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    Cash Budget and Variance Calculation

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    See attached file for full problem description.
    Markus Corporation's sales of gizmos are 25% for cash and 75% on credit. Past collection history indicates that credit sales are collected as follows:

    30% in the month of sale
    60% in the month following sale
    10% in the second month following sale

    In January, sales were $42,000 and February sales were $45,000. Projected sales for March are 3,000 gizmos at $10 each. Projected sales for April are 4,500 gizmos at $12 each. The cash balance at March 1 was $5,785.

    Markus expects to purchase $24,000 of materials in February and $21,000 of materials in March. Three-quarters of all purchases are paid for in the month of purchase, and the other one-fourth are paid for in the month following the month of purchase. In addition, a 2% discount is allowed for payments made in the month of purchase. All other fixed expenses are $7,000 per month and are paid in the month of purchase.

    Instructions
    A. Prepare a cash budget for March.
    B. Why is the cash budget important?

    Question 5

    Chefs Company developed the following standard costs for its product for 2006:
    CHEFS COMPANY
    Standard Cost Card

    Cost Elements Standard Quantity × Standard Price = Standard Cost
    Direct materials 4 pounds $ 10 $40
    Direct labor 2 hours 20 40
    Variable overhead 2 hours 8 16
    Fixed overhead 2 hours 4 8
    $104
    The company expected to work at the 30,000 direct labor hours level of activity and produce 15,000 units of product.

    Actual results for 2006 were as follows:
    ? 14,200 units of product were actually produced.
    ? Direct labor costs were $552,420 for 27,900 direct labor hours actually worked.
    ? Actual direct materials purchased and used during the year cost $543,320 for 57,800 pounds.
    ? Total actual manufacturing overhead costs were $340,000.

    Instructions
    Compute the following variances for Chefs Company for 2006 and indicate whether the variance is favorable or unfavorable.
    1. Direct materials price variance.
    2. Direct materials quantity variance.
    3. Direct labor price variance.
    4. Direct labor quantity variance.
    5. Overhead controllable variance.
    6. Overhead volume variance.

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    https://brainmass.com/business/cash-budgeting/cash-budget-and-variance-calculation-137431

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    Question 4)

    Markus Corporation's sales of gizmos are 25% for cash and 75% on credit. Past collection history indicates that credit sales are collected as follows:

    30% in the month of sale
    60% in the month following sale
    10% in the second month following sale

    In January, sales were $42,000 and February sales were $45,000. Projected sales for March are 3,000 gizmos at $10 each. Projected sales for April are 4,500 gizmos at $12 each. The cash balance at March 1 was $5,785.

    Markus expects to purchase $24,000 of materials in February and $21,000 of materials in March. Three-quarters of all purchases are paid for in the month of purchase, and the other one-fourth are paid for in the month following the month of purchase. In addition, a 2% discount is allowed for payments made in the month of purchase. All other fixed expenses are $7,000 per month and are paid in the month of purchase.

    Instructions
    A. Prepare a cash budget for March.

    In the cash budget we put the cash collections and cash disbursements.
    Cash collection is from sales. For March, the collection will be 25% of the March sales in cash. Of the credit sales, 30% of March will be collected, 60% of Feb credit sales and 10% of ...

    Solution Summary

    The solution has two problems - 1. Preparing a cash budget. 2. Calculation various variances.

    $2.19