1 Sales forecast January 5,100 units February 6,900 units March 7,300 units April 7,500 units The unit sales price is $55 All sales are on credit and collections are 30 in the month of sale and 70 the following month Accounts receivable as of December 31 of the previous year was $18,000 this amount is expected to be collected in January of the current year 2 End of month inventory must equal 30 of next months sales The inventory at the end of December 31 of the previous year was 1,530 units 3 The following are the expected costs for direct materials, direct labor and manufacturing overhead DM DL Overhead January $12 unit $15 unit $7,500 $2 65 per unit produced February $12 unit $15 unit $7,500 $2 65 per unit produced March $12 unit $15 unit $7,500 $2 65 per unit produced A Direct materials are paid 40 in the month incurred and 60 in the following month Account payable for materials as of December 31 is $5,100 this amount will be paid in January B Direct labor is paid in the month incurred C Overhead costs are paid in the month incurred Fixed overhead includes depreciation of $5,500 per month 4 Selling costs are sales commissions $2 10 per unit sold shipping costs $0 50 per unit sold Administrative costs per month are salaries $15,000 rent $2,000 depreciation $1,900 All costs are paid in month incurred 5 The company plans to buy equipment costing $100,000 in February and to pay dividends of $40,000 in March 6 The cash balance as of December 31 of the previous year was $25,000 The company requires a minimum cash balance of $5,000 The company has a revolving credit with US Bank to borrow in increments of $1,000 at the beginning of each month at interest of 12 annual rate The company may borrow at the beginning of any month and repays its loans, or any parts of its loans, at the end of any month Interest payments are due on any principle at the time it is repaid (the amount repaid does not have to be in increments of $1,000) For simplicity, assume that interest is not compounded As of December 31 the company has no outstanding loans Required Based on the information given, prepare the following budgets for each month of the first quarter of 2021 and the quarter totals Sales Budget, including a schedule of expected cash collections Production Budget (in units) Direct materials budget, including schedule of expected cash disbursements Direct labor budget Manufacturing Overhead Budget Selling and Administrative Expenses Budget Cash Budget D 1 Company Inc Sales Budget For the Quarter Ended XX XX XX Month Feb Jan Mar Quarter Budgeted Unit Sales Selling Price Per Unit Total Sales $ $ $ $ $ Schedule of Expected Cash Collections $ Beginning Accounts Receivable January Sales February Sales March Sales Total Cash Collections $ $ $ $ $ Company Inc Production Budget For the Quarter Ended XX XX XX Month Feb Jan Mar Quarter Budgeted Unit Sales (Sales Budget) Add Desired Units of Ending Finished Goods Inventory Total Needs Less Units of Beginning Finished Goods Inventory Required Production in Units Company Inc Direct Materials Budget For the Quarter Ended XX XX XX Month Jan Feb Mar Quarter Required Production in Units DM cost per unit Cost of Raw Materials to be purchased $ Schedule of Expected Cash Disbursements for Purchases of Materials $ Beginning Accounts Payable January Purchases February Purchases March Purchases Total Cash Disbursements for Materials $ $ $ $ Company Inc Direct Labor Budget For the Quarter Ended XX XX XX Month Feb Jan Mar Quarter Required Production in Units DL cost per unit Cost of DL $ $ $ $ $ Company Inc Manufacturing Overhead Budget For the Quarter Ended xx XX XX Month Feb Jan Mar Quarter $ $ $ $ $ Required Production in Units (Production Budget) Variable Manufacturing Overhead Rate Variable Manufacturing Overhead Fixed Manufacturing Overhead Total Manufacturing Overhead Less Depreciation Cash Disbursements for Manufacturing Overhead $ $ $ $ Company Inc Selling and Administrative Expense Budget For the Quarter Ended xx xx xx Month Feb Jan Mar Quarter $ $ $ $ Budgeted Units Sales (Sales Budget) Variable Selling Expenses Per Unit Variable Selling Expense Fixed Administrative Expenses Salaries Rent Depreciation Total Fixed Administrative Expenses Total Selling and Administrative Expenses Less Depreciation Cash Disbursements for Selling and Administrative Expenses $ $ $ $ $ $ $ $ $ $ Company Inc Cash Budget For the Quarter Ended XX XX XX Month Feb Jan Mar Quarter Beginning Cash Balance Add Cash Receips Collections From Customers (Sales Budget) Total Cash Available Less Cash Disbursements Direct Materials Direct Labor Manufacturing Overhead Selling and Administrative Equipment Purchases Total Cash Disbursements Exceeds (Deficiency) of Cash Available Over Disbursements Borrowing Interest Principle Ending Cash Balance $ $ $ $ $

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1. Sales forecast: January: 5,100 units; February: 6,900 units; March: 7,300 units; April: 7,500 units. The unit sales price is $55. All sales are on

1. Sales forecast: January: 5,100 units; February: 6,900 units; March: 7,300 units; April: 7,500 units. The unit sales price is $55. All sales are on credit and collections are 30% in the month of sale and 70% the following month. Accounts receivable as of December 31 of the previous year was $18,000; this amount is expected to be collected in January of the current year.

