accounting due in 6hrs

A202 Discussion Problem: Operating Budgets

Chic Containers, Inc. manufactures CD cases. The cases sell for $10 per unit. The sales

forecast predicts sales of 60,000 units for the coming year (2002), and 70,000 for the

following year (2003). A1l sales to customers are on account. Receivables at the

beginning of the year were $20,000. Chic Containers expects to collect all of the opening

receivables balance and75o/" of the sales made during the coming year.

At the beginning of the year, Chic Containers had 3,000 units in finished goods

inventory. Desired ending inventory is 5%o of the next year's projected sales.

The nylon to make these cases costs $.50 per yard, and it takes 1,-,5 yards to make a single case. The company began the year with 1,600 yards of nylon in raw materials inventory, and desired ending raw materials inventory is 2,000 yards. All purchases of nylon are made with cash.

Each case requires .25 direct labor hours to produce, at a rate of $ 10 per hour.

Variable overhead is applied using a predetermined overhead rate of $1.50 per unit. Fixed overhead for the coming year is expected to be as follows:

Depreciation Inspector's salary Properfy tax Supervisor's salary

Variable selling and per unit sold. Fixed

Depreciation Sales staff Advertising President's salary

administrative expenses for the comingyear are estimated at $ .75 selling and administrative_expenses are expected to be as follows:

$30,000 $25,000 $8,000 $30,000

$ 10,000 $40,000 $5,000 $45,000

J

Prepare the following:

t. Sales budget and schedule of expected cash collections 2. Production budget 3. Direct materials budget 4. Direct labor budget 5. Manufacturing overhead budget 6. Selling and administrative expense budget