Manasee Atre is an award-winning innovator who makes educational toys for preschool children. Manasee€™s company, which she whimsically named Pumpkin Patch, makes plastic pieces that can be assembled to create imaginative animal and human models. The standard set consists of several types of €œhead gear,€ €œnoses,€ €œeyes,€ €œears,€ €œarms and legs,€ as well as €œfoot wear.€ The deluxe set adds to the number of options under each category.
For the second half of 2008, estimated sales in units for each set are as follows:

Manasee provides you with the following additional information:
Sales price: The actual sales for May and the forecasted sales for June were $150,000 and $155,000, respectively, for the standard set. The relevant numbers for the deluxe set are $70,000 (May sales) and $65,000 (June sales).
Manasee prices the standard set at $17 per unit and the deluxe set at $26 per unit.
Inventory policy for finished goods: Manasee€™s policy for finished goods inventory is to stock 25% of the forecasted demand for the next month. As of June 30, Manasee expects to have 2,500 units of the standard set and 875 units of deluxe set in stock. These inventories were valued at $12.00 and $17.00 per unit, respectively. Pumpkin Patch uses the FIFO (First-In-First-Out) method to value its inventories.
The company€™s long-term plans call for it to have 4,000 units of the standard set and 1,000 units of the deluxe set on January 31, 2009.
Production requirements: The standard set consumes 1 pound of plastic per unit, whereas the deluxe set consumes 1.50 pounds of plastic per unit. Plastic costs $3.00 per pound. The cost of all other materials is $1.00 per unit for the standard set and $1.25 per unit for the deluxe set.
The standard set requires 0.50 direct labor hours per unit, and the deluxe set requires 0.75 labor hours per unit. Labor costs $16 per hour.
Fixed manufacturing overhead is expected to be $48,000 per month. Of this amount, $22,000 represents depreciation and other noncash expenses. Pumpkin Patch does not have any variable manufacturing overhead.
Inventory policy€”raw materials: With regard to the plastic used to produce each set, Manasee likes to have an ending materials inventory to meet all of the material needs for the next month€™s anticipated production.
Pumpkin Patch expects to have 13,000 pounds of plastic in inventory as of June 30, 2008.
Manasee€™s long-term plans call for her to have 10,000 pounds of plastic in inventory as of January 31, 2009.
Payables policy: Pumpkin Patch pays for half of its material purchases in the month of purchase and the remainder the following month.
Accounts payable for materials and other items were expected to be $19,500 on June 30, 2008.
All other materials are purchased on a cash basis during the month when they are used.
Collection policy: For both the standard and deluxe set, 40 percent of any month€™s sales are for cash. Ten percent of the credit sales are collected in the month of sale, 70% are collected the following month, and 18% are collected in the second month after the sale. The remaining 2% of receivables are deemed uncollectible. Pumpkin Patch writes off bad debts to the income statement during the month the debt is deemed uncollectible (i.e., two months after the sale occurs). The firm makes no accruals for estimated bad debts in the month of sale.
Sales and administration costs: Monthly nonmanufacturing expenses consist of the following:
Salaries and wages ........ $3,000
Commissions .... 6% of sales revenue
Rent ............ $7,000
Other expenses .... 4% of sales revenue
Depreciation $1,500 (for office equipment)

Except depreciation, all nonmanufacturing expenses are paid in cash when incurred.
Cash and financing: Pumpkin Patch maintains a minimum cash balance of $15,000. Borrowing can make up any anticipated shortfalls. Ignore interest on the loan in your calculations. For simplicity, assume that the bank will only lend (and accept repayments) in $1,000 increments. (Minimize the amount borrowed, however.)
Cash on hand on June 30 is expected to be $16,000.
Special items for cash budget: Pumpkin Patch needs to make a payment of $15,000 during July for equipment previously purchased on credit. The firm also has scheduled a
Dividend payment of $20,000 in September.

Required:
a. Prepare Pumpkin Patch€™s contribution margin income statement for each of the last six months of 2008.
b. Prepare Pumpkin Patch€™s cash budget for each of the last six months of 2008.
c. Write a brief report summarizing Pumpkin Patch€™s budget for the second half of2008.

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Month Standard Deluxe July August September October November December 10,000 11,400 12,000 15,600 18,000 22,000 4,000 1,500 5,000 5,500 6,000 4,200 January 2009 8,000