Petrini Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations:The budgeted selling price per unit is $110. Budgeted unit sales for January, February, March, and April are 7,500, 10,600, 12,000, and 11,700 units, respectively. All sales are on credit.Regarding credit sales, 30% are collected in the month of the sale and 70% in the following month.The ending finished goods inventory equals 30% of the following month's sales.The ending raw materials inventory equals 10% of the following month's raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $4.00 per pound.Regarding raw materials purchases, 40% are paid for in the month of purchase and 60% in the following month.The direct labor wage rate is $23.00 per hour. Each unit of finished goods requires 2.6 direct labor-hours.Manufacturing overhead is entirely variable and is $8.00 per direct labor-hour.The variable selling and administrative expense per unit sold is $1.70. The fixed selling and administrative expense per month is $70,000.The budgeted accounts receivable balance at the end of February is closest to:

Question

Quizplus · Accepted Answer

To find the budgeted accounts receivable balance at the end of February, we first need to calculate the total credit sales for January and February:

January credit sales = 7,500 units x $110 = $825,000
February credit sales = 10,600 units x $110 = $1,166,000

We know that 30% of credit sales are collected in the month of sale, so January collections would be:

January collections = $825,000 x 30% = $247,500

For February, 70% of credit sales are collected from January and 30% are collected from February sales:

February collections from January sales = $825,000 x 70% = $577,500
February collections from February sales = $1,166,000 x 30% = $349,800

Total cash collections for February = $577,500 + $349,800 = $927,300

To find the budgeted accounts receivable balance at the end of February, we need to subtract the total cash collections from the total credit sales for January and February:

January and February credit sales = $825,000 + $1,166,000 = $1,991,000

Budgeted accounts receivable balance at the end of February = $1,991,000 - $927,300 = $1,063,700

However, we also need to take into account the fact that 70% of March credit sales will be collected in April. Therefore, we need to add 70% of March credit sales to the budgeted accounts receivable balance at the end of February:

March credit sales = 12,000 units x $110 = $1,320,000
April collections from March sales = $1,320,000 x 70% = $924,000

Adjusted budgeted accounts receivable balance at the end of February = $1,063,700 + $924,000 = $1,987,700

But we also need to subtract the February collections from March sales:

Adjusted budgeted accounts receivable balance at the end of February = $1,987,700 - $349,800 = $1,637,900

However, we need to keep in mind that this is only an estimate and that actual collections may differ from the budgeted amounts.

Petrini Corporation Makes One Product and It Provided the Following