1. Great and Beyond company is preparing budgets for the quarter ending April 30.

The
budgeted sales for the next five months are 15000 for May, 30000 for June, 25000 for
July, 20000 for August, 10000 for September. The company’s selling price is $20/unit.
Prepare a sales budget for the quarter ending July 31.

2. Great and Beyond’s collection pattern is 60% collected in the month of sale, and 40%
collected in the upcoming month of sale. All sales are on account. In May, the April 30th
accounts receivable balance of $20,000 will be collected in full in April. Compose a
schedule of expected cash collections.

3. The board of directors wants ending inventory to be equal to 30% of the following
month’s budgeted sales in units. 3000 units were on hand at April 30. Prepare a
production budget.

4. 10 pounds of material are required to manufacture a unit of a product and each pound
costs $0.50. 12000 pounds are at hand on April 30. The board of directors wants
materials on hand at the end of each month equal to 20% of the following month’s
production. Prepare the direct materials budget.

5. The company pays $0.5 per pound for its materials. One-half of a month’s purchases is
paid for in the month of purchase; the other half is paid in the following month. April 30
accounts payable balance is $20000. Calculate expected cash disbursements.

6. At Great and Beyond, each unit takes around 0.1 hours which is 6 minutes of direct
labor. The company pays $15 per hour to its employees. No specific skill is required for
the employees since they will perform basic tasks. Compose a direct labor budget.

7. Manufacturing overhead is applied to units of product on the basis of direct labor hours
at Great and Beyond. Fixed manufacturing overhead is $60,000 per month, which
includes $15,000 of noncash costs and the variable manufacturing overhead rate is $15
per direct labor hour. Prepare a manufacturing overhead budget.

8. Calculate ending inventory budget.

9. The variable selling and administrative expenses are $0.75/unit sold while the fixed
expenses are $50000 per month which include $10,000 of noncash costs. Prepare a
selling and administrative expense budget.

10. Great and Beyond company maintains a 12% open line of credit for $65,000, maintains a
minimum cash balance of $25000, borrows on the first day of the month and repays
loans on the last day of the month, pays a cash dividend of $30,000 in May, purchases
 $150000 of equipment in June and $46,300 in July (both purchases paid in cash), has a
May 1 cash balance of $40,000. Prepare a cash budget.

11. Assemble a budgeted income statement.

12. The company reported the following account balances prior to preparing its budgeted
financial statements: land $70000, common stock $120000, retained earnings $238000
(May 1), Equipment $150000.

Opinions:

1. Our sales shown in the sales budget are not consistent from month to month and
therefore we must be more efficient and try to keep the sales increasing consistently.

2. For our production budget, we have a great desired ending inventory in proportion to
our budgeted sales and our required production are consistent from month to month. In
June, we had a spike in sales and we couldn’t keep up with the demand of production
and therefore, lost sales in July. We must be able to hold slightly more inventory as well
as be more efficient in production.
3. In the direct materials budget, the materials per unit is high and thus exponentially
increasing our production needs. This in turn increases the materials to be purchased
and it could be the reason why we can’t produce many units at a consistent fast rate.
4. Our direct labor time per unit in the direct labor budget should be reduced to also speed
our production process. We can only create 10 units per hour which we cannot sustain.
Our hourly wage can be slightly reduced to increase our profit margin since our selling
price is $20 per unit.
5. In the manufacturing overhead budget, our noncash costs such as depreciation are
relatively low meaning our fixed overhead costs are high. Overall, the variable
manufacturing overhead rate and costs are proportional to previous budgets.
6. For our ending inventory budget, the direct materials cost per unit is high in relation to
overhead and direct labor. This ultimately increases our unit product cost and decreases
our profit margin. However, our ending inventory units are acceptable.
7. In the selling and administrative expense budget, we have a good variable selling and
administrative rate and the cash expenses are relatively low in comparison with our
sales per month.
8. In the cash budget, the proportion of total cash available and total disbursements is
excellent since throughout the quarter our balance has increased greatly. However, our
equipment purchases constitute a somewhat large portion of the cash disbursements.
Our ending cash balance is decent even though we repaid our loan and its interest.
9. For our budgeted income statement, our cost of goods sold is high since our unit
product cost is high leading to a tremendously lower net income. It takes more than
50% of our sales.
10. The budgeted balance sheet shows that we have a great number of assets and we are
very liquid since we have a good amount of cash at hand as well as the other assets can
be converted to cash easily. Our liabilities are easily payable and not a burden on the
company. Our owner’s equity is also in a great balance.