Elf Company manufactures miniature picnic tables to be sold to elementary schools and children daycares. The controller of Elf Company is currently preparing a budget for the second quarter of the year. The following sales forecast has been made by the sales manager for the first half of 2020:
January…………………………………..8,500 tables
February…………………………………..9,000 tables
March…………………………………..9,500 tables
April…………………………………..10,000 tables
May…………………………………..12,000 tables
June…………………………………..15,000 tables
Each table sells for $50 and all sales are on account. Past history has shown that 30% of credit sales are collected in the month that the sale occurred, 40% of the sales are collected the month following the month of sale, 25% of credit sales are collected two months following the month of sale and the remaining 5% is collected in the third month following the sale. The estimated sales for July and August are 16,000 and 16,500 tables respectively. Elf Company had 2,000 tables in finished goods inventory at the end of March. The department ends each month with enough finished-goods inventory to cover 20 percent of the next month’s sales.
Each picnic table requires 10 board metres of spruce blanks to manufacture. Spruce planks cost $0.50 per board metre, and the production department ends each month with enough wood to cover 10 percent of the next month’s production requirements. The company had 10,400 board metres of spruce wood in its ending raw material inventory at the end of March. The purchase of wood is all on account and the company pays 60% of its purchases in the month of purchase and the remaining 40% in the month following the purchase. Purchases of wood in March totalled $48,400.
Each table requires 1.5 hours of direct labour to manufacture. The production department incurs a cost of $20 per hour for direct-labour wages and fringe benefits.
Required:
a. Prepare the Sales Budget for the quarter ended June 30, 2020.
b. Prepare the Production Budget for the quarter ended June 30, 2020.
c. Prepare the Raw Material Purchase Budget for the quarter ended June 30, 2020.
d. Prepare the Direct Labour Budget for the quarter ended June 30, 2020.
e. Prepare a schedule showing the cash collections from sales for the quarter ended June 30, 2020.
f. Prepare a schedule showing the cash disbursements for the purchase of raw materials for the quarter ended June 30,2020.
