1 The management of Zigby Manufacturing prepared the following balance sheet for March 31. 2IGBY MANUFACTURING Balance Sheet 35 Assets points Cash Accounts receivable Raw materials inventory March 31 $ 40,000 344,400 Liabilities and Equity Liabilities Accounts payable $201,000 98,500 Loan payable Finished goods inventory 325,540 Long-term note payable 12,000 500,000 $713,000 Equipment $600,000 Equity eBook Less: Accumulated depreciation 150,000 450,000 Common stock Retained earnings 335,000 210,440 Total assets $1.258,440 Total liabilities and equity 545,440 $1,258,440 Print To prepare a master budget for April, May, and June, management gathers the following information. References a. Sales for March total 20,500 units. Budgeted sales in units follow: April, 20,500; May, 19,500; June, 20,000; and July, 20,500. The product's selling price is $24.00 per unit and its total product cost is $19.85 per unit. b. Raw materials inventory consists solely of direct materials that cost $20 per pound. Company policy calls for a given month's ending materials inventory to equal 50% of the next month's direct materials requirements. The March 31 raw materials inventory is 4,925 pounds. The budgeted June 30 ending raw materials inventory is 4,000 pounds. Each finished unit requires 0.50 pound of direct materials, c. Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's budgeted unit sales. The March 31 finished goods inventory is 16,400 units. d. Each finished unit requires 0.50 hour of direct labor at a rate of $15 per hour. e. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $20,000 per month is the only fixed factory overhead item. f. Sales commissions of 8% of sales are paid in the month of the sales. The sales manager's monthly salary is $3,000. g. Monthly general and administrative expenses include $12,000 for administrative salaries and 0.9% monthly interest on the long- term note payable. h. The company budgets 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 (no credit sales are collected in the month of sale). 1. All raw materials purchases are on credit, and accounts payable are solely tied to raw materials purchases. Raw materials purchases are fully paid in the next month (none are paid in the month of purchase). j. The minimum ending cash balance for all months is $40,000. If necessary, the company borrows enough cash using a loan to reach the minimum Loans require an interest onvment of 1% at each month-end (before any repavmenti. If the month-end preliminary Check my purchases are fully paiu in the next monu (one are paid in the mon on purchase. j. The minimum ending cash balance for all months is $40,000. If necessary, the company borrows enough cash using a the minimum. Loans require an interest payment of 1% at each month-end (before any repayment). If the month-end pre cash balance exceeds the minimum, the excess will be used to repay any loans. k. Dividends of $10,000 are budgeted to be declared and paid in May. I. No cash payments for income taxes are budgeted in the second calendar quarter. Income tax will be assessed at 35% and budgeted to be paid in the third calendar quarter. m. Equipment purchases of $100,000 are budgeted for the last day of June. Required: Prepare the following budgets for the months of April, May, and June: 1. Sales budget. 2. Production budget. 3. Direct materials budget. 4. Direct labor budget. 5. Factory overhead budget. 6. Selling expense budget. 7. General and administrative expense budget. 8. Schedule of cash receipts. 9. Schedule of cash payments for direct materials. 10. Cash budget. 11. Budgeted income statement for entire second quarter (not monthly). 12. Budgeted balance sheet at June 30. ZIGBY MANUFACTURING Selling Expense Budget April May June Total Budgeted sales Sales commission percent Sales commissions 488,925 $ 465,075 $ 477,000 8% 8% 8% 39,114 $ 37,206 $ 38,160 $ 114,480 Sales salaries 3,000 3,000 3,000 9,000 Total selling expenses $ 42,114 $ 40,206 $ 41,160 $ 123,480 ZIBGY MANUFACTURING Schedule of Cash Receipts .April May June Sales $ 492,000 $ 468,000 $ 480,000 Cash receipts from Cash sales 147,600 1,440,400 144,000 Collections of prior period sales 344,400 327,600 336,000 Total cash receipts $ 492,000 $ 1,768,000 $ 480,000 Schedule of Cash Payments for Direct Materials April May June $ 198,000 $ 201,500 $ +.000 Materials purchases Cash payments for Current period purchases Prior period purchases Total cash payments $ 0 $ 0 10 0 Cash Budget April May June Beginning cash balance $ 40,000 $ 85,675 $ 129,420 Add: Cash receipts from sales 492 484,800 471,600 Total cash available 40,492 570,475 601,020 Less: Cash payments for: Direct material 201,000 198,000 201,500 Direct labor 147,750 149,250 153,000 Variable overhead 26,595 26,865 27,540 General and administrative salaries 12,000 12,000 2000 Sales commissions 39,360 37,440 58,400 Sales salaries 3,000 3,000 3,000 Loan interest 120 0 0 Dividends 0 10,000 0 Purchases of equipment 0 0 100,000 Long-term note interest 4,500 4,500 4,500 Taxes paid 0 0 0 Total cash payments 434,325 441,055 539,940 Preliminary cash balance 97,675 129,420 61,080 Additional loan (loan repayment) (12,000) 0 (21,080) Ending cash balance $ 85,675 $ 129,420 $ 40,000 Loan balance- Beginning of month Additional loan (loan repayment) Loan balance - End of month Loan balance April May June $ 12,000 $ 0 $ 0 (12,000) 0 (21,080) $ 0 $ 0 $ 0