Iguana, Inc., manufactures bamboo picture frames that sell for $25 each. Each fr
ID: 2567095 • 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 $12.00 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:
Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.60 per unit sold.
Iguana, Inc., had $10,800 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the credit sales, 50 percent is collected during the month of the sale, and 50 percent 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 $2,000. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $150 in depreciation. During April, Iguana plans to pay $3,000 for a piece of equipment.
4.
value:
10.00 points
Required information
Required:
Compute the following for Iguana, Inc., for the second quarter (April, May, and June). (Do not round your intermediate calculations.)
References
eBook & Resources
WorksheetLearning Objective: 08-03b Prepare the following components of the operating budget: Production budget.Learning Objective: 08-03e Prepare the following components of the operating budget: Manufacturing overhead budget.
Difficulty: 3 HardLearning Objective: 08-03c Prepare the following components of the operating budget: Raw materials purchases budget.Learning Objective: 08-03f Prepare the following components of the operating budget: Cost of goods sold budget.
Learning Objective: 08-03a Prepare the following components of the operating budget: Sales budget.Learning Objective: 08-03d Prepare the following components of the operating budget: Direct labor budget.Learning Objective: 08-03g Prepare the following components of the operating budget: Selling and administrative expense budget.
Check my work
5.
value:
10.00 points
Required information
Required:
Complete Iguana's budgeted income statement for quarter 2. (Round cost per unit in intermediate calculations to 2 decimal places.)
References
eBook & Resources
WorksheetDifficulty: 2 MediumLearning Objective: 08-03h Prepare the following components of the operating budget: Budgeted income statement.
Check my work
6.
value:
10.00 points
Required information
Required:
1. Compute the budgeted cash receipts for Iguana. (Do not round your intermediate calculations. Round final answers to 2 decimal places.)
2. Compute the budgeted cash payments for Iguana. (Do not round your intermediate calculations. Round final answers to 2 decimal places.)
3. Prepare the cash budget for Iguana. Assume the company can borrow in increments of $1,000.00 to maintain a $10,000.00 minimum cash balance. (Leave no cell blank enter "0" wherever required. Round your answers to 2 decimal places.)
Explanation / Answer
Production budget for second quarter
Opening stock (250×040%) ( 40% of april sales) = 100
Unit sales (250+300+400) = 950
closing stock = 375×40% = 150
= production = 150+950-100 = 1000
Manufacturing overhead budget
= variable = 1000×.30 = 300
Fixed = 600×3 = 1800
= total manufacturing overhead = 2100
Raw material purchase budget
Production for april
Opening stock 100( same as calculated in production budget)
Sales 250
closing stock (40% of may sales i.e300) = 120
prproduction for april = 270
opeopening stock of raw material = 30% of 270 = 81
Required for units produced during the quarter = 1000× 4 feet = 4000
Closing stock = 30% of july production = 30% of 395 = 118.50
Raw material purchase requirements = 4000+118.50-81 = 4037.50
W.note Production for july:
Opening stock 40% of 375 = 150
Sales = 375
Closing stock = 40% of 425 = 170
Production = 395
Direct labour budget
= 1000×.5 hours × 12 per hour = 6000
Selling and administrative budget
650×3 = 1950
+.60×(250+300+400) = 570
= total = 2520
Budgeted cash receipts
Cash sales 80% of 950 = 760×25 = 19000
Received from credit sales =
Of current quarter 50% ×( 20% of (250+300+400))= 95×25 = 2375
Of last month 50% of 20% of275= 27.5×25 = 687.50
= total cash receipts = 22062.50
Budgeted cash payments
Raw material purchase = payment for march purchase = 2000×20% = 400
Payment for current quarter = 4037.5× 2× 80% = 6460
Equipment purchase = 3000
Direct labour = 6000
Selling & administrative = 1950
Fixed manufacturing overhead = 1800-(150×3) = 1350
= total budgeted cash payments = 19160
Cash budget
= opening cash = 10800
+ received = 22062.50
- payment = 19160
= 13702.50