Budgeting Paper 24

1

Rokat Corporation is a manufacturer of tables sold to schools, restaurants, hotels and other institutions. Rokat manufactures the table tops, but an outside supplier sells the table legs to Rokat. The Assembly Department takes a manufactured table top and attaches the 4 purchased table legs. It takes 20 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40% of next month’s sales are in the finished goods inventory. Rokat also purchases sufficient raw materials to ensure that raw materials inventory is 60% of the following month’s scheduled production. Rokat’s sales budget in units for the next quarter is as follows:
July 2300
August 2500
September 2100
Rokat’s ending inventories in units for June 30 are:
Finished goods 1900
Raw materials (legs) 4000
The number of tables to be produced during August is:






2

Rokat Corporation is a manufacturer of tables sold to schools, restaurants, hotels and other institutions. Rokat manufactures the table tops, but an outside supplier sells the table legs to Rokat. The Assembly Department takes a manufactured table top and attaches the 4 purchased table legs. It takes 20 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40% of next month’s sales are in the finished goods inventory. Rokat also purchases sufficient raw materials to ensure that raw materials inventory is 60% of the following month’s scheduled production. Rokat’s sales budget in units for the next quarter is as follows:
July 2300
August 2500
September 2100
Rokat’s ending inventories in units for June 30 are:
Finished goods 1900
Raw materials (legs) 4000
Assume the required production for August and September is 1,600 and 1,800 units respectively, and the number of table legs in the July 31 raw materials inventory is 4,200 units. The number of table legs to be purchased in August is:






3

Rokat Corporation is a manufacturer of tables sold to schools, restaurants, hotels and other institutions. Rokat manufactures the table tops, but an outside supplier sells the table legs to Rokat. The Assembly Department takes a manufactured table top and attaches the 4 purchased table legs. It takes 20 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40% of next month’s sales are in the finished goods inventory. Rokat also purchases sufficient raw materials to ensure that raw materials inventory is 60% of the following month’s scheduled production. Rokat’s sales budget in units for the next quarter is as follows:
July 2300
August 2500
September 2100
Rokat’s ending inventories in units for June 30 are:
Finished goods 1900
Raw materials (legs) 4000
Assume that Rokat Corporation will produce 1,800 units in the month of September. How many employees will be required for the Assembly Department? (Fractional employees are acceptable since employees can be hired on a part-time basis. Assume a 40-hour week and a 4-week month.)






4

Wellfleet Company manufactures recreational equipment and prepares annual operational budgets for each department. The Purchasing Department is finalizing plans for the fiscal year ending June 30, 2009, and has gathered the following information regarding 2 of the components used in both tricycles and bicycles. Wellfleet uses the first-in, first-out inventory method.
A19 B12 Tricycles Bicycles
Beginning inventory, July 1, 2008 3,500 1,200 800 2,150
Ending inventory, June 30, 2009 2,000 1,800 1,000 900
Unit cost $1.20 $4.50 $54.50 $89.60
Projected fiscal year unit sales - - 96,000 130,000
Component usage:
Tricycles 2/Unit 1/Unit - -
Bicycles 2/Unit 4/Unit - -
The budgeted dollar value of Wellfleet Company’s purchases of component A19 for the fiscal year ending June 30, 2009 is:






5

Wellfleet Company manufactures recreational equipment and prepares annual operational budgets for each department. The Purchasing Department is finalizing plans for the fiscal year ending June 30, 2009, and has gathered the following information regarding 2 of the components used in both tricycles and bicycles. Wellfleet uses the first-in, first-out inventory method.
A19 B12 Tricycles Bicycles
Beginning inventory, July 1, 2008 3,500 1,200 800 2,150
Ending inventory, June 30, 2009 2,000 1,800 1,000 900
Unit cost $1.20 $4.50 $54.50 $89.60
Projected fiscal year unit sales - - 96,000 130,000
Component usage:
Tricycles 2/Unit 1/Unit - -
Bicycles 2/Unit 4/Unit - -
If the economic order quantity of component B12 is 70,000 units, the number oftimes that Wellfleet Company should purchase this component during the fiscal year ended June 30, 2009 is:






