays $0.40 per pound for its materials. One-half of a month's purchases is paid for in the month of purchase; the other half is paid in the following month. The March 31 accounts payable balance is $12,000. At Royal, each unit of product requires 0.05 hours (3 minutes) of direct labor. The Company has a "no layoff" policy so all employees will be paid for 40 hours of work each week. In exchange for the "no layoff" policy, workers agree to a wage rate of $10 per hour regardless of the hours worked (no overtime pay). For the next three months, the direct labor workforce will be paid for a minimum of 1,500 hours per month At Royal, manufacturing overhead is applied to units of product on the basis of direct labor hours. The variable manufacturing overhead rate is $20 per direct labor hour. Fixed manufacturing overhead is $50,000 per month and includes $20,000 of noncash costs (primarily depreciation of plant assets). At Royal, the selling and administrative expenses budget is divided into variable and fixed components. The variable selling and administrative expenses are $0.50 per unit sold. Fixed selling and administrative expenses are $70,000 per month. The fixed selling and administrative expenses include $10,000 in costs primarily depreciation - that are not cash outflows of the current month. Royal: month Maintains a 16% open line of credit for $75,000 Maintains a minimum cash balance of $30,000 Borrows on the first day of the month and repays loans on the last day of the Pays a cash dividend of $49,000 in April Purchases $143,700 of equipment in May and $48,300 in June (both purchases paid in cash). Has an April 1 cash balance of $40,000 Royal reported the following account balances prior to preparing its budgeted financial statements: Land $50,000 Common stock $200,000 Retained earnings $146,150 Equipment - $175,000 Required: 1. Prepare a sales budget, including a schedule of expected cash collections. 2. Prepare a production budget. 3. Prepare a direct materials budget, including a schedule of expected cash disbursements for purchases of materials. 4. Prepare a direct labor budget. 5. Prepare a manufacturing overhead budget. 6. Prepare a selling and administrative expense budget. 7. Prepare a cash budget. Royal Company is preparing budgets for the quarter ending June 30. Budgeted sales for the next five months are: April June August 20,000 units May 30,000 units July 15,000 units 50,000 units 25,000 units The selling price is $10 per unit. All sales are on account. Royal's collection pattern is: 70% collected in the month of sale, 25% collected in the month following sale, 5% uncollectible. The March 31 accounts receivable balance of $30,000 will be collected in full. The management at Royal Company wants ending inventory to be equal to 20% of the following month's budgeted sales in units. On March 31, 4,000 units were on hand. At Royal Company, five pounds of material are required per unit of product. Management wants materials on hand at the end of each month equal to 10% of the following month's production. On March 31, 13,000 pounds of material are on hand. Material cost is $0.40 per pound. Royal pays $0.40 per pound for its materials. One-half of a month's purchases is paid for in the month of purchase; the other half is paid in the following month. The March 31 accounts payable balance is $12,000. At Royal, each unit of product requires 0.05 hours (3 minutes) of direct labor. The Company has a "no layoff" policy so all employees will be paid for 40 hours of work each week. In exchange for the "no layoff" policy, workers agree to a wage rate of $10 per hour regardless of the hours worked (no overtime pay). For the next three months, the direct labor workforce will be paid for a minimum of 1,500 hours per month At Royal, manufacturing overhead is applied to units of product on the basis of direct labor hours. The variable manufacturing overhead rate is $20 per direct labor hour. Fixed manufacturing overhead is $50,000 per month and includes $20,000 of noncash costs (primarily depreciation of plant assets). At Royal, the selling and administrative expenses budget is divided into variable and fixed components. The variable selling and administrative expenses are $0.50 per unit sold. Fixed selling and administrative expenses are $70,000 per month. The fixed selling and administrative expenses include $10,000 in costs primarily depreciation - that are not cash outflows of the current month. Royal: month Maintains a 16% open line of credit for $75,000 Maintains a minimum cash balance of $30,000 Borrows on the first day of the month and repays loans on the last day of the Pays a cash dividend of $49,000 in April Purchases $143,700 of equipment in May and $48,300 in June (both purchases paid in cash). Has an April 1 cash balance of $40,000 Royal reported the following account balances prior to preparing its budgeted financial statements: Land $50,000 Common stock $200,000 Retained earnings $146,150 Equipment - $175,000 Required: 1. Prepare a sales budget, including a schedule of expected cash collections. 2. Prepare a production budget. 3. Prepare a direct materials budget, including a schedule of expected cash disbursements for purchases of materials. 4. Prepare a direct labor budget. 5. Prepare a manufacturing overhead budget. 6. Prepare a selling and administrative expense budget. 7. Prepare a cash budget.
