Question 1

The Johnston Company had the following costs based on the production and sale of
40,000 units:
Direct Materials . . . . . . . . . . . . . . . . . . . $5 per unit
Direct Labour. . . . . . . . . . . . . . . . . . . . . $8 per unit
Variable Manufacturing Overhead . . . . . . $3 per unit
Fixed Manufacturing Overhead . . . . . . . . $4 per unit
Sales Commissions . . . . . . . . . . . . . . . . 10% of Sales
Fixed Selling & Administrative costs . . . . .$9 per unit
Other information:
The company had the following actual sales for November and budgeted sales for
December, January, and February:
November December January February
Sales (in units) . . . . 45,000 50,000 60,000 30,000 units
Selling Price per unit . $40/unit $42/unit $45/unit $35/unit
The company has a policy of always maintaining the following inventory levels:
Finished Goods Inventory = 1,000 units plus 10% of next month's sales.
Direct Materials Inventory = $2,000 plus 30% of next month's production
requirements.
The company's sales and collection history shows that 10% of all sales are for
cash and the accounts receivable are collected in the following way:
70% in the month of the sale
28% in the month after the sale
A cash balance of $10,000 is maintained at all times (any shortages are borrowed
and any excess funds are used to retire debt)
Amortization expense is 70% of the fixed manufacturing overhead and 40% of the
fixed selling and administrative costs.
The company expects to purchase equipment for $800,000 in December with a
$400,000 down payment and the balance to be paid in 90 days.

1. Prepare "Production Budgets" for the months of December and January.

2. Prepare a "Direct Materials Purchases Budget" (in $'s) for December.
3. Prepare a "Cash Budget" for December.
2) Duffy Corporation has prepared the following sales budget:

Month Cash Sales Credit Sales

May $16,000 $68,000
June 20,000 80,000
July 18,000 74,000
August 24,000 92,000
September 22,000 76,000

Collections are 40% in the month of sale, 45% in the month following the sale, an
d 10% two months following the sale. The remaining 5% is expected to be uncolle
ctible.

Required:

Prepare a schedule of cash collections for July through September.

3) Perry Company has gathered the following information:

April 30, cash balance, $90,000

Dividends paid in May, $24,000
Cash expenditures in May for operating expenses, $73,600
Amortization expense in May, $9,000
Cash collections in May, $178,000
Merchandise purchases paid in cash in May, $112,400
Purchased equipment for cash in May, $35,000

Perry desires to keep a minimum cash balance of $20,000.

Required:

Prepare a cash budget for May, and indicate whether or not Perry meets
minimum cash requirements.