Payne Company's management requests that we prepare its master budget. The budget is to cover the months of April, May, and June. Its balance sheet at March 31 follows.

Additional Information
a. Sales for March were 10,000 units. Budgeted sales units are 10,500 for April, 9,500 for May, 10,000 for June, and 10,500 for July. The product's selling price is $\$25$ per unit.
b. Company policy calls for month-end finished goods inventory to equal $80\%$ of next month's budgeted unit sales. The March 31 finished goods inventory of 8,400 units complies with the policy.
Company policy also calls for month-end materials inventory to equal $50\%$ of next month's budgeted direct materials needed for production. The March 31 ending materials inventory of 2,425 units complies with the policy. The company expects to have 2,100 units of materials inventory on June 30 . Product cost information follows.

c. Sales commissions of $12\%$ of sales are paid in the month of the sales. The sales manager's monthly salary will be $\$3,500$ in April and $\$4,000$ per month thereafter.
d. Monthly general and administrative expenses include $\$8,000$ for administrative salaries and $0.9\%$ monthly interest on the long-term note payable.
e. The company expects $30\%$ of sales to be for cash and the remaining $70\%$ on credit. Credit sales are collected in full in the month following the sale (none are collected in the month of sale).
f. All direct materials purchases are on credit, and no payables arise from any other transactions. All credit purchases (recorded in accounts payable) are paid in the month following the purchase. Materials cost $\$12.60$ per pound.

g. The minimum ending cash balance for all months is $\$50,000$. If necessary, the company borrows enough cash using a loan to reach the minimum. Loans require an interest payment of $1\%$ at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be used to repay any loans.
h. Dividends of $\$100,000$ are to be declared and paid in May.
i. No cash payments for income taxes are to be made during the second calendar quarter. Income taxes are budgeted at $35\%$ in the quarter.
j. Equipment purchases for cash of $\$55,000$ are budgeted for June.
k. Fixed overhead consists only of $\$5,000$ per month of depreciation expense on factory equipment.
Required
Prepare the following budgets and schedules for each month of April, May, and June. In addition, compute the three-month total for parts 1, 6 and 7 for use in preparing financial statements.
1. Sales budget.
2. Production budget.

3. Direct materials budget. Round costs of materials purchases to the nearest dollar.
4. Direct labor budget.
5. Factory overhead budget.
6. Selling expense budget.
7. General and administrative expense budget.
8. Schedule of cash receipts from sales.
9. Schedule of cash payments for direct materials.
10. Cash budget.
11. Budgeted income statement, budgeted statement of retained earnings, and budgeted balance sheet.

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Assets Cash Accounts receivable Raw materials inventory (2.425 lbs. @ $12.60)... Finished goods inventory (8,400 units @ $11.45).. Equipment...... Less: Accumulated depreciation Total assets PAYNE COMPANY Balance Sheet March 31 $480,000 $ 50,000 175,000 30,555 96,180 90.000 390,000 $741,735 Liabilities and Equity Liabilities Accounts payable........ $ 63,315 12,000 200,000 $275,315 Loan payable.... Long-term note payable.. Equity Common stock ...... Retained earnings Total liabilities and equity *** 435,000 31,420 466,420 $741.735