Expert Answer:
Answer rating: 100% (QA)
To prepare the requested budgets for Royal Company well go step by step through each requirement Heres the detailed output for each budget 1 Sales Budget and Schedule of Expected Cash Collections Mont... View the full answer
Related Book For
Cornerstones of Managerial Accounting
ISBN: 978-0176530884
2nd Canadian edition
Authors: Maryanne M. Mowen, Don Hanson, Dan L. Heitger, David McConomy, Jeffrey Pittman
Posted Date:
Students also viewed these accounting questions
-
Royal Company is preparing budgets for the quarter ending June 30. The marketing department of Royal Company prepares the following information that will be used to prepare a budget for the quarter...
-
Royal Company is preparing budgets for the quarter ending June 30, 2018. Budgeted sales for the next five months are: April 20,000 units May 50,000 units June 30,000 units July 25,000 units ...
-
May-22 1 1 1 6 22 31 31 31 31 31 uChampion (UC) Shop commenced business on 1 May 2022. The following transactions occurred during the first month of operations: Jenny, the owner, invested cash into...
-
Why are sheared or blanked edges generally not smooth?
-
How many arrangements of the letters in CHEMIST have H before E, or E before T, or T before M? (Here "before" means anywhere before, not just immediately before.)
-
An investigator collects a sample of a radioactive isotope with an activity of \(370,000 \mathrm{~Bq}\). 48 hours later, the activity is 120,000 Bq. What is the half-life of the sample?
-
The following income statement applies to Stuart Company for the current year: .:. Required a. Use the contribution margin approach to calculate the magnitude of operating leverage. b. Use the...
-
ROA is 50 percent; the net profit margin is 10 percent; average total assets are $1,000,000; and the total asset turnover ratio is 5. What are net sales?
-
Calculate the effective bandwidth for the following cases. For (a) and (b), assume there is a steady supply of data to send; for (c), simply calculate the average over 12 hours. (a) 10-Mbps Ethernet...
-
P Ltd acquired 60% of the shares in S Ltd on 1st January, 2008 when S Ltd had retained earnings of Shs 18,000,000. The market price of S's shares just before the date of acquisition was Shs 1,600. P...
-
Evidence on Market Efficiency Some people argue that the efficient market hypothesis cannot explain the 2010 US flash market crash or the high price-to-earnings ratio of European shares in 2005 and...
-
General Modems has 5-year warrants that currently trade in the open market. Each warrant gives its owner the right to purchase one share of equity for an exercise price of 35. (a) Suppose the equity...
-
An outstanding issue of Jeronimo Martins bonds has a call provision attached. The total principal value of the bonds is 120 million, and the bonds have an annual coupon rate of 6.6 per cent. The...
-
What is meant by hierarchies in long-term financing and why are bonds higher in priority than shares?
-
Efficient Markets Hypothesis Prospectors plc is a publicly traded gold prospecting company with operations in Northern Tanzania. Although the firms searches for gold usually fail, the prospectors...
-
Write a paper about The Effects of War and Peace on Foreign Aid Use the Internet to research one (1) developing nation of your choice. Your research should include an examination of the effects that...
-
we have to compute the letter grades for a course. The data is a collection of student records stored in a file. Each record consists of a name(up to 20 characters), ID (8 characters), the scores of...
-
Cathy, Heathcliff, and Isabelle are equal shareholders in Wuthering Heights (WH), an S corporation. Heathcliff has decided he would like to terminate the S election. In the following alternative...
-
Winkin, Blinkin, and Nod are equal shareholders in SleepEZ, an S corporation. In the conditions listed below, how much income should each report from SleepEZ for 2019 under both the daily allocation...
-
Jane has been operating Mansfield Park as a C corporation and decides she would like to make an S election. What is the earliest the election will become effective under each of these alternative...
Study smarter with the SolutionInn App