Question

The Ace Battery Company has forecast its sales in units as follows: January February March April 1,200 May 1,050 June 1,000 July 1,500 1,750 1,900 1,600 Ace always keeps an ending inventory equal to 140 percent of the next month's expected sales. The ending inventory for December (January's beginning inventory) is 1,680 units, which is consistent with this policy. Materials cost $13 per unit and are paid for in the month after production. Labour cost is $6 per unit and is paid in the month the cost is incurred. Overhead costs are $8,000 per month. Interest of $8,400 is scheduled to be paid in March, and employee bonuses of $13,600 will be paid in June. a. Prepare a monthly production schedule for January through June (Enter all values as positive value.) Saved ework Help Save & Exit Submit Check my work January 1200 February 1050 March 1000 April 1500 May 1750 June 1900 July 1600 Forecasted unit sales Desired ending inventory Beginning inventory Units to be produced b. Prepare a monthly summary of cash payments for January through June. Ace produced 1.000 units in December Ace Battery Company Summary of Cash payments February March December January April May June Units produced Material cost Labour cost Overhead cost Interest Employee bonuses Total cash payments

Answer 1

The Ace Battery Company

a) Monthly Production Schedule

January February March April May June

Sales Forecast: 1,200 1,050 1,000 1,500 1,750 1,900

Ending inventory 1,470 1,400 2,100 2,450 2,660 2,240

Sales units available 2,670 2,450 3,100 3,950 4,410 4,140

Beginning inventory 1,680 1,470 1,400 2,100 2,450 2,660

Units for production 990 980 1,700 1,850 1,950 1,480

b) Monthly Cash Payments:

January February March April May June

Payments:

Production materials 0 $12,870 $12,740 $22,100 $24,050 $25,350

Labor costs $5,940 5,880 10,200 11,100 11,700 8,880

Overhead costs 8,000 8,000 8,000 8,000 8,000 8,000

Interest expense 8,400

Employee bonuses 13,600

Total payments $13,940 $26,750 $39,340 $41,200 $43,750 $55,830

Step-by-step explanation:

a) Data and Calculations:

January February March April May June July

Sales Forecast: 1,200 1,050 1,000 1,500 1,750 1,900 1,600

Ending inventory 1,470 1,400 2,100 2,450 2,660 2,240

Sales units available 2,670 2,450 3,100 3,950 4,410 4,140

Beginning inventory 1,680 1,470 1,400 2,100 2,450 2,660 2,240

Units for production 990 980 1,700 1,850 1,950 1,480

Costs of materials $12,870 $12,740 $22,100 $24,050 $25,350 $19,240

Payments:

Production materials 0 $12,870 $12,740 $22,100 $24,050 $25,350

Labor costs $5,940 5,880 10,200 11,100 11,700 8,880

Overhead costs 8,000 8,000 8,000 8,000 8,000 8,000

Interest expense 8,400

Employee bonuses 13,600

Cash payments $13,940 $26,750 $39,340 $41,200 $43,750 $55,830