1 - Klandon Company manufactures decorative rocks for aquariums. Kim Klandon is preparing the budget for the quarter ended June 30. She has gathered the following information: 1. Klandon's sales manager reported that the company sold 15,000 bags of rocks in March. He has developed the following sales forecast. The expected sales price is $25 per bag. April May June 18,000 bags 22,000 bags 20,000 bags 24,000 bags 16,000 bags July August 2. Sales personnel receive a 4% commission on every bag of rocks sold. The following monthly fixed selling and administrative expenses are planned for the quarter. However, these amounts do not include the depreciation increase resulting from the budgeted equipment purchase in June (see part 7). Monthly Fixed Selling and Administrative Costs Variable Cost/Unit $10,000 Depreciation Salaries of sales personnel $1.00 25.000 1.000 Advertising 10,000 500 Management salaries Miscellaneous Bad debts Total costs $46,500 $1.00 3. After experiencing difficulty in supplying customers in a timely fashion due to inventory shortages, the company established a policy requiring the ending Finished Goods Inventory to equal 20% of the following month's budgeted sales, in units. On March 31, 4,000 bags were on hand, 4. Eight pounds of direct materials are required to fill each bag of finished rocks. The company wants to have direct materials on hand at the end of each month equal to 10% of the following month's production needs. On March 31, 13,000 pounds of materials were on hand 5. The direct materials used in production cost $1.25 per pound Sixty percent of the month's purchases are paid for in the month of purchase the remaining 40%, in the following month. No discount is available, 6. The standard labor allowed for one bag of rocks is 30 minutes. The current direct labor rate is $12 per hour. 7. On June 1, the company plans to spend $60,000 to upgrade its office equipment that is fully depreciated. The new equipment is expected to have a five-year life with no residual value. While full-depreciated, the old equipment will be retained in service mharal 8. The budgeted monthly variable and fixed overhead amounts are as follows. Variable overhead is based on the number of units produced. The fixed overhead budget is based on an annual production of 420,000 bags. Depreciation Monthly Fixed Overhead Variable Cost/Unit $8,000 2,500 $0.08 Indirect materials Indirect labor 13,000 0.27 Utilities 18,000 0.15 Property taxes 4,000 Maintenance 7,000 0.25 $0.75 Total costs $52,500 9. All sales are made on account. Historically, the company has collected 70% of its sales in the month of sale and 25% in the month following the sale. The remaining 5% of sales is uncollectible (and is included in the previous selling and administrative bad debt expense information). 10. Klandon must maintain a minimum cash balance of $40,000. An open line of credit at a local bank allows the company to borrow up to $175,000 per quarter in 51.000 increments. 11. All borrowing is done at the beginning of the month, and all repayments are made at the end of a month in $1,000 increments. Accrued interest is paid any time a principal payment is made. The interest rate is 12% per year, 12. A quarterly dividend of $53,000 will be declared and paid in April. 13. Income taxes payable for the first quarter will be paid on April 15. Klandon's tax rate is 30%. 14. The March 31 balance sheet is as follows: March 31 Cash $40,000 Accounts receivable 93,750 Raw materials inventory 21,600 73,000 Finished goods inventory Plant & equipment 200,000 (50,000) Accumulated depreciation $378,350 Total assets $12,000 Accounts payable 24,000 Income taxes payable 52.000 Common stock . = 290.350 Retained earnings Total liabilities and equities $378,350 (a) Prepare all components of Klandon's master budget for the second quarter. (Enter negative amounts using either a negative sign preceding the number es45. Do not leave any answer field blank. Enter O for amounts) Sales Budget April June May $ April May $ $ > $ $ -11 = June Quarter $ $ $ $ Production Budget April May June Quarter July I Materials Purchases Budget April May June > $ $ $ Manufacturing Overhead Budget April May >> > > $ $ June Quarter I $ $ Ending Inventory and Cost of Goods Sold Budget $ > $ $ > > A > > > > . = ii June Quarter $