HOME 10.39 The Red Midget Company

HOME 10.39The Red Midget Company processes and distributes beans. The beans are packed in 1-pound plastic bags and sold to grocery chains for $0.50 each in boxes of 100 bags. Sales in February were 14,000 boxes , and the firm anticipates selling 16,000 boxes during March boxes during March. Typically, 80% of the firm’s customers pay within the month of sale, 18% of the customers after, and 2% of sales are never collected. The firm buys beans from local farmers. The farmers are paid $0.20 per pound, cash. Most of the processing is done automatically. Consequently, most($80,000) of the firm’s factory overhead is depreciation expense.The firm advertises heavily and will publish $75,000 worth of advertisements in popular magazines during March. This is up from February’s $60,000 for advertisements. The firm pays for 10% of its advertising in the month the advertisements are run and 90% in the next month. Following are March’s budgeted Income Statement and Statement of Cost of Goods Manufactured and sold. All costs and expenses are paid for as incurred unless specifically indicated otherwise above. The firm will begin March with a cash balance of $25,000 and pays monthly dividend of $15,000 to the owners.BUDGETED INCOME STATEMENT?Sales——————————————$800,000?Cost of goods sold—————————-540,000?Gross margin———————————–260,000?Administrative salaries———————–80,000?Sales commissions—————————–69,000?Advertising————————————–75,000?Bad debt expense——————————–16,000?Operating income——————————$20,000BUDGETED STATEMENT OF COST OF GOODS MANUFACTURED AND SOLD?Beginning balance direct materials——————$20,000?Direct materials purchases—————————$330,000?Materials available for use—————————-$350,000?Ending balance direct materials———————–30,000?Direct materials used———————————–320,000?Labor costs incurred————————————–90,000?Overhead costs——————————————–115,000?Cost of good manufactured—————————–525,000?Beginning finished goods balance———————-45,0000?Goods available for sale———————————–570,000?Ending finished goods balance—————————–30,000?Cost of good sold——————————————–$540,000QuestionA.From the information provided, prepare a cash receipts and disbursements budget for March.