Iguana, Inc., manufactures bamboo picture frames that sell for $25 each. Each fr
ID: 2447735 • Letter: I
Question
Iguana, Inc., manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $2.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $15.00 per hour. Iguana has the following inventory policies: Ending finished goods inventory should be 40 percent of next month’s sales. Ending raw materials inventory should be 30 percent of next month’s production. Expected unit sales (frames) for the upcoming months follow:
March 385
April 360
May 410
June 510
July 485
August 535
Variable manufacturing overhead is incurred at a rate of $0.20 per unit produced. Annual fixed manufacturing overhead is estimated to be $4,200 ($700 per month) for expected production of 3,000 units for the year. Selling and administrative expenses are estimated at $760 per month plus $0.50 per unit sold. Iguana, Inc., had $11,900 cash on hand on April 1...
Of its sales, 80 percent is in cash. Of the credit sales, 50% is collected during the month of the sale, and 50% is collected during the month following the sale. Of raw materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month.
Raw materials purchases for March 1 totaled $3,100. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $260 in depreciation. During April, Iguana plans to pay $4,100 for a piece of equipment.
1. Compute the budgeted cash payments for Iguana. (Do not round your intermediate calculations. Round final answers to 2 decimal places.)
Explanation / Answer
Budgeted cash payments for Iguana
SUMMARY Mar Apr May Jun Jul Aug
Opening Balance of cash 0 $11900 $13097 $14580 $17586 $20232
Add :- Cash collectioins $8663 $9176 $10138 $12500 $12188 $13251
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Total Inflow $8663 $21076 $23235 $27080 $29774 $33483
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less :- Payments for raw materials $4202 $3379 $3525 $3929 $3943 $2687
labour $3990 $2880 $3375 $3750 $3795 $2415
Manufacturing overhead $806 $777 $790 $800 $801 $764
Selling and administrative overhead $953 $943 $965 $1015 $1003 $1028 ==========================================
Total Payments $9951 $7979 $8655 $9494 $9542 $6894
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Closing Balance of Cash $11900 $13097 $14580 $17586 $20232 $26589
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Workings :-
Opening cash balance March April May June July August
Units sold 385 365 410 510 485 535
Sales $9625 $9125 $10250 $12750 $12125 $13375
credit sales -20% $1925 $1825 $2050 $2550 $2425 $2675
collections - 50% in current month (a) $ 963 $ 913 $1025 $1275 $1213 $1338
-50% in following month (b) $0 $ 963 $ 913 $1025 $1275 $1213
cash sales -80% of total sales (c) $7700 $7300 $8200 $10200 $9700 $10700
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Total cash collections (a)+(b)+(c) $8663 $9176 $10138 $12500 $12188 $13251
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Opening finished goods Mar Apr May Jun Jul Aug
Sales -units 385 365 410 510 485 535
ending inventory -40%of next month sales 146 164 204 194 214 0
opening inventory 0 146 164 204 194 214
Production (sales+ending inventory-opening inventory) 531 383 450 500 505 321
Raw material consumption-4 units x production units 2124 1532 1800 2000 2020 1284
ending raw material inventory-30% of next month production 115 135 150 152 96 0
opening inventory 0 115 135 150 152 96
Raw material purchases(consumption+closing-opening) 2239 1552 1815 2002 1964 1188
Value of raw material purchases ($2 per unit ) $4478 $3104 $3630 $4004 $3928 $2376
Payment for raw material purchases -80% in current month $3582 $2483 $2904 $3203 $3142 $1901
(purchased on mar 1=$3100) -20% in next month $620 $896 $621 $726 $801 $ 786
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Total payment for raw materials $4202 $3379 $3525 $3929 $3943 $2687
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Labour expense
Production - units 531 383 450 500 505 321
Labor hours
(0.5 hour x production units ) 266 192 225 250 253 161
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Labour Amount ($15 per hour x no of hours) $3990 $2880 $3375 $3750 $3795 $2415
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Production - units 531 383 450 500 505 321
Variable Manufacturing overhead ($0.2xproduction units) $106 $77 $90 $100 $101 $64
Fixed Manufacturing overhead $700 $700 $700 $700 $700 $700
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Total Manufacturing overhead $806 $777 $790 $800 $801 $764
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Selling and Administrative expenses
Sales -units 385 365 410 510 485 535
variable cost ($0.5 per unit sold ) $193 $183 $205 $255 $243 $268
Fixed cost $ 760 $760 $760 $760 $760 $760
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Total selling and administrative expenses $953 $943 $965 $1015 $1003 $1028
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