During October 2018 Laranx Ltd. formulated its 2019 sales and purchases forecast and budget for its product
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Question:
During October 2018 Laranx Ltd. formulated its 2019 sales and purchases forecast and budget for its product FT45:
FT45 Sales forecast and Purchases budget
Details | Sales Units | Purchases $ |
November 2018 | 5,600 | 2,025,000 |
December 2018 | 3,800 | 1,498,500 |
January | 4,800 | 2,151,000 |
February | 5,400 | 2,295,000 |
March | 3,200 | 1,377,000 |
April | 1,700 | 1,576,125 |
May | 3,200 | 2,192,625 |
June | 2,400 | 2,700,000 |
July | 1,000 | 787,500 |
August | 2,200 | 900,000 |
September | 4,000 | 562,500 |
October | 1,900 | 1,462,500 |
November | 2,500 | 1,237,500 |
December | 2,000 | 1,552,500 |
Notes:
- a) The company planned to sell one FT45 for $440 in 2019.
- b) The closing stock level at the end of each month is to be held at a level equal to fifteen
- percent (15%) of the budgeted sales for the next two (2) months. Closing raw material stock in units in-store at the end of each month is to be equivalent to fifteen percent (15%) of the forecasted sales for the preceding 2 months.
- c) It takes four (4) units of ES22 to produce one FT45. The cost of one unit of ES22 is $225.
- d) The warehouse and store managers estimate a monthly deterioration of 70 FT45 and 45 units of ES22. They have suggested that a provision should be made for these items' damages and deterioration in store.
- e) At the end of March 2019, the bank balance was in O/D of $125,000.
- f) 20% of the company’s sales were for cash, and 80% were received one-month after-sale while 50% of purchases are for cash; 50% is paid for two months later.
- g) Taxation for the second quarter of 2019 amounting to $300,000 was due in May 2019.
- h) The company is to receive a dividend payment from its investment in equal amounts of 435,000 in the last two months of the second quarter of 2019.
- i) In June of 2019 delinquent debtors repaid $2,800,000 of their debt to restore their reputation with Laranx Ltd.
- j) Operating and Miscellaneous expenses amounted to $130,000 and $90,000 respectively on a monthly basis.
- k) In April 2019 the CEO’s company car was sold to his secretary for $750,000.
- l) Rental income amounting to $4,310,000 per annum is budgeted for 2019.
- m) A delivery van was bought for $3,330,000 and payments were made evenly in the second quarter of 2019.
- n) Salesmen are paid commission based on the amounts collected from sales each month. The amount is 8% of sales collection each month.
- o) A new plant for production was built in January for $1,500,000. Payments to the contractor were made in installments as follows: $300,000 in May 2019; $300,000 in June 2019; and the balance in July 2019.
- Required:
- For the period, April 2019 to June 2019 do the following:
- a) The sales budget for 2019.
- b) The production budget for 2019.
- c) The direct raw materials usage budget for 2019.
- d) The direct raw materials purchases budget for 2019.
- e) A cash collection summary from sales showing cash and credit collections separately.
- f) A payment summary for purchases showing cash purchases and credit purchases separately.
- g) A cash budget for the second quarter of 2019. Clearly show amounts for cash sales, credit sales, cash purchases, credit purchases, and totals.
Related Book For
Managerial Accounting
ISBN: 9781259275814
11th Canadian Edition
Authors: Ray H Garrison, Alan Webb, Theresa Libby
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