Pine Furniture Manufacturers forecasted the following

sales:
Jan 5,000 March 7,000
Feb 4,000 April 8,000
Create the sales budget:

For the first four months of the year, Pines Furniture

would like to have ending inventory stock of 60% of the
units to be sold for the next month. In addition, ending
inventory last December was 3,000 units and the company
wants to stock also 3,000 units by the end of April.
Present the Production Budget.

Pine Furniture knows that one chair requires 10 sq ft of

direct materials (wood). Pine Furniture has set a standard
that 90% of the next month’s direct materials should be in
stock before the month begins. The stock is held in ending
finished goods inventory of the current month. In addition
, Pine Furniture has estimated the cost of raw materials to
be $0.80/sq ft.

Pine Furniture estimates that it requires two hours of

direct labor hours (DLH) to produce each chair. Direct
labor employees are paid $12/hour.

Manufacturing overhead (MOH) is applied using direct

labor hours and a predetermined rate of $3.00/ DLH for
variable manufacturing overhead (VMOH). Fixed
manufacturing overhead, for costs including factory rent
and supervisor salaries amounts to $7,000 per month.

Present also the Budgeted Cost of Goods Manufactured.

Pine Manufacturing has operating expenses for everything

that must be done to run the business outside of its
factory. Sales employees are paid a commission of $1.
50/chair sold and the cost of shipping chairs to customers
is expected to be $0.50/chair. In contrast, fixed operating
expenses do not change when the number of chairs sold
change. The largest fixed operating expense is salaries for
the office employees. Fixed costs can change, however,
for reasons other than the number of units sold. Pine
Furniture plans to sponsor a big booth at an industry trade
show in March, increasing its costs from $2,000 to $20,000
in that month.
Based on past trends, Pine Furniture forecasts that 20% of
customer sales, will be cash sales that are collected at the
time of sale. (Therefore 80% is credit sales). Pine Furniture
allows 30 days from the invoice date for customers to pay
their invoice. Based on past trends, 9% of credit sales
customers pay within the current month. Collections from
70% of the customers come a month after sales and
Collections from 20% of customers are received late, two
months after the credit sale.
Prepare the collection schedules.

Based on past trends, Pine Furniture forecasts that 5% of

purchases. These could be website or instore purchases.
Pine Furniture will make 95% of its total manufacturing
purchases on credit. The suppliers of Pine Furniture require
payment within 30 days from the invoice date. Based on
past trends, Pine Furniture pays for 10% of credit purchases
in the current month, meaning January invoices are paid in
the month of January. Payments to 80% of Pine
Manufacturer’s suppliers are paid within the credit term
given by supplier which is 30 days. Payments for 10% of
Pine Manufacturer’s purchases are made two months after
the credit purchase. To complete the cash payments
budget, include additional information regarding other
kinds of cash outflow is needed, such as direct labor wages,
capital expenditures and dividend payments.