02 Jan Direct labor for

Dos Tacos, Inc., a manufacturer of salsa, has the following historical collection pattern for its credit

sales.

55 percent collected in the month of sale.

20 percent collected in the first month after sale.

15 percent collected in the second month after sale.

8 percent collected in the third month after sale.

2 percent uncollectible.

The sales on account have been budgeted for the last seven months as follows:

June ………………………………………………………………………… $ 53,000

July …………………………………………………………………………… 64,000

August ……………………………………………………………………….. 72,000

September ………………………………………………………………….. 80,000

October ……………………………………………………………………… 89,000

November …………………………………………………………………..105,000

December …………………………………………………………………… 82,000

Required:

1. Compute the estimated total cash collections during October from credit sales.

2. Compute the estimated total cash collections during the fourth quarter from sales made on account

during the fourth quarter.

3. Make sure to show the calculations by month during the 4th quarter (Oct-Dec)

problem 2

HCJ Corporation is completing their cash budget for the following year. They are going to buy an industrial robot. They will make the acquisition on January 2 of next year, and it will take most of the year to train the personnel and reorganize the production process to take full advantage of the new equipment.”

The robot will cost $1,000,000 financed with a a one-year $1,000,000 loan from My Bank and Trust Company. I’ve negotiated a repayment schedule of four equal installments on the last day of each quarter.

The interest rate will be 10 percent, and interest payments will be quarterly as well

HCJ Corporation is a manufacturer of metal picture frames. The firm’s two product lines are designated as S (small frames; 5 x 7 inches) and L (large frames; 8 x10 inches). The primary raw materials are flexible metal strips and 9-inch by 24-inch glass sheets. Other raw materials, such as cardboard backing, are insignificant in cost and are treated as indirect materials.

Here is the provided budget information

1. Sales in the fourth quarter of 20×0 are expected to be 50,000 S frames and 40,000 L frames. Over the next two years, sales in each product line will grow by 5,000 units each quarter over the previous quarter. For example, S frame sales in the first quarter of 20×1 are expected to be 55,000 units.

2. HCJ’s sales history indicates that 60 percent of all sales are on credit, with the remainder of the sales in cash. The company’s collection experience shows that 80 percent of the credit sales are collected during the quarter in which the sale is made, while the remaining 20 percent is collected in the following quarter. (For simplicity, assume the company is able to collect 100 percent of its accounts receivable.)

3. The S frame sells for $10, and the L frame sells for $15. These prices are expected to hold constant

throughout 20×1.

4. HCJ’s production team attempts to end each quarter with enough finished-goods inventory in each product line to cover 20 percent of the following quarter’s sales. Moreover, an attempt is made to end each quarter with 20 percent of the glass sheets needed for the following quarter’s production. Since metal strips are purchased locally, HCJ buys on a just-in-time basis; inventory is negligible. The purchase and production quantities are shown.

5. All direct-material purchases are made on account, and 80 percent of each quarter’s purchases are paid in cash during the same quarter as the purchase. The other 20 percent is paid in the next quarter.

6. Indirect materials are purchased as needed and paid for in cash. Work-in-process inventory is negligible.

7. Projected manufacturing costs in 20×1 are as follows:

Direct material:

Metal strips. @ $1 per foot

Glass sheets: $8 per sheet

Direct labor for both products .1 hour @ $20 per hour

Manufacturing overhead: .1 direct-labor hour @ $10 per hour

Total manufacturing cost per unit . S: $7 L: $10

1. Sales budget:

2. Cash receipts budget:

3. Cash disbursements budget: (including purchases of direct materials and payments for same)

4. Summary cash budget: