Colorado State University Cost of Production Worksheet

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Vonn Company, a furniture store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the quarter:

  • As of the end of the prior quarter, September 30, the company’s general ledger showed the following account balances:
    • Cash $62,000 (debit)
    • Accounts receivable $480,000 (debit)
    • Inventory $78,000 (debit)
    • Buildings and equipment, net $570,000 (debit)
    • Accounts payable $193,000 (credit)
    • Capital stock $300,000 (credit)
    • Retained earnings $619,000 (credit)
  • Actual sales for September and budgeted sales for the next four months are as follows: September $280,000, October $400,000, November $600,000, December $300,000 and January $200,000.
  • Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts receivable at December 31 are a result of December credit sales.
  • The company’s gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.)
  • Monthly expenses are budgeted as follows: salaries and wages, $27,000 per month; advertising, $70,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $42,000 per quarter.
  • Each month’s ending inventory should equal 25% of the following month’s cost of goods sold.
  • One half of the month’s inventory purchases is paid for in the month of purchase; the other half is paid in the following month.
  • During November, the company will purchase a new copy machine for $1,700 cash. During December, other equipment will be purchased for cash at a cost of $84,500.
  • During October, the company will declare and pay $45,000 in cash dividends.
  • Management wants to maintain a minimum cash balance of $30,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Required tasks:

Using the data above, populate the following statements and schedules for the October-December quarter. Submit your responses in an Excel spreadsheet neatly organized. If desired, you may modify the schedule formats as necessary to show your work as long as all of the content is included.

  1. Schedule of expected cash collections
  2. Schedule of Expected Cash Collections
    October November December Quarter
    Cash sales
    Credit sales
    Total Collections
  3. Merchandise purchases budget
  4. Merchandise Purchases Budget
    October November December Quarter
    Budgeted Cost of Goods Sold
    Add desired ending inventory
    Total needs
    Less beginning inventory
    Required purchases
  5. Schedule of expected cash disbursements for merchandise purchases
  6. Schedule of Expected Cash Disbursements-Merchandise Purchases
    October November December Quarter
    September purchases
    October purchases
    November purchases
    December purchases
    Total disbursements
  7. Schedule of expected cash disbursements for selling and administrative expenses
  8. Schedule of Expected Cash Disbursements-Selling and Administrative Expenses
    October November December Quarter
    Salaries and wages
    Advertising
    Shipping
    Other expenses
    Total disbursements
  9. Cash budget:
  10. Cash Budget
    October November December Quarter
    Cash balance, beginning
    Add cash collections
    Total cash available
    Less cash disbursements
    For inventory
    For selling & admin exp.
    For purchase of equipment
    For cash dividends
    Total cash disbursements
    Excess (deficiency) of cash
    Financing needed
    Borrowings
    Repayments
    Interest
    Net borrowings
    Cash balance, ending

    Submit your responses in an Excel spreadsheet, neatly organized. Reference Lynda.com in the CSU-Global Library (Links to an external site.) for Microsoft Excel tutorials or use the Excel Tutorials link found in the classroom if assistance is needed.

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