6

DeBerg Co. has developed the following sales projections for the year:
May $100,000
June 120,000
July 140,000
August 160,000
September 150,000
October 130,000
Normal cash collection experience has been that 50% of sales are collected during the month of sale and 45% are collected the following month. The remaining 5% of sales is never collected. DeBerg’s budgeted cash collections for the third calendar quarter are:






7

Information about Noskey Corporation’s sales revenue is presented in the following table.
November (Actual) December (Budget) January
Cash sales $ 80,000 $100,000 $ 60,000
Credit sales 240.000 360.000 180,000
Total sales $320,000 $460,000 $240,000
Management estimates that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Purchases of inventory are equal to next month’s sales and gross profit margin is 30%. All purchases of inventory are on account; 25% are paid during the month of purchase, and the remaining 75% are paid during the month following the purchase. Noskey Corporation’s budgeted cash collections in December from November credit sales are:






8

Information about Noskey Corporation’s sales revenue is presented in the following table.
November (Actual) December (Budget) January
Cash sales $ 80,000 $100,000 $ 60,000
Credit sales 240.000 360.000 180,000
Total sales $320,000 $460,000 $240,000
Management estimates that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Purchases of inventory are equal to next month’s sales and gross profit margin is 30%. All purchases of inventory are on account; 25% are paid during the month of purchase, and the remaining 75% are paid during the month following the purchase. Noskey Corporation’s budgeted total cash receipts in January are:






9

The Raymar Company is preparing its cash budget for the months of April and May. The firm has established a $200,000 line of credit with its bank at a 12% annual rate of interest on which borrowings for cash deficits must be made in $10,000 increments. There is no outstanding balance on the line of credit loan on April 1 . Principal repayments are to be made in any month in which there is a surplus of cash. Interest is to be paid monthly. If there are no outstanding balances on the loans, Raymar will invest any cash in excess of its desired end-of-month cash balance in U.S. Treasury bills. Raymar intends to maintain a minimum balance of $100,000 at the end of each month by either borrowing for deficits below the minimum balance or investing any excess cash. Monthly collection and disbursement patterns are expected to be:
• Collections: 50% of the current month’s sales budget and 50% ofthe previous month’s sales budget.
• Accounts Payable Disbursements: 75% of the current month’s accounts payable budget and 25% of the previous month’s accounts payable budget.
• All other disbursements occur in the month in which they are budgeted.
Budget Information
March April May
Sales $40,000 $50,000 $100,000
Accounts payable 30,000 40,000 40,000
Payroll 60,000 70,000 50,000
Other disbursements 25,000 30,000 10,000
In April, Raymar’s budget will result in:






10

The Raymar Company is preparing its cash budget for the months of April and May. The firm has established a $200,000 line of credit with its bank at a 12% annual rate of interest on which borrowings for cash deficits must be made in $10,000 increments. There is no outstanding balance on the line of credit loan on April 1 . Principal repayments are to be made in any month in which there is a surplus of cash. Interest is to be paid monthly. If there are no outstanding balances on the loans, Raymar will invest any cash in excess of its desired end-of-month cash balance in U.S. Treasury bills. Raymar intends to maintain a minimum balance of $100,000 at the end of each month by either borrowing for deficits below the minimum balance or investing any excess cash. Monthly collection and disbursement patterns are expected to be:
• Collections: 50% of the current month’s sales budget and 50% ofthe previous month’s sales budget.
• Accounts Payable Disbursements: 75% of the current month’s accounts payable budget and 25% of the previous month’s accounts payable budget.
• All other disbursements occur in the month in which they are budgeted.
Budget Information
March April May
Sales $40,000 $50,000 $100,000
Accounts payable 30,000 40,000 40,000
Payroll 60,000 70,000 50,000
Other disbursements 25,000 30,000 10,000
In May, Raymar will be required to:






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