Question

Part #1: K Company is planning its cash disbursements for the upcoming months. In June, it anticipates $72,000 in Purchases, $130,000 in Payroll, and $40,000 in Loan Payments. In July, it anticipates $77,000 in Purchases, $140,000 in Payroll, and $35,000 in Loan Payments. In August, it anticipates $84,000 in Purchases, $150,000 in Payroll, and $30,000 in Loan Payments. Purchases are usually paid half in the current month and half in the following month. Payroll is paid 70 percent in the current month and 30 percent in the following month. Loan Payments are paid in the month due. Prepare a schedule of cash disbursements for the month of July only. Part #2: Q Company anticipates production for its second quarter to be 18,000 units in April, 28,400 units in May, and 36,000 units in June. Each unit of finished product requires four pounds of raw materials. Q Company maintains raw materials inventories equal to 25 percent of the following month’s pounds needed for production. The April 1 inventories are in line with Q Company’s inventory policy. The anticipated cost per pound in April is $6 while the anticipated cost per pound in May is $6.25. Prepare a Direct Materials Purchases Budget with columns for April and May only. Part #3: F Company’s Production Budget indicates that 13,000 units will be produced in April and 12,300 units in May. Workers are paid $19 per hour. It generally takes a worker 15 minutes (which is .25 hours) to make a unit. Prepare a Direct Labor Budget with columns for April and May only.

Answer 1

Part 1)

CASH DISBURSEMENT FOR MONTH OF JULY
			Total
Purchase
June Purchase	72000*1/2=	36000
July Purchase	77000*1/2=	38500
Total cash disbursement for Purchase in July			74500
Payroll
June payroll	130000*30%=	39000
July payroll	140000*70%=	98000
Total cash disbursement for payroll in July			137000
Loan payment in July			35000
Total cash disbursement in July			246500

2)

DIRECT MATERIAL PURCHASE BUDGET FOR MONTH OF APRIL AND MAY
	April	May	June
Units to be produced	18000	28400	36000
Material requirement per unit	4	4	4
Total material required for production	18000*4= 72000	113600	144000
Add:Ending raw material inventory desired	113600*25%= 28400	144000*25%= 36000
Total Material required	100400	149600
less:Beginning raw material inventory	- 18000   [72000*25%]	-28400
Material needs to be purchased	82400	121200
material cost per pound	6	6.25
Total material cost	82400*6= 494400	757500

3)

DIRECT LABOR BUDGET FOR MONTH OF APRIL AND MAY
	April	May
Units to be produced	13000	12300
Hours required per unit [60 minutes in an hour)	15/60= .25	.25
Total hours required per unit	13000*.25=3250	3075
Rate per hour	19	19
Total direct labor cost	3250*19= 61750	58425