Borkenstick makes a very popular undyed cloth sandal in one style, but in Regular and Deluxe. The Regular sandals have cloth soles and the Deluxe sandals have cloth covered wooden soles. Borkenstick is preparing its budget for June 2012, and has estimated sales based on past experience. Other information for the month of June follows:

Borkenstick uses a FIFO cost flow assumption for finished goods inventory. All the sandals are made in batches of 50 pairs of sandals. Borkenstick incurs manufacturing overhead costs, marketing and general administration, and shipping costs. Besides materials and labor, manufacturing costs include setup, processing, and inspection costs. Borkenstick ships 40 pairs of sandals per shipment. Borkenstick uses …show more content…

Nonmanufacturing Costs Budget For the Month of June, 2012 Total Marketing and general administration 8% 550,000 Shipping (5,000 pairs / 40 pairs per shipmt) x $10 Total 2. Cash Budget $44,000 1,250 $45,250 $ 77,250 $54,821 314,000 45,426 414,247 491,497 81,934 $409,563 400 600 $61.93 95.27 $24,772 57,162 81,934 $84,760 386 yards 295 bd-ft $3.50 5.00 $1,351 1,475 $ 2,826 Total

June 30, 2012 Cash balance, June 1 (from Balance Sheet) Add receipts Collections from May accounts receivable Collections from June accounts receivable ($550,000 60%) Total collection from customers Total cash available for needs (x) Deduct cash disbursements Direct material purchases in May Direct material purchases in June ($51,461 80%) Direct manufacturing labor Manufacturing overhead ( $45,426 70% because 30% is depreciation) Nonmanufacturing costs ( $45,250 90% because 10% is depreciation) Taxes Dividends Total disbursements (y) Financing Interest at 6% ($100,000 6% 1 ÷ 12) (z) Ending cash balance, June 30 (x) ─ (y) ─ (z)

$

6,290 205,200

330,000 535,200 $541,490 $ 10,400 41,169 314,000

31,798

40,725 7,200 10,000 $455,292 $ $ 500 85,698

3. Budgeted Income Statement For the Month of June, 2012 Revenues Cost of goods sold Gross margin Operating (nonmanufacturing) costs Bad debt expense ($550,000 2%) Interest expense (for June) Net income $550,000 $409,563 $140,437 $45,250 11,000 500 56,750 $ 83,687