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Budgets of ABC Company appear as follows for the first three months of 2016 Budget Income Statements For the Three Months Ending March 31, 20X6 Sales (10,000 units) $30,000 Variable costs: Production $8,000 Selling and administrative 7,500 15,500 Contribution margin 14,500 Fixed costs Production $1,800 Selling and administrative 2,400 4,200 Income $10,300 + Production Budge (in units) January February March Desired ending inventory 4,500 7,500 6,000 Units sold 2,000 3,000 5.000 Total requirements 6,500 10,500 11,000 Beginning inventory 2,500 4,500 7500 Production 4,000 6,000 35001. What are variable manufacturing costs per unit? 2. What are monthly fixed manufacturing costs requiring cash disbursements? 3. What are the company's expectations about cash collections from receivables? (all sales are on account) 4. What were sales in December 20X5? 5. What are accounts receivable at March 31,20X6? 6. What proportion of variable selling and administrative expenses is paid in the month incurred, and what proportion is paid the following month? (Hint: variable selling costs are 25% of sales.) 7. What are accrued expenses payable for selling and administrative expenses at March 31, 20X6? 8. How much cash does Simpson expect to have at March 31, 20X6 (the balance at January 1 is $1800)? 9. If the company could sell 2,000 additional units in the three month period, what would income be? (ignore interest expense) 10. Look at the production budget. From comparison of inventories, sales, and so on, determine Simpson's inventory policy. 11. Does the beginning inventory for January reflect Simpson policy? Show why, or why not. 12. What are budgeted sales for April?Cash Receipts Budget January February March Collections December Sales $ 750 January Sales 1,500 $4,500 February sales 2,250 $6,750 March sales 3.750 Total Collections $2.250 $6,750 $10.500 Cash Disbursement Budget January February March Production costs: Variable $ 3,200 $4,800 $2,800 Fixed 600 600 600 Selling and administrative: Variable-current month 600 900 1.500 -prior month 150 900 1,350 Fixed 800 800 800 Totals $5,350 $8,000 $7,050

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