2. End of month inventory must equal 30% of next months sales. The inventory at the end of December 31 of the previous year was 1,530 units.

3. The following are the expected costs for direct materials, direct labor and manufacturing overhead:

DM DL Overhead

January $12/unit $15/unit $7,500 + $2.65 per unit produced

February $12/unit $15/unit $7,500 + $2.65 per unit produced

March $12/unit $15/unit $7,500 + $2.65 per unit produced

A. Direct materials are paid 40% in the month incurred and 60% in the following month.

Account payable for materials as of December 31 is $5,100; this amount will be paid in January.

B. Direct labor is paid in the month incurred.

C. Overhead costs are paid in the month incurred. Fixed overhead includes depreciation of $5,500 per month.

4. Selling costs are sales commissions: $2.10 per unit sold; shipping costs: $0.50 per unit sold. Administrative costs per month are: salaries: $15,000; rent: $2,000; depreciation: $1,900. All costs are paid in month incurred.

5. The company plans to buy equipment costing $100,000 in February and to pay dividends of $40,000 in March.

6. The cash balance as of December 31 of the previous year was $25,000. The company requires a minimum cash balance of $5,000. The company has a revolving credit with US Bank to borrow in increments of $1,000 at the beginning of each month at interest of 12% annual rate. The company may borrow at the beginning of any month and repays its loans, or any parts of its loans, at the end of any month. Interest payments are due on any principle at the time it is repaid (the amount repaid does not have to be in increments of $1,000). For simplicity, assume that interest is not compounded. As of December 31 the company has no outstanding loans.

Required:

Based on the information given, prepare the following budgets for each month of the first quarter of 2021 and the quarter totals:

Sales Budget, including a schedule of expected cash collections;
Production Budget (in units);
Direct materials budget, including schedule of expected cash disbursements;
Direct labor budget;
Manufacturing Overhead Budget;
Selling and Administrative Expenses Budget;
Cash Budget.

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D 1 Company Inc. Sales Budget For the Quarter Ended XX-XX-XX Month Feb Jan Mar Quarter Budgeted Unit Sales Selling Price Per Unit Total Sales $ $ $ $ $ Schedule of Expected Cash Collections $ Beginning Accounts Receivable January Sales February Sales March Sales Total Cash Collections $ - $ $ - $ $ . Company Inc. Production Budget For the Quarter Ended XX-XX-XX Month Feb Jan Mar Quarter Budgeted Unit Sales (Sales Budget) Add: Desired Units of Ending Finished Goods Inventory Total Needs Less: Units of Beginning Finished Goods Inventory Required Production in Units Company Inc. Direct Materials Budget For the Quarter Ended XX-XX-XX Month Jan Feb Mar Quarter Required Production in Units DM cost per unit Cost of Raw Materials to be purchased $ Schedule of Expected Cash Disbursements for Purchases of Materials $ Beginning Accounts Payable January Purchases February Purchases March Purchases Total Cash Disbursements for Materials $ $ $ $ Company Inc. Direct Labor Budget For the Quarter Ended XX-XX-XX Month Feb Jan Mar Quarter Required Production in Units DL cost per unit Cost of DL $ $ $ $ $ Company Inc. Manufacturing Overhead Budget For the Quarter Ended xx-XX-XX Month Feb Jan Mar Quarter $ $ $ $ $ Required Production in Units (Production Budget) Variable Manufacturing Overhead Rate Variable Manufacturing Overhead Fixed Manufacturing Overhead Total Manufacturing Overhead Less: Depreciation Cash Disbursements for Manufacturing Overhead $ $ $ - $ Company Inc. Selling and Administrative Expense Budget For the Quarter Ended xx-xx-xx Month Feb Jan Mar Quarter $ $ $ $ Budgeted Units Sales (Sales Budget) Variable Selling Expenses Per Unit Variable Selling Expense Fixed Administrative Expenses Salaries Rent Depreciation Total Fixed Administrative Expenses Total Selling and Administrative Expenses Less: Depreciation Cash Disbursements for Selling and Administrative Expenses $ $ $ $ $ $ $ $ $ $ Company Inc. Cash Budget For the Quarter Ended XX-XX-XX Month Feb Jan Mar Quarter Beginning Cash Balance Add: Cash Receips Collections From Customers (Sales Budget) Total Cash Available Less: Cash Disbursements Direct Materials Direct Labor Manufacturing Overhead Selling and Administrative Equipment Purchases Total Cash Disbursements Exceeds (Deficiency) of Cash Available Over Disbursements Borrowing Interest Principle Ending Cash Balance $ - $ $ - $ $