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Assignment-3 Case Solution



Calculate the Budgeted Cash Collections for November 2016.

Cash collection September October November
In the Month of sales  $        108,000  $        132,000  $        120,000
One month after sale                        -  $          63,000  $          77,000
Two months after sale                        -                        -  $            9,000
Total Cash Collected  $        108,000  $        195,000  $        206,000



1)     Do you agree with the consultant’s comments? Why or why not?

Yes, I do agree with the Consultants Comments that effective budget planning and development process could be the key to the success of a business in the volatile market. As budgeting could enable the management of the organization implementing it, to have better control over their money.Furthermore, effective budgeting could allow the management to forecast the sales and cost of sales associated with the business. Which would allow them to appropriately set the prices of their products based on the cost of sales forecast. Moreover, an effective budget enable the management to evaluate the performance of their organization based on the estimation madein its budgets.Therefore, it can be determined that, the three above mentioned perceived benefits of the budgeting were sufficient enough to justify the cost of implementing it within the organization. As it could provide key insight to management with respect to the issues that would be faced the organization in its future operations.

2)     Budgeting usually begins with the Sales forecast. Since this is a critical first step in the process, identify at least two (2) factors that you should consider when preparing Sales forecasts.

Forecasting sales in the critical first step in the budgeting process therefore, the management team could consider two factors while preparing the sales budget. The first factors to consider is the market sales growth rate, which exhibits the amount of annual growth in the sales over the period of operation based on the demand and market volatility. Secondly, the budget preparation team should consider the selling price of its products, as it could significant impact the sales forecast by increasing or decreasing it in the future. Hence, these two factor should be considered while preparing the budget of a company. As it would enable the management of the organization to make appropriate forecasts regarding its sales in the future, better positioning itself in the highly diverse and competitive landscape.



What is the total cost of Job 1A54?

Direct Material $2,250
Direct labor $300
Prime cost $2,550
Overhead Cost  
Machine setup $120
Materials handling $50
Machining $1,300
Test Runs $150
Total cost $4,170





How many units must be produced during the month?

Production Budget August
Forecasted Sales units          12,000
Add: Closing Inventory            2,000
Total Production required          14,000
Less: Opening Inventory          (2,000)
Units to be Produced          12,000




What would be the budgeted Production for August?

Production Budget June July August September
Units to be sold    30,000                               40,000     60,000          50,000
Add: Closing Inventory      8,000                               12,000     10,000                    -
Total Production required    38,000                               52,000     70,000          50,000
Less: Opening Inventory             -                               (8,000)   (12,000)        (10,000)
Budget units    38,000                               44,000     58,000          40,000




a)      What would be the expected Cash Collections from customers during April?

Cash collection (a) January February March April
In the Month of sale          72,000            60,000            78,000            90,000
one month after Sale              36,000            30,000            39,000
Two Months after sale                  9,600              8,000
Total Cash collected          72,000            96,000          117,600          137,000


b)     What would be the expected Cash Disbursements during April for Inventory purchases?

Cash Disbursement (b) January February March April
Purchases          60,000            78,000            90,000          100,000
Discount Availed @3%              (1,800)            (2,340)            (2,700)
Total Cash Disbursement          60,000            76,200            87,660            97,300


c)      What would be the expected Cash Disbursements during April for Operating Expenses?

Cash Disbursement (c) April
Operating Expense          38,000
Salaries          15,000
Variable Expense          15,000
Depreciation(non-cash expense)            8,000
Total Operating Cash disbursement          30,000

d)     What would be the expected Cash Balance on April 30?

Expected Cash balance (d) April
Opening Balance          35,000
Cash collected       137,000
Cash Disbursement          97,300
Operating Cash Disbursement          30,000
Cash balance at the end of the Month          44,700




Compute the following items for the company's monthly production report using the weighted average method:

a)     The Equivalent Units (EUs) of production for materials.

(a) Material Conversions
Completed and transferred            30,000                               30,000             30,000
Ending WIP November 30              8,000                                 8,000               2,400
Equivalent Units of Production                                 38,000             32,400


b)     The Cost per Equivalent unit for conversion.

Cost of November Material Conversions
Opening WIP November 1            34,500                                 9,720
Added during the month          146,000                             194,400
Total Cost          180,500                             204,120
Equivalent Units            38,000                               32,400
Cost Per Equivalent Units  $            4.75  $                               6.30

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