Vinall Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations:?Budgeted selling price per unit$85?Budgeted unit sales (all on credit):?? July9,400? August11,700? September10,300? October11,200?Raw materials requirement per unit of output2 pounds?Raw materials cost$2.00 per pound?Direct labor requirement per unit of output2.1 direct labor-hours?Direct labor wage rate$25.00 per direct labor-hourCredit sales are collected: 30% in the month of the sale 70% in the following monthRaw materials purchases are paid: 20% in the month of purchase 80% in the following monthThe ending finished goods inventory should equal 20% of the following month's sales. The ending raw
materials inventory should equal 20% of the following month's raw materials production needs.Required: a. What are the budgeted sales for August?b. What are the expected cash collections for August?c. According to the production budget, how many units should be produced in August?d. If 20,960 pounds of raw materials are needed for production in September, how many pounds of raw materials should be purchased in August?e. What is the estimated cost of raw materials purchases for August?f. If the cost of raw material purchases in July is $40,688, then in August what are the total estimated cash disbursements for raw materials purchases?g. What is the total estimated direct labor cost for August assuming the direct labor workforce is adjusted to match the hours required to produce the forecasted number of units produced?
What will be an ideal response?
a. The budgeted sales for August are computed as follows:
| ? | Unit sales (a) | 11,700 |
| ? | Selling price per unit (b) | $85 |
| ? | Total sales (a) × (b) | $994,500 |
b. The expected cash collections for August are computed as follows:
| ? | July sales: 9,400 units × $85 per unit = $799,000; $799,000 × 70% = | $559,300 |
| ? | August sales: 11,700 units × $85 per unit = $994,500; $994,500 × 30% = | 298,350 |
| ? | Total cash collections | $857,650 |
c. The budgeted required production for August is computed as follows:
| ? | Budgeted sales in units | 11,700 |
| ? | Add desired ending inventory* | 2,060 |
| ? | Total needs | 13,760 |
| ? | Less beginning inventory** | 2,340 |
| ? | Required production | 11,420 |
** August sales of 11,700 units × 20%= 2,340 units
d. The budgeted raw material purchases for August are computed as follows:
| ? | Required production in units of finished goods | 11,420 |
| ? | Units of raw materials needed per unit of finished goods | 2 |
| ? | Units of raw materials needed to meet production | 22,840 |
| ? | Add desired units of ending raw materials inventory* | 4,192 |
| ? | Total units of raw materials needed | 27,032 |
| ? | Less units of beginning raw materials inventory** | 4,568 |
| ? | Units of raw materials to be purchased | 22,464 |
** 22,840 pounds × 20% = 4,568 pounds.
e. The budgeted cost of raw material purchases for August is computed as follows:
| ? | Units of raw materials to be purchased (a) | 22,464 |
| ? | Unit cost of raw materials (b) | $2.00 |
| ? | Cost of raw materials to be purchased (a) × (b) | $44,928 |
f. The estimated cash disbursements for materials purchases in August is computed as follows:
| ? | July purchases: $40,688 × 80% | $32,550 |
| ? | August purchases: $44,928 × 20% | 8,986 |
| ? | Total cash disbursements | $41,536 |
g. The estimated direct labor cost for August is computed as follows:
| ? | Required production in units | 11,420 |
| ? | Direct labor hours per unit | 2.1 |
| ? | Total direct labor-hours needed (a) | 23,982 |
| ? | Direct labor cost per hour (b) | $25.00 |
| ? | Total direct labor cost (a) × (b) | $599,550 |
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