Bronco Company (BC) budgeted sales for the first quarter of the current year are as follows: Budgeted
Question:
Bronco Company (BC) budgeted sales for the first quarter of the current year are as follows:
Budgeted Sales (Units)
January 60,000
February 80,000
March 90,000
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A. The company wants to maintain an inventory of finished units equal to 30 percent of the following month’s sales units, and 10,000 units are on hand at the beginning of January. Each unit requires two kilos of raw material costing $1 per kilo. The company maintains a raw materials inventory equal to 20 percent of the month’s production needs. Prepare a production budget and raw material purchase budget (in $) for January and February.
B. Each unit requires 0.5 labor hour to produce each unit at $8 per labor hour rate. Overhead is applied based on a predetermine overhead rate of $2 per direct labor hour. Prepare direct labor and manufacturing overhead budget for January.
C. Bronco Company (BC) sells a product for $10. BC estimated other monthly operating expenses are as follows: Fixed selling expensed $20,000 Fixed Administrative expenses $40,000 Variable selling expenses $1 per unit Prepare a pro-forma income statement for the month ending January.
D. Richard Branson, the larger-than-life British inventor, said, “Never take your eyes off the cash flow, because it’s the lifeblood of business.” Explain what he meant “cash is the lifeblood of business”. Many businesses prepare cash budget to manage their cash situation. Explain what is a Cash Budget and discuss how a cash budget helps businesses to manage its cash.
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty