Freese, Inc., is in the process of preparing the fourth quarterbudget for 2016, and the following data have been assembled:
- The company sells a single product at a price of $70 per unit.The estimated sales volume for the next six months is as follows:
| | |
| September | 10,400 | units |
| October | 9,600 | units |
| November | 11,200 | units |
| December | 16,000 | units |
| January | 7,200 | units |
| February | 8,000 | units |
|
- All sales are on account. The company's collection experiencehas been that 30% of a month's sales are collected in the month ofsale, 68% are collected in the month following the sale, and 2% areuncollectible. It is expected that the net realizable value ofaccounts receivable (i.e., accounts receivable less allowance foruncollectible accounts) will be $495,040 on September 30,2016.
- Management's policy is to maintain ending finished goodsinventory each month at a level equal to 30% of the next month'sbudgeted sales. The finished goods inventory on September 30, 2016,is expected to be 2,880 units.
- To make one unit of finished product, 5 pounds of materials arerequired. Management's policy is to have enough materials on handat the end of each month to equal 40% of the next month's estimatedusage. The raw materials inventory is expected to be 20,160 poundson September 30, 2016.
- The cost per pound of raw material is $6, and 70% of allpurchases are paid for in the month of purchase; the remainder ispaid in the following month. The accounts payable for raw materialpurchases is expected to be $91,152 on September 30, 2016.
d. Prepare a materials purchases budget inpounds, by month and in total, for the fourth quarter of 2016.
| October | Novemeber | Deecember | Total |
| Beginning inventory of raw materials | 20,160 | | | |
| Purchase of raw materials | | | | |
| Raw materials available for use | | | | |
| Desired ending inventory of raw materials | | | | |
| Quantity of raw materials to be used in production | | | | |
e. Prepare a schedule of cash payments formaterials, by month and in total, for the fourth quarter of 2016.(Do not round intermediate calculations.)
| Cash payments for: | October | November | December | Total |
| September purchases | | | | |
| October purchases | | | | |
| November purchases | | | | |
| December purchases | | | | |
| Total cash payments | | | | |
