Dudley Manufacturing is preparing its master budget for the first quarter of the upcoming year. The following data pertain to Dudley Manufacturing's operations:

Current Assets as of December 31 (prior year):

Cash .......................................................................................................................... $ 4,500

Accounts receivable, net ......................................................................................... $ 50,000

Inventory ................................................................................................................. $ 15,000

Property, plant, and equipment, net ....................................................................... $122,500

Accounts payable .................................................................................................... $ 42,400

Capital stock ........................................................................................................... $126,000

Retained earnings .................................................................................................... $ 22,920

a. Actual sales in December were $70,000. Selling price per unit is projected to remain stable at $10 per unit throughout the budget period. Sales for the first five months of the upcoming year are budgeted to be as follows:

January ........................................................................................................... $83,000

February ......................................................................................................... $92,000

March ............................................................................................................. $94,000

April ................................................................................................................ $97,000

May ................................................................................................................. $89,000

b. Sales are 30% cash and 70% credit. All credit sales are collected in the month following the sale.

c. Dudley Manufacturing has a policy that states that each month's ending inventory of finished goods should be 25% of the following month's sales (in units).

d. Of each month's direct material purchases, 10% are paid for in the month of purchase, while the remainder is paid for in the month following purchase. Two pounds of direct material is needed per unit at $2 per pound. Ending inventory of direct materials should be 10% of next month's production needs.

e. Most of the labor at the manufacturing facility is indirect, but there is some direct labor incurred. The direct labor hours per unit is 0.02. The direct labor rate per hour is $10 per hour. All direct labor is paid for in the month in which the work is performed. The direct labor total cost for each of the upcoming three months is as follows:

January..........$1,705

February.........$1,850

March............$1,895

f. Monthly manufacturing overhead costs are $5,000 for factory rent, $3,000 for other fixed manufacturing expenses, and $1.20 per unit for variable manufacturing overhead. No depreciation is included in these figures. All expenses are paid in the month in which they are incurred.

g. Computer equipment for the administrative offices will be purchased in the upcoming quarter. In January, Dudley Manufacturing will purchase equipment for $6,200 (cash), while February's cash expenditure will be $12,000 and March's cash expenditure will be $16,800.

h. Operating expenses are budgeted to be $1 per unit sold plus fixed operating expenses of $1,400 per month. All operating expenses are paid in the month in which they are incurred.

i. Depreciation on the building and equipment for the general and administrative offices is budgeted to be $4,700 for the entire quarter, which includes depreciation on new acquisitions.

j. Dudley Manufacturing has a policy that the ending cash balance in each month must be at least $4,000. It has a line of credit with a local bank. The company can borrow in increments of $1,000 at the beginning of each month, up to a total outstanding loan balance of $160,000. The interest rate on these loans is 2% per month simple interest (not compounded). Dudley Manufacturing would pay down on the line of credit balance if it has excess funds at the end of the quarter. The company would also pay the accumulated interest at the end of the quarter on the funds borrowed during the quarter.

k. The company's income tax rate is projected to be 30% of operating income less interest expense. The company pays $11,000 cash at the end of February in estimated taxes.

Requirements

1. Prepare a schedule of cash collections for January, February, and March, and for the quarter in total. Use the following format:

2. Prepare a production budget, using the following format:

3. Prepare a direct materials budget, using the following format:

4. Prepare a cash payments budget for the direct material purchases from Requirement 3, using the following format:

5. Prepare a cash payments budget for direct labor, using the following format:

6. Prepare a cash payments budget for manufacturing overhead costs, using the following format:

7. Prepare a cash payments budget for operating expenses, using the following format:

8. Prepare a combined cash budget, using the following format:

9. Calculate the budgeted manufacturing cost per unit, using the following format (assume that fixed manufacturing overhead is budgeted to be $0.70 per unit for the year):

10. Prepare a budgeted income statement for the quarter ending March 31, using the following format:

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Cash Collections Budget anuary Felay ar Cash sales Credit sales Total cash collections Production Budget JanuaryFebruary March Quarter Unit sales Plus: Desired ending inventory Total needed Less: Beginning inventory Units to be produced Direct Materials Budget January FebruaryMarch Quarter Units to be produced x Pounds of DM needed per unit Quantity (pounds) needed for production Plus: Desired ending inventory of DM Total quantity (pounds) needed Quantity (pounds) to purchase x Cost per pound Total cost of DM purchases Cash Payments for Direct Material Purchases Budget January FebruaryMarch Quarter December purchases (from Accounts Payable) anuary purchases February purchases March purchases Total cash payments for direct material purchases Cash Payments for Direct Labor Budget JanuaryFebruary March Quarter Direct labor Cash Payments for Manufacturing Overhead Budget JanuaryFebruary March Quarter Variable manufacturing overhead costs Rent (fixed) Other fixed MOH Total payments for MOH costs Cash Payments for Operating Expenses Budget January February M arch Quarter Variable operating expenses Fixed operating expenses Total payments for operating expenses Combined Cash Budget anuaryFebruary March Quarter Cash balance, beginning Add cash collections Total cash available Less cash payments: Direct material purchases Direct labor Manufacturing overhead costs Operating expenses Tax payment Equipment purchases Total cash payments Ending cash balance before financing Financing: Repayments Interest payments Cash balance, ending Budgeted Manufacturing Cost per Unit Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead costs per unit Fixed manufacturing overhead per unit Budgeted cost of manufacturing each unit Budgeted Income Statement For the Quarter Ending March 31 Sales.asas. Cost of goods sold Gross profit. Operating in Less interest expense Less provision for income taxes.