P9-19 - Cyrdon, Inc
Crydon, Inc., manufactures an
advanced swim fin for scuba divers. Management is now preparing detailed
budgets for the third quarter, July through September, and has assembled the
following information to assist in preparing the budget:
a. The Marketing Department has
estimated sales as follows for the remainder of the year
(in pairs of swim fins):
The selling price of the swim
fins is $50 per pair.
July . . . . . . . . . . . . . .
. . . . 6,000
August . . . . . . . . . . . . .
. . . 7,000
September . . . . . . . . . . . .
. 5,000
October . . . . . . . . . . . . .
. . . 4,000
November . . . . . . . . . . . .
. . 3,000
December. . . . . . . . . . . . .
. 3,000
b. All sales are on account.
Based on past experience, sales are expected to be collected in the following
pattern:
40% in the month of sale
50% in the month following sale
10% uncollectible
The beginning accounts receivable
balance (excluding uncollectible amounts) on July 1 will be $130,000.
c. The company maintains finished
goods inventories equal to 10% of the following month’s sales. The inventory of
finished goods on July 1 will be 600 pairs.
d. Each pair of swim fins
requires 2 pounds of geico compound. To prevent shortages, the company would
like the inventory of geico compound on hand at the end of each month to be
equal to 20% of the following month’s production needs. The inventory of geico
compound on hand on July 1 will be 2,440 pounds.
e. Geico compound costs $2.50 per
pound. Crydon pays for 60% of its purchases in the month of purchase; the
remainder is paid for in the following month. The accounts payable balance for
geico compound purchases will be $11,400 on July 1.
Required:
1. Prepare a sales budget, by
month and in total, for the third quarter. (Show your budget in both pairs of
swim fins and dollars.) Also prepare a schedule of expected cash collections,
by month and in total, for the third quarter.
2. Prepare a production budget
for each of the months July through October.
3. Prepare a direct materials
budget for geico compound, by month and in total, for the third quarter. Also
prepare a schedule of expected cash disbursements for geico compound, by month
and in total, for the third quarter.
TUTORIAL PREVIEW
1.
The sales budget for the third quarter:
July
|
Aug.
|
Sept.
|
Quarter
|
|
Budgeted sales (pairs)
|
6,000
|
7,000
|
5,000
|
18,000
|
Selling price per pair
|
× $50
|
× $50
|
× $50
|
× $50
|
Total budgeted sales
|
$300,000
|
$350,000
|
$250,000
|
$900,000
|
File name: P9-19 - Cyrdon, Inc.doc
File type: .doc PRICE: $15
