7-4A (Algo) Manufacturing: Preparation of a complete master budget LO P1, P2, P3 The management of Zigby Manufacturing prepared the following balance sheet for March 31. Assets ZIGBY MANUFACTURING Balance Sheet March 31 Liabilities Accounts payable Liabilities and Equity $ 211,400 23,000 500,000 $ 734,400 346,000 490,020 836,020 Cash $ 51,000 Accounts receivable 520,800 Raw materials inventory 94,100 Loan payable Finished goods inventory 443,520 Long-term note payable Equipment Less: Accumulated depreciation $ 622,000 161,000 Equity 461,000 Common stock Retained earnings Total assets $ 1,570,420 Total liabilities and equity To prepare a master budget for April, May, and June, management gathers the following information. $ 1,570,420 a. Sales for March total 24,000 units. Budgeted sales in units follow: April, 24,000; May, 16,600; June, 22,200; and July, 24,000. The product's selling price is $31.00 per unit and its total product cost is $26.40 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 4,705 pounds. The budgeted June 30 ending raw materials inventory is 5,100 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 70% of the next month's budgeted unit sales. The March 31 finished goods inventory is 16,800 units. d. Each finished unit requires 0.50 hour of direct labor at a rate of $26 per hour. e. The predetermined variable overhead rate is $3.80 per direct labor hour. Depreciation of $31,400 per month is the only fixed factory overhead item. f. Sales commissions of 5% of sales are paid in the month of the sales. The sales manager's monthly salary is $4,100. g. Monthly general and administrative expenses include $25,000 for administrative salaries and 0.8% 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). i. 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 $51,000. 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 month-end preliminary cash balance exceeds the minimum, the excess will be used to repay any loans. k. Dividends of $21,000 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% in the quarter 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. Req 1 Req 2 Req 3 Req 4 Req 5 Req 6 Req 7 Req 8 to 10 Req 11 Req 12 Sales budget. ZIGBY MANUFACTURING Sales Budgets April May June Budgeted sales units 24,000 $ 16,600 $ 22,200 Selling price per unit $ Total budgeted sales $ 744,000 $ 514,600 31.00 $ 31.00 $ $ 31.00 688,200 Req 1 Req 2 Req 3 Req 4 Req 5 Req 6 Reg 7 Req 8 to 10 Req 11 Req 12 Production budget. Budgeted sales units Add: Desired ending inventory Next period budgeted sales units Ratio of inventory to future sales Desired ending inventory units Total required units Units to produce ZIGBY MANUFACTURING Production Budget April May June Total 24,000 16,600 22,200 16,600 22,200 24,000 70% 70% 70% Req 1 Req 2 Req 3 Req 4 Req 5 Req 6 Req 7 Req 8 to 10 Req 11 Req 12 Direct materials budget. (Round per unit values to 2 decimal places.) Units to produce ZIGBY MANUFACTURING Direct Materials Budget April May June Materials needed for production (pounds) Total materials required (pounds) Materials to purchase (pounds) Materials cost per pound Cost of direct materials purchases Req 1 Req 2 Req 3 Req 4 Req 5 Req 6 Req 7 Req 8 to 10 Req 11 Req 12 Direct labor budget. (Round per unit values to 2 decimal places.) Units to produce Direct labor hours needed Cost of direct labor ZIGBY MANUFACTURING Direct Labor Budget April May June Total 0 Req 1 Req 2 Req 3 Req 4 Req 5 Req 6 Req 7 Req 8 to 10 Req 11 Req 12 Factory overhead budget. (Round variable overhead rate values to 2 decimal places.) Direct labor hours needed Variable overhead rate per direct labor hour Budgeted variable overhead Budgeted fixed overhead Budgeted total factory overhead ZIGBY MANUFACTURING Factory Overhead Budget April May June Total Req 1 Req 2 Req 3 Req 4 Req 5 Req 6 Req 7 Req 8 to 10 Req 11 Req 12 Selling expense budget. Budgeted sales Sales commissions ZIGBY MANUFACTURING Selling Expense Budget April May June Req 1 Req 2 Req 3 Req 4 Req 5 Req 6 Req 7 Req 8 to 10 Req 11 Req 12 General and administrative expense budget. ZIGBY MANUFACTURING General and Administrative Expense Budget Total general and administrative expenses April May June Req 1 Req 2 Req 3 Req 4 Req 5 Req 6 Req 7 Req 8 to 10 Req 11 Req 12 8. Schedule of cash receipts. 9. Schedule of cash payments for direct materials. 10. Cash budget. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign.) Sales Cash receipts from Cash sales Collections of prior period sales Total cash receipts ZIBGY MANUFACTURING Schedule of Cash Receipts April May June $ 744,000 $ 514,600 $ 688,200 $ 0 $ 0 $ 0 Schedule of Cash Payments for Direct Materials Materials purchases Cash payments for Current period purchases Prior period purchases Total cash payments April May June $ 196,700 $ 219,900 $ 219,300 $ 0 $ 0 $ 0 Show less Beginning cash balance Total cash available Less: Cash payments for: Total cash payments Preliminary cash balance Ending cash balance Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month Cash Budget April May June 0 0 0 Loan balance April May June $ 0 Req 1 Req 2 Req 3 Req 4 Req 5 Req 6 Req 7 Req 8 to 10 Req 11 Req 12 Budgeted income statement for entire second quarter (not monthly). (Round your final answers to the nearest whole dollar.) ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30 Selling, general and administrative expenses Total operating expenses 0 0 $ 0 Req 1 Req 2 Req 3 Req 4 Req 5 Req 6 Req 7 Req 8 to 10 Req 11 Req 12 Budgeted balance sheet at June 30. (Round your final answers to the nearest whole dollar.) ZIGBY MANUFACTURING Budgeted Balance Sheet June 30 Assets Total assets Liabilities Equity Total Liabilities and Equity Liabilities and Equity 0