CH 7 case study
ACC 232 NAME
CH 7 Case Study
Workbook AP-15B on pp XXXXXXXXXX
LimeLemon Inc.
Sales Budget
For the quarter ended June 30, 2019
April May June Total
LimeLemon Inc.
Production Budget
For the quarter ended June 30, 2019
April May June Total
LimeLemon Inc.
Direct Material Purchases Budget
For the quarter ended June 30, 2019
April May June Total
LimeLemon Inc.
Purchasing Budget
For the quarter ended June 30, 2019
April May June Total
LimeLemon Inc.
Forecasted Cash Sales and Credit Sales
For the quarter ended June 30, 2019
April May June Total
LimeLemon Inc.
Schedule of Cash Receipts
For the quarter ended June 30, 2019
April May June Total
LimeLemon Inc.
Schedule of Cash Disbursements
For the quarter ended June 30, 2019
April May June Total
LimeLemon Inc.
Cash Budget
For the quarter ended June 30, 2019
April May June Total
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189
AP-15B LO 4 6
a) LimeLemon Inc. is a manufacturer of athletic wear for running and yoga. They sell premium athletic
pants. LimeLemon Inc. has a March 30 year end. Estimated sales information for the upcoming fiscal
year are as follows:
Month Sales in units
Sales
Price
April 440 $75/unit
May 520 $75/unit
June 480 $90/unit
July 510 $85/unit
August 300 $85/unit
Prepare the sales budget for the first quarter.
limelemon inc.
Sales Budget
For the Quarter ended June 30, 2019
 April May June Period end
) When creating the budget, management likes to have extra inventory on hand in the event that actual
sales are higher than budgeted. Management has determined that 20% of the following month’s
udgeted sales should be sufficient for the extra inventory. Ending inventory at March 31, 2019 was
100 units.
Prepare the production budget for the first quarter.
limelemon inc.
Production Budget
For the Quarter ended June 30, 2019
 April May June Period end
c) Each pair of pants requires 2.5 yards of fa
ic and each yard costs $12. Management budgets for extra
materials in the event that there is a shortage from suppliers. Management would like to have 20% of
the following month’s production needs in ending inventory each month. Ending inventory of fa
ic at
March 31, 2018 is 300 yards.
Prepare the direct materials budget and purchasing budget for the first quarter.
Chapter 7 Master Budget
190
limelemon inc.
direct Material Purchases Budget
For the Quarter ended June 30, 2019
 April May June Period end
limelemon inc.
Purchasing Budget
For the Quarter ended June 30, 2019
 April May June Period end
d) LimeLemon’s sales history indicates that 35% of sales will be for cash and 65% of sales will be on credit.
Using the information from the sales budget, the forecasted cash and credit sales can be determined:
limelemon inc.
Forecasted Cash Sales and Credit Sales
For the Quarter ended June 30, 2019
 April May June Period end
LimeLemon has reviewed past collection history and has determined that credit sales will be collected as
follows: 60% is collected in the month of sale and 40% is collected the following month. The total credit
sales for the month of March 2019 were $45,000.
Prepare the budgeted schedule of cash receipts for the first quarter.
limelemon inc.
Schedule of Cash receipts
For the Quarter ended June 30, 2019
 April May June Period end
Chapter 7Master Budget
191
e) LimeLemon will pay for 50% of its purchases of material in the month the material is purchased, and
the remaining 50% in the following month. The total credit purchases for the month of March 2019
were $25,000.
Prepare the budgeted schedule of cash disbursements for the first quarter.
limelemon inc.
Schedule of Cash disbursements
For the Quarter ended June 30, 2019
 April May June Period end
f ) Prepare a cash budget for the first quarter.
Assume the following:
1) LimeLemon has access to an open line of credit with the bank to bo
ow money if needed. To keep
things simple, ignore interest calculations on the bank bo
owings. Also, loan bo
owings and
epayments are taken in multiples of $1,000.
2) LimeLemon started the year with $11,300 in its bank account and must maintain a minimum cash
alance of $4,000 at the end of each month.
3) LimeLemon maintains that it will repay debts as soon as possible with any excess cash that becomes
available.
4) LimeLemon has budgeted the following for 2019:
• Payment for operating expenses = $15,600 for April, $14,300 for May, and $12,500 for June
• Depreciation expense is $2,500 a month.
• LimeLemon will need to purchase new equipment costing $38,000. LimeLemon will pay $8,000 in
April and the remaining balance in May.
• Cash dividends of $1,000 will be paid to in all three months of the first quarter.
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limelemon inc.
Cash Budget
For the Quarter ended June 30, 2019
 April May June Period end