1. Frame-It Company produces and sells picture frames. To guard against out of stock
situations, the company requires that 20% of the next month's sales be on hand at the end of
each month. Budgeted sales of picture frames over the next three months are:
Budgeted sales in units
January
130,000
February
180,000
March
240,000
Compute budgeted production for February.
Budgeted production February= 180,000
Add: Beginning is 240,000×20% =48,000
Less: ending 18,000×20% = (36,000)
_________
FEBRUARY PRODUCTION. $192,000
2. Santiago Company has budgeted production for next year as follows:
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
Production in units
80,000
96,000
128,000
112,000
Five pounds of raw materials are required for each unit produced. Required raw materials
inventory at the end of each quarter is 10% of the next quarter's production needs. Compute
budgeted purchases of raw materials for the third quarter.
Raw material= 128,000×5pound= 640,000
Add: ending = 112,000×10% ×5pound =56,000
Less beginning= 128,000×10%×5 = 64,000
___________________
Budgeted Raw Materials.
= 632,000
3. Daley Company plans to sell 86,000 units during the month of August. If the company has
18,000 units on hand at the start of the month, and plans to have 16,000 units on hand at the end
of the month, how many units must be produced during the month?
Planned sells 86,000
Add planning to have: 16,000
Less: available on hand (18,000)
__________
Units to be produced= 84,000
4. Café Company’s sales budget for the fourth quarter is as follows:
Total sales
October
$280,000
November
$240,000
December
$320,000
Management expects that 30% of the sales are for cash; the rest are on credit. Of the credit
sales, 60% are collected in the month of sale, 25% percent in the month following sale, and
10% percent in the second month following sale. The remaining 5% is uncollectible. Prepare
a schedule of expected cash collections for December.
Dec. Cash collection= 320,000×30%cash= 96,000
Dec. Credit collection 320,000×70%debt×60%= 134,400
Nov. Credit collection 240,000×70%×25%= 42,000
Oct. Credit collection 280,000×70%×10%= 19,600
___________
Total cash collection for December.
292,000