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CLARITY Company makes one product. Its sales price is expected to be P82 per unit. Actual 2021 sales: November 6,200 units December 6,800 units CLARITY budgets its sales for the next six months of 2021 as follows: January February March 5,400 units| April | 5,000 units| 5,200 units May 5,500 units June 3,800 units 6,000 units All sales are on accout. CLARITY collects its accounts as follows: 70% in the month of sale 20% in the month following sale 10% in the second month following sale Uncollectible accounts are negligible and can be disregarded. The beginning inventory on January 1, 2022 is 540 units. CLARITY desires an ending finished goods inventory of 10% of the next month's budgeted sales. Each unit of finished goods requires 4 kilos of raw material that cost P3 a kilo. CLARITY desires an ending inventory of raw materials equal to 20% of the following month's production needs. Assume that CLARITY met this requirement at the end of December, 2021. CLARITY makes all purchases on account on terms net 30. CLARITY pays its accounts payable as follows: 60% in the month of sale and 40% in the month following sale. Purchases in December were P62,000. Required: Prepare the following by month for the first quarter of 2021 and for the first quarter as a whole. 1. Sales budget. 2. Production budget. 3. Purchases budget.

CLARITY Company makes one product. Its sales price is expected to be P82 per unit. Actual 2021 sales: November 6,200 units December 6,800 units CLARITY budgets its sales for the next six months of 2021 as follows: January February March 5,400 units| April | 5,000 units| 5,200 units May 5,500 units June 3,800 units 6,000 units All sales are on accout. CLARITY collects its accounts as follows: 70% in the month of sale 20% in the month following sale 10% in the second month following sale Uncollectible accounts are negligible and can be disregarded. The beginning inventory on January 1, 2022 is 540 units. CLARITY desires an ending finished goods inventory of 10% of the next month's budgeted sales. Each unit of finished goods requires 4 kilos of raw material that cost P3 a kilo. CLARITY desires an ending inventory of raw materials equal to 20% of the following month's production needs. Assume that CLARITY met this requirement at the end of December, 2021. CLARITY makes all purchases on account on terms net 30. CLARITY pays its accounts payable as follows: 60% in the month of sale and 40% in the month following sale. Purchases in December were P62,000. Required: Prepare the following by month for the first quarter of 2021 and for the first quarter as a whole. 1. Sales budget. 2. Production budget. 3. Purchases budget.

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter7: Budgeting
Section: Chapter Questions
Problem 10PB: All Temps has a policy of always paying within the discount period, and each of its suppliers...
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CLARITY Company makes one product. Its sales price is expected to be PS2 per unit. Actual 2021 sales: November 6,200 units December 6,800 umits CLARITY budgets its sales for the next six months of 2021 as follows: Jamuary February 5,400 units April 5,000 units 5,200 units May 5,500 units June 5,800 units 6,000 units March All sales are on account. CLARITY collects its accounts as follows: 70% in the month of sale 20% in the month following sale 10% in the second month following sale Uncollectible accounts are negligible and can be disregarded. The beginning inventory on January 1, 2022 is 540 units. CLARITY desires an ending finished goods inventory of 10% of the next month's budgeted sales. Each unit of finished goods requires 4 kilos of raw material that cost P3 a kilo. CLARITY desires an ending inventory of raw materials equal to 20% of the following month's production needs. Assume that CLARITY met this requirement at the end of December, 2021. CLARITY makes all purchases on account on tems net 30. CLARITY pays its accounts payable as follows: 60% in the month of sale and 40% in the month following sale. Purchases in December were P62,000. Required: Prepare the following by month for the first quarter of 2021 and for the first quarter as a whole. 1. Sales budget. 2. Production budget. 3. Purchases budget. 4. Schedule of cash collections. 5. Schedule of cash disbursements for accounts payable.
Transcribed Image Text:CLARITY Company makes one product. Its sales price is expected to be PS2 per unit. Actual 2021 sales: November 6,200 units December 6,800 umits CLARITY budgets its sales for the next six months of 2021 as follows: Jamuary February 5,400 units April 5,000 units 5,200 units May 5,500 units June 5,800 units 6,000 units March All sales are on account. CLARITY collects its accounts as follows: 70% in the month of sale 20% in the month following sale 10% in the second month following sale Uncollectible accounts are negligible and can be disregarded. The beginning inventory on January 1, 2022 is 540 units. CLARITY desires an ending finished goods inventory of 10% of the next month's budgeted sales. Each unit of finished goods requires 4 kilos of raw material that cost P3 a kilo. CLARITY desires an ending inventory of raw materials equal to 20% of the following month's production needs. Assume that CLARITY met this requirement at the end of December, 2021. CLARITY makes all purchases on account on tems net 30. CLARITY pays its accounts payable as follows: 60% in the month of sale and 40% in the month following sale. Purchases in December were P62,000. Required: Prepare the following by month for the first quarter of 2021 and for the first quarter as a whole. 1. Sales budget. 2. Production budget. 3. Purchases budget. 4. Schedule of cash collections. 5. Schedule of cash disbursements for accounts payable.
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