Managerial Accounting, Materials Budgets, Cash schedules, balance sheet, ect.

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Mr. Smith is preparing for a meeting with his banker to arrange the financing for the first quarter. Based on his sales forecast and the information he has provided (as detailed in the Situation below), your job as his new financial analyst is to prepare the following reports for the First Quarter of


1. Monthly Sales Budget

2. Monthly Production Budget

3. Monthly Direct Materials Budget

4. Monthly Schedule of Expected Cash Collection from Customers

5. Monthly Schedule of Expected Cash Payments for Direct Materials

6. Monthly Cash Budget

7. Monthly and Quarterly Budgeted Income Statements

8. Quarterly Budgeted Balance Sheet


Iona Corporation makes standard-size 2-inch fasteners, which it sells for $155 per thousand. Mr. Smith is the majority owner and manages the inventory and finances of the company. He estimates sales for the following months in year 2019 to be:

January…………… $263,500 (1,700,000 fasteners)

February…………. $186,000 (1,200,000 fasteners)

March…………….. $217,000 (1,400,000 fasteners)

April………………. $310,000 (2,000,000 fasteners)

May……………….. $387,500 (2,500,000 fasteners)

In 2018, Iona Corporation’s budgeted sales were $175,000 in November and $232,500 in December (1,500,000 fasteners).

Past history shows that Iona Corporation collects 50 percent of its accounts receivable in the normal 30-day credit period (the month after the sale) and the other 50 percent in 60 days (two months after the sale). It pays for its materials 30 days after receipt. In general, Mr. Smith likes to keep a two-month supply of inventory in anticipation of sales. Inventory at the beginning of December was 2,600,000 units. (This was not equal to his desired two-month supply.)

The major cost of production is the purchase of raw materials in the form of steel rods, which are cut, threaded, and finished. Last year raw material costs were $52 per 1,000 fasteners, but Mr. Smith has just been notified that material costs have risen, effective January 1, to $60 per 1,000 fasteners. The Iona Corporation uses FIFO inventory accounting. Labor costs are relatively constant at $20 per thousand fasteners, since workers are paid on a piecework basis. Overhead is allocated at $10 per thousand units, and selling and administrative expense is 20 percent of sales. Labor expense and overhead are direct cash outflows paid in the month incurred, while interest and taxes are paid quarterly.

The corporation usually maintains a minimum cash balance of $25,000, and it puts its excess cash into marketable securities. The average tax rate is 40 percent, and Mr. Smith usually pays out 50 percent of net income in dividends to stockholders. Marketable securities are sold before funds are borrowed when a cash shortage is faced. Ignore the interest on any short-term borrowings. Interest on the long-term debt is paid in March, as are taxes and dividends.

As of year-end, the Iona Corporation’s budgeted balance sheet was as follows:

(see attachment for image of ballance sheet)

the excel document is the format needed for submital

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