Exercise 9-2

The marketing department of Graber Corporation has submitted the following sales forecast for the upcoming fiscal year.
Quarters
First Second Third Fourth
Budgeted sales in units 16,000 15,000 14,000 15,000

The selling price of the company’s product is $22.00 per unit. Management expects to collect 75% of sales in the quarter in which the
sales are made and 20% in the following quarter, and 5% of sales are expected to be uncollectible. The beginning balance of accounts
receivable, all of which is expected to be collected in the first quarter, is $66,000.
Selling price per unit
Sales collections:
In the quarter of sales
In the quarter following sales
Uncollectible

Accounts receivable - beginning

The company expects to start the first quarter with 3,200 units in finished goods inventory. Management desires an ending finished
goods inventory in each quarter equal to 20% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the
fourth quarter is 3,400 units.

Inventory to start first quarter units

Desired ending inventory of next quarter's budgeted sales
Ending inventory fourth quarter units

Required:
1. Prepare the company’s sales budget and schedule of expected cash collections.
2. Prepare the company’s production budget for the upcoming fiscal year.

1 Graber Corporation
Sales Budget
For the year ending December 31, 20XX
First Second Third Fourth Total

Total Sales

$ -
Graber Corporation
Schedule of Cash collections
For the year ending December 31, 20XX
First Second Third Fourth Total

Total Cash Collections

2 Graber Corporation
Production Budget
For the year ending December 31, 20XX
First Second Third Fourth Total

Required production in units

Accounts receivable - beginning of year

Add desired ending inventory
Budgeted sales in units
First Quarter Sales
Fourth Quarter Sales
Less beginning inventory
Second Quarter Sales
Selling price per unit
Third Quarter Sales
Total needs
Exercise 9-3
Micro Products Inc. has developed a very powerful electronic calculator. Each calculator requires 3 small chips that cost $3 each and are purchased from an overseas
supplier. Micro Products has prepared a production budget for the calculator by quarters for year 2 and for the first quarter of year 3, as shown below:

Year 2 Year 3
First Second Third Fourth First
Required production in calculators 60,000 90,000 150,000 100,000 80,000

Raw material - Number of chips per calculator

Cost of raw material per chip

The chip used in production of the calculator is sometimes hard to get, so it is necessary to carry large inventories as a precaution against stock-outs. For this reason,
the inventory of chips at the end of a quarter must be equal to 20% of the following quarter’s production needs. A total of 36,000 chips will be on hand to start the
first quarter of year 2.
Desired ending raw material inventory of following quarter's production needs

Raw material inventory at beginning of First Quarter chips

Required:
Prepare a direct materials purchases budget for chips, by quarter and in total, for year 2. At the bottom of your budget, show the dollar amount of purchases for each
quarter and for the year in total

Micro Products Inc

Direct Materials Budget
For the 12 months ending Year 2
Year 2 Year 3
First Second Third Fourth TOTAL First

Raw materials to be purchased- chips

Cost of raw materials to be purchased

Add desired ending inventory- chips

Less beginning inventory- chips
Number of chips per calculator
Required production in calculators
Total needs- chips
Total production needs- chips
Exercise 9-3
Micro Products Inc. has developed a very powerful electronic calculator. Each calculator requires 3 small chips that cost $3 each and are purchased from an overseas
supplier. Micro Products has prepared a production budget for the calculator by quarters for year 2 and for the first quarter of year 3, as shown below:

Year 2 Year 3
First Second Third Fourth First
Required production in calculators 60,000 90,000 150,000 100,000 80,000

Raw material - Number of chips per calculator 3

Cost of raw material $3.00 per chip

The chip used in production of the calculator is sometimes hard to get, so it is necessary to carry large inventories as a precaution against stock-outs. For this reason,
the inventory of chips at the end of a quarter must be equal to 20% of the following quarter’s production needs. A total of 36,000 chips will be on hand to start the
first quarter of year 2.
Desired ending raw material inventory 20% of following quarter's production needs

Raw material inventory at beginning of First Quarter 36,000 chips

Required:
Prepare a direct materials purchases budget for chips, by quarter and in total, for year 2. At the bottom of your budget, show the dollar amount of purchases for each
quarter and for the year in total

