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##### Aztec Company sells its product for \$170 per unit. Its actual and projected sales follow.

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Question;Aztec Company sells its product for \$170 per unit. Its actual and projected sales follow.UnitsApril (actual)May (actual)June (budgeted)July (budgeted)August (budgeted)Dollars9,0003,2006,0007,0004,400\$1,530,000544,0001,020,0001,190,000748,000All sales are on credit. Recent experience shows that 28% of credit sales is collected in the month of the sale, 42% in the month after the sale, 28% in the second month after the sale, and 2% proves to be uncollectible. The products purchase price is \$110 per unit. All purchases are payable within 14days. Thus, 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 20% of the next months unit sales plus a safety stock of 115 units. The April 30 and May 31 actual inventorylevels are consistent with this policy. Selling and administrative expenses for the year are \$1,536,000 and are paid evenly throughout the year in cash.The companys minimum cash balance at month-end is \$100,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds \$100,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 11% interest rate. On May 31, the loan balance is \$48,500, and the companys cash balance is \$100,000. (Round amounts to the nearest dollar.)1. Prepare a table that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July.AprilMayPercent Collected inJuneJulyAugustAprilMayAmount Collected inJuneJulyAugustCredit sales from:AprilMayJuneJulyAugustCredit sales from:AprilMayJuneJulyAugust2. Prepare a table that shows the computation of budgeted ending inventories (in units) for April, May, June, and July.AZTEC COMPANYBudgeted Ending InventoryFor April, May, June and JulyAprilMayJuneJulyAugustNext month's budgeted salesRatio of inventory to future salesBudgeted "base" ending inventorySafety stockBudgeted Ending Inventory3. Prepare the merchandise purchases budget for May, June, and July. Report calculations in units and then show the dollar amount of purchases foreach month.AZTEC COMPANYMerchandise Purchases BudgetsFor May, June and JulyAprilMayJuneJulyAugustBudgeted Ending Inventory (units)Budgeted unit sales for monthRequired units of available merchandiseBudgeted beginning inventory (units)Budgeted purchases (units)Budgeted cost per unitBudgeted cost of merchandise purchases4. Prepare a table showing the computation of cash payments on product purchases for June and July.Cash payments on product purchases (for June and July)Percent Paid inMayJuneJulyAugustFrom purchases in:MayJuneJulyAugustTotalMayAmount Paid inJuneJulyAugustFrom purchases in:MayJuneJuly5. Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month. (Donot round intermediate calculations.)AZTEC COMPANYCash BudgetJune and JulyJuneJulyBeginning cash balancecash receipts from customersTotal cash availableCash disbursements:Payments on purchasesSelling and administrative expensesInterest expenseother option could be here *** see rightTotal cash disbursementsPreliminary cash balanceAdditional loan (repayment)Ending cash balance<================other options1 additional loan (repayment)2 cash receipts from customers3 interest expense4 payments on purchases5 selling and administrative expensesLoan balanceJuneLoan balance - Beginning of monthAdditional loan repaymentLoan balance - End of monthBlack Diamond Company produces snow skis. Each ski requires 2 pounds of carbon fiber. The companysmanagement predicts that 5,400 skis and 6,400 pounds of carbon fiber will be in inventory on June 30 ofthe current year and that 154,000 skis will be sold during the next (third) quarter. A set of two skis sells for\$340. Management wants to end the third quarter with 3,900 skis and 4,400 pounds of carbon fiber ininventory. Carbon fiber can be purchased for \$19 per pound. Each ski requires 0.5 hours of direct labor at\$24 per hour. Variable overhead is applied at the rate of \$12 per direct labor hour. The company budgetsfixed overhead of \$1,786,000 for the quarter.1. Prepare the third-quarter production budget for skis.Prepare the third-quarter production budget for skis.BLACK DIAMOND COMPANYProduction Budget (in units)Third QuarterBudgeted ending inventory (skis)Add budgeted units sales for quarterRequired units available for productionDeduct budgeted beginning inventory (skis)Units to be manufactured2. Prepare the third-quarter direct materials (carbon fiber) budget, include the dollar cost of purchases.Prepare the third-quarter production budget for skis.BLACK DIAMOND COMPANYDirect Materials BudgetThird QuarterBudgeted productionother option could be here *** see rightMaterials (carbon fiber) needed for productionAdd budgeted ending inventory (carbon fiber)Total materials (carbon fiber) requirementsDeduct budgeted beginning inventory (carbon fiber)Units of materials (carbon fiber) to be purchasedMaterials price per poundTotal cost of direct materials purchases

Paper#38194 | Written in 18-Jul-2015

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