Chapter 09 Homework

Production and Purchases Budgets in Units
At the end of business on June 30, 2009, the Wooly Rug Company had 100,000 square yards of rugs and 600,000 pounds of raw materials on hand. Budgeted sales for the third quarter of 2009 are:

The Wooly Rug Company wants to have sufficient square yards of finished product on hand at the end of each month to meet 40 percent of the following month's budgeted sales and sufficient pounds of raw materials to meet 30 percent of the following month's production requirements. Five pounds of raw materials are required to produce one square yard of carpeting.

Prepare a production budget for the months of July, August, and September and a purchases budget in units for the months of July and August

Cash Receipts
The sales budget for Perrier Inc. is forecasted as follows:

To prepare a cash budget, the company must determine the budgeted cash collections from sales. Historically, the following trend has been established regarding cash collection of sales:

• 60 percent in the month of sale.
• 20 percent in the month following sale.
• 15 percent in the second month following sale.
• 5 percent uncollectible.

The company gives a 1 percent cash discount for payments made by customers during the month of sale. The accounts receivable balance on April 30 is $29,000, of which $8,000 represents uncollected March sales and $21,000 represents uncollected April sales. Prepare a schedule of budgeted cash collections from sales for May, June, and July. Include a three-month summary of estimated cash collections

Cash Disbursements
Assume that Waycross Manufacturing manages its cash flow from its home office. Waycross controls cash disbursements by category and month. In setting its budget for the next six months, beginning in July, it used the following managerial guidelines:

Predicted activity for selected months follow:

Prepare a schedule showing cash disbursements by account for July and August.