case project

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Answered 3 days AfterJul 30, 2022

Answer To: case project

Khushboo answered on Aug 02 2022
17 Votes
1. Brief Presentation of the cu
ent situation of the entity
The entity is engaged in producing and distributing a special type of chemical compound named WX. The cu
ent situation of the entity states that the entity is having quit
e a good amount of sales units in November and December and it is expected that it will continue the same trend in the coming month. The selling price of the compound is $60 per unit in the year 2021 and it is expected that the entity will sell at the same price in the coming month. Budgeting helps in setting the goal and tracking the progress for achieving the same (Ganti A 2022). The total sales for the coming quarter will be as below:
    Sales budget:
    January
    Fe
uary
    March
    Quarte
     
     
     
     
     
    Budgeted sales in units
    11,000
    10,000
    13,000
    34,000
    Selling price per unit
      ×   $60
      ×   $60
      ×   $60
      ×   $60
    Total sales
    $660,000
    $600,000
    $780,000
    $2,040,000
Based on the sales budget the entity has estimated its production budget which states that the entity should produce 10800 units in January, 10600 units in Fe
uary, and 12600 units in March. The entity has estimated that five kilograms of raw material will be required in the production of the goods and each kilogram will cost $0.60 to the entity. The production of the special chemical compound has also incu
ed various manufacturing overhead and selling and administrative expenses which are shown below:
Manufacturing overhead budget
    
    January
    Fe
uary
    March
    Quarte
    The total cost of labor and manufacturing overhead
    $409,600
    $403,600
    $463,600
    $1,276,800
Selling and administrative budget
    
    January
    Fe
uary
    March
    Quarte
    The total cost of selling & administrative
    $144,100
    $134,100
    $164,100
    $442,300
The cash budget of the entity reveals that the entity is having a deficiency of cash balance in January as cash receipts are lower than the cash used by the entity. The management of the entity is having the policy of maintaining a minimum cash balance of $30,000. To maintain the cash balance of $30,000 the management has bo
owed a loan amounting to $169,749 and interest at the rate of 0.5% will be charged on the amount bo
owed which amounts to $849 in January. In Fe
uary, the entity is having a net operating cash inflow of...
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