Micro Products Inc

Direct Materials Budget
For the 12 months ending Year 2
Year 2 Year 3
First Second Third Fourth TOTAL First

Correct Required production in calculators 60,000 90,000 150,000 100,000 400,000 80,000
Correct Number of chips per calculator 3 3 3 3 3 3
Correct Total production needs- chips 180,000 270,000 450,000 300,000 1,200,000 240,000 Correct
Correct Add desired ending inventory- chips 54,000 90,000 60,000 48,000 48,000
Correct Total needs- chips 234,000 360,000 510,000 348,000 1,248,000
Correct Less beginning inventory- chips 36,000 54,000 90,000 60,000 36,000
Raw materials to be purchased- chips 198,000 306,000 420,000 288,000 1,212,000

Cost of raw materials to be purchased $ 594,000 $ 918,000 $ 1,260,000 $ 864,000 $ 3,636,000

Correct Correct Correct Correct Correct

Add desired ending inventory- chips

Less beginning inventory- chips
Number of chips per calculator
Required production in calculators
Total needs- chips
Total production needs- chips
Exercise 9-2
The marketing department of Graber Corporation has submitted the following sales forecast for the upcoming fiscal year.
Quarters
First Second Third Fourth
Budgeted sales in units 16,000 15,000 14,000 15,000

The selling price of the company’s product is $22.00 per unit. Management expects to collect 75% of sales in the quarter in which the
sales are made and 20% in the following quarter, and 5% of sales are expected to be uncollectible. The beginning balance of accounts
receivable, all of which is expected to be collected in the first quarter, is $66,000.
Selling price per unit $22.00
Sales collections:
In the quarter of sales 75%
In the quarter following sales 20%
Uncollectible 5%

Accounts receivable - beginning $66,000

The company expects to start the first quarter with 3,200 units in finished goods inventory. Management desires an ending finished
goods inventory in each quarter equal to 20% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the
fourth quarter is 3,400 units.

Inventory to start first quarter 3,200 units

Desired ending inventory 20% of next quarter's budgeted sales
Ending inventory fourth quarter 3,400 units

Required:
1. Prepare the company’s sales budget and schedule of expected cash collections.
2. Prepare the company’s production budget for the upcoming fiscal year.

1 Graber Corporation
Sales Budget
For the year ending December 31, 20XX
First Second Third Fourth Total
Correct Budgeted sales in units 16,000 15,000 14,000 15,000 60,000
Correct Selling price per unit $22 $22 $22 $22 $22
Total Sales $ 352,000 $ 330,000 $ 308,000 $ 330,000 ###
Correct Correct Correct Correct Correct

$ 334,400
Graber Corporation
Schedule of Cash collections
For the year ending December 31, 20XX
First Second Third Fourth Total
Correct Accounts receivable - beginning of year $ 66,000 $ 66,000
Correct First Quarter Sales 264,000 70,400 334,400
Correct Second Quarter Sales 247,500 66,000 313,500
Correct Third Quarter Sales 231,000 61,600 292,600
Correct Fourth Quarter Sales 247,500 247,500
Total Cash Collections $ 330,000 $ 317,900 $ 297,000 $ 309,100 ###
Correct Correct Correct Correct Correct

2 Graber Corporation
Production Budget
For the year ending December 31, 20XX
First Second Third Fourth Total
Correct Budgeted sales in units 16,000 15,000 14,000 15,000 60,000 Correct
Correct Add desired ending inventory 3,000 2,800 3,000 3,400 3,400 Correct
Correct Total needs 19,000 17,800 17,000 18,400 63,400 Correct
Correct Less beginning inventory 3,200 3,000 2,800 3,000 3,200 Correct
Required production in units 15,800 14,800 14,200 15,400 60,200 Correct
Correct Correct Correct Correct Correct
44,800

Accounts receivable - beginning of year

Add desired ending inventory
Budgeted sales in units
First Quarter Sales
Fourth Quarter Sales
Less beginning inventory
Second Quarter Sales
Selling price per unit
Third Quarter Sales
Total needs