Question Details

Barker Company produces and sells a single product with budgetedor standard costs as follows:

Overhead rates are based on 8,000 standard direct labor hoursper month, i.e., this is the master budget denominator activitylevel.

Desired ending inventories of materials are based on 10% of thenext months materials needed. Desired ending finished goods arebased on 5% of next periods budgeted unit sales.

Unit Sales are budgeted as follows:

The budgeted sales price is $1000 per unit. Sales are budgetedas 80% credit sales and 20% cash sales. Past experience indicatesthat 60% of credit sales are collected during the month of sale,38% are collected in the following month, and 2% are uncollectible.A 1% cash discount is allowed to all customers (cash or credit) whopay within the month the sale takes place. Selling andadministrative expenses are: Variable = 20% of sales dollars, Fixed= $250,000 per month.

The budget assumption concerning cash payment proportions isthat all current purchases of direct material, direct labor,factory overhead and selling and administrative items will be paidfor during the current period. The beginning cash balance forFebruary is $10,000. Depreciation and other non-cash fixed costsare: manufacturing = $100,000, selling and administrative =$75,000.

Required:

A Partial Master Budget for February as follows.

Sales budget for February, including net sales dollars.

Production Budget, i.e., units to be produced for February.

Direct Material quantity needed for production for February.

Direct Material quantity to be purchased for February.

Budgeted cost of direct material purchases for February.

Budgeted cost of direct material used for February.

Direct labor needed for production for February.

Budgeted cost of direct labor used for February.

Budgeted factory overhead costs for February.

Prepare a cash budget for February (including the cashcollections and cash disbursements supporting schedules).