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1) Beech Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The companys balance sheet as of June 30th is shown below:

Beech Corporation
Balance Sheet
June 30
Assets
Cash	$	83,000
Accounts receivable		126,000
Inventory		69,750
Plant and equipment, net of depreciation		220,000
Total assets	$	498,750
Liabilities and Stockholders Equity
Accounts payable	$	81,000
Common stock		348,000
Retained earnings		69,750
Total liabilities and stockholders equity	$	498,750

Exercise 8-12

Beechs managers have made the following additional assumptions and estimates:

1. Estimated sales for July, August, September, and October will be $310,000, $330,000, $320,000, and $340,000, respectively.

2. All sales are on credit and all credit sales are collected. Each months credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at June 30 will be collected in July.

3. Each months ending inventory must equal 30% of the cost of next months sales. The cost of goods sold is 75% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July.

4. Monthly selling and administrative expenses are always $58,000. Each month $6,000 of this total amount is depreciation expense and the remaining $52,000 relates to expenses that are paid in the month they are incurred.

5. The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.

Required:

1. Prepare a schedule of expected cash collections for July, August, and September.

2-a. Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.

2-b. Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September.

3. Prepare an income statement that computes net operating income for the quarter ended September 30.

4. Prepare a balance sheet as of September 30.

2)

The Production Department of Hruska Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Units to be produced	10,100	9,100	11,100	12,100

Each unit requires 0.25 direct labor-hours and direct laborers are paid $13.00 per hour.

In addition, the variable manufacturing overhead rate is $1.80 per direct labor-hour. The fixed manufacturing overhead is $81,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $21,000 per quarter.

Required:

1. Calculate the companys total estimated direct labor cost for each quarter of the upcoming fiscal year and for the year as a whole.

2&3. Calculate the companys total estimated manufacturing overhead cost and the cash disbursements for manufacturing overhead for each quarter of the upcoming fiscal year and for the year as a whole.

3)

Wolfpack Company is a merchandising company that is preparing a budget for the month of July. It has provided the following information:

Wolfpack Company Balance Sheet June 30
Assets
Cash	$	75,600
Accounts receivable		61,800
Inventory		36,600
Buildings and equipment, net of depreciation		199,000
Total assets	$	373,000
Liabilities and Stockholders Equity
Accounts payable	$	33,000
Common stock		100,000
Retained earnings		240,000
Total liabilities and stockholders equity	$	373,000

Budgeting Assumptions:

1. All sales are on account. Thirty percent of the credit sales are collected in the month of sale and the remaining 70% are collected in the month subsequent to the sale. The accounts receivable at June 30 will be collected in July.
2. All merchandise purchases are on account. Twenty percent of merchandise inventory purchases are paid in the month of the purchase and the remaining 80% is paid in the month after the purchase. The accounts payable at June 30 will be paid in July.
3. The budgeted inventory balance at July 31 is $37,800.
4. Depreciation expense is $3,980 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred.
5. The companys cash budget for July shows expected cash collections of $98,700, expected cash disbursements for merchandise purchases of $48,000, and cash paid for selling and administrative expenses of $20,620.

Required:

1. For the month of July, calculate the following:

a. Budgeted sales

b. Budgeted merchandise purchases

c. Budgeted cost of goods sold

d. Budgeted net operating income

2. Prepare a budgeted balance sheet as of July 31.

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