15 Resford, pesident of Photo Artistry Company, was just coneluding a budget meeting with his senios aff lis was November of 20x4, and the group was discussing preparation of the firm's master budget for th6. Tre decided to go aheakd and porchase the industrial robot we've been talking about. We'll make ic ayuisition in January 2 of next year, and I expect if will take most of the year to train the personinel int rorgainize the production process to take full advantage of the new eqpaipment." In response to a question about financing the acquisition, Rexford replied as follows: "The robot will cos $950,000. There will also be an additional $50,000 is ancillary equipment to be purchased. witl finance these purchases with a one-year $1,000,000 loan from Shark Bank and Trust Company. Te negotiated a repayment schedule of four equal installments on the last day of each quarter. The iterst rate will be 10 percent, and interest payments will be quarterly as well." With that the meetiag thatz vp and the budget process was on. Phoso Artistry Company is a manufacturer of metal picture frames. The firm's two product lines utdesignated as S (small frames; 57 inches) and L (large frames; 810 inches). The primary raw mutrials ane flexible metal strips and 9 -inch by 24 -inch glass sheets. Each S frame requires a 2 -foot actal strip, an L frame requires a 3-foot strip. Allowing for normal breakage and scrap glass, the compayy can get cither four S frames or two L frames out of a glass sheet, Other raw materials, such as calbourd hacking, are insignificant in cost and are treated as indirect materials. Emily Jackson. Photo Anistry's controller, is in charge of preparing the master badget for 20.5 . She has gathered the followinginformation: 1. Sales in the fourth quarter of 204 are expected to be 50,000S frames and 40,000L frames. The ales manager predicts that over the next two years, sales in each product line will grow by 5.000 utits each quarter over the previous quarter. For example, $ frame sales in the first quarter of 20x5 are expected to be 55,000 units. 2. Ptow Artistry's sales history indicates that 60 percent of all sales are on credit, with the remainder of the sales in cash. The company's collection experience shows that 80 percent of the credit sales are collected during the quarter in which the sale is made, while the remaining 20 percent is collatted in the following quarter. (For simplicity, assume the company is able to collect 100 percent of its accounts receivable.) 3. The S frame sells for $10, and the L. frame sells for $15. These prices are expected to hold constant throughout 205. 4. The production manager attempts to end each quarter with enough finished goods imentory in tach product line to cover 20 percent of the following quarter's sales. Moreover, an attempt is thase to end each quarter with 20 percent of the glass sheets needed for the following quarter's production. Since metal strips are purchased locally, the company beys them on a just-in-time besis, inventory is negligible. 5. All direct-material purchases are made on account, and 80 pereent of each quarter's purchases are paid in cash during the same quarter as the purchase. The other 20 percent is paid in the next quance. 6. Indirect materials are parchased with cash as needed. Work-in-process is negligible. 7. Projectied production costs in 205 are as folkws: Case 9-45 Comprehensive Master Budget: Shant-Term Financing; Acquistion of Pobotic Equipment (10 9-2, 9-3, 9-5, 9-6) 1. Total sales pevenue, sth quarler $1,600,000 7. Cost of poods sold: $3,050,000 8. Gross margin: $1,800,000 Ail s these soas will be puid in cash during the taarier iskarted except foe depeccatinn. 9. Photo Artistry's quartesly selling and administrative expenses are $100,000, paid in cash. 10. Jackson anticipates that dividends of $0000 will be declared and paid in cash cach quarter, 11. Fhoth Artisiry's projected balance sheet as of Dectmber 31, 20x4, follows: Aequired: Prepare Pheso Aristry Company's masier budget for 205 by completing the folesins schodules and saicments. 1. Sales budget: 2. Cash receipts budgec: 4. Direct-material budget: Netal stipe: 5 frames to be produced x Metal quantily per una of. Netdod for $ trame production L tranes to be produced x Metal quantly per und oir) leeded for L frame production Thad metal neoded ior production; io te puchased (it) x Pice per loot Ceat of metal strips to be purchased Qust shoets S tramins to be produced x Cass quantiy per unit (sheets) Heded lor S lrame production 1 franes io be produced x Qlass quartify fer ind isheotses Theded for L frame production lotel gars ncesded ior profuction isheets! fod Desired undiry imemory bed glass rosth Less Foterted tegrning mustery Qhes io be puchasad - Pice Der ofess thert Qai uf idas io to puctises Fotien muteris puchases greal and ofarid 5. Cash ditukncments tusders. 0. sumnary casn ounget: Cash receipts (from schedule 2) Less: Cash disbursements (from schedule 5) Change in cash balance due to operations Payment of dividends Proceeds from bank ioan (12) 5 ) Purchase of equioment Quarterly instalmert on loan principal Quarterty interest payment Changs in cash balance during the period Cash balence, beginning of period Cash tasance, end of period 7. Prepare a budgeted schedule of cost of goods manufactured and sold for the year 205. (hin: in the budget, actual and applied overhead will be equal.) 8. Prepare Photo Artistry's budgeted income statement for 205. (Ignore income taxes.) 9. Prepare Photo Artistry's budgeted statement of retained earnings for 205. 10. Prepare Photo Artistry's budgeted balance sheet as of December 31,205