Question

1 ) Mercury Bag Company produces cases of grocery bags. The managers at Mercury are trying to develop budgets for the upcoming quarter. The following data have been gathered.

  

Projected sales in units		1,390	cases
Selling price per case	$	240
Inventory at the beginning of the quarter		150	cases
Target inventory at the end of the quarter		100	cases
Direct labor hours needed to produce one case		2	hours
Direct labor wages	$	10	per hour
Direct materials cost per case	$	8
Variable manufacturing overhead cost per case	$	6
Fixed overhead costs for the upcoming quarter	$	220,000

a. Using the above information, develop Mercury's sales forecast in dollars and production schedule in units.

b. What is Mercury's budgeted variable manufacturing cost per case?

c. Prepare Mercury's manufacturing cost budget.

d. What is the projected ending value of the Inventory account?

2) On March 1 of the current year, Spicer Corporation compiled information to prepare a cash budget for March, April, and May. All of the company’s sales are made on account. The following information has been provided by Spicer’s management.

  

Month	Credit Sales
January	$	300,000	(actual)
February		400,000	(actual)
March		435,000	(estimated)
April		887,000	(estimated)
May		800,000	(estimated)

  

The company’s collection activity on credit sales historically has been as follows.

  

Collections in the month of the sale	50	%
Collections one month after the sale	30
Collections two months after the sale	15
Uncollectible accounts	5

  

Spicer’s total cash expenditures for March, April, and May have been estimated at $1,200,000 (an average of $400,000 per month). Its cash balance on March 1 of the current year is $500,000. No financing or investing activities are anticipated during the second quarter.

  

Compute Spicer’s budgeted cash balance at the ends of March, April, and May.

Answer 1