ales as wit cash collections from d. Each mass-storage unit uses 5 hours of direct labor and three units of direct material Problem 9-73 Understanding Relationships, Master Budget, Comprehensive Laborers are paid $10 per hour, and one unit of direct materials costs $80. e. There are 65,700 units of direct materials in beginning inventory as of January 1. 20X1, Review the end of each quarter, Optima plans to have 30% of the direct materials needed for new Optima Company is a high-technology organization that produces a mass-storage system. The quarter's unit sales. Optima will end the year with the same amount of direct materials design of Optima's system is unique and represents a breakthrough in the industry. The units found in this year's beginning inventory, f. Optima buys direct materials on account. Half of the purchases are paid for in the quarter Optima produces combine positive features of both compact and hard disks. The company is of acquisition, and the remaining half are paid for in the following quarter. Wages and completing its fifth year of operations and is preparing to build its master budget for the coming salaries are paid on the 15th and 30th of each month. g. Fixed overhead totals $1 million each quarter. Of this total, $350,000 represents year (20X1). The budget will detail each quarter's activity and the activity for the year in total. depreciation. All ocher fixed expenses are paid for in cash in the quarter incurred. The The master budget will be based on the following information: fixed overhead rate is computed by dividing the year's total fixed overhead by the year's a. Fourth-quarter sales for 20X0 are 55,000 units. budgeted production in units. h. Variable overhead is budgeted at $6 per direct labor hour. All variable overhead expenses b. Unit sales by quarter (for 20X1) are projected as follows: are paid for in the quarter incurred. i. Fixed selling and administrative expenses total $250,000 per quarter, including $50,000 First quarter 65,000 depreciation. Second quarter j. Variable selling and administrative expenses are budgeted at $10 per unit sold. All selling 70,000 and administrative expenses are paid for in the quarter incurred. Third quarter 75,000 k. The balance sheet as of December 31, 20X0, is as follows: Fourth quarter 90,000 Assets Cash 250,000 The selling price is $400 per unit. All sales are credit sales. Optima collects 85% of all sales Direct materials inventory 5.256,010 Accounts receivable 3.300,000 within the quarter in which they are realized; the other 15% is collected in the following Plant and equipment, net 33.500,000 quarter. There are no bad debts. Tocal assets $42.306.000 c. There is no beginning inventory of finished goods. Optima is planning the following ending finished goods inventories for each quarter: Liabilities and Stockholders' Equity Accounts payable 13,000 units Capital stock $ 7,248,000' First quarter 27,000,000 Retained earnings Second quarter 15,000 units 8,058,000 Total liabilities and stockholders' equity Third quarter For purchang of direct materials only. $42.306,000 20,000 units Fourth quarter 10,000 units L. Optima will pay quarterly dividends of $300,000. At the end of the fourth quarter, $2 million of equipment will be purchased. (Continued) Required: Prepare a master budget for Optima Company for each quarter of 20X1 and for the year is total. The following component budgets must be included: 1. Sales budget 2. Production budget 3. Direct materials purchases budget 4. Direct labor budget 5. Overhead budget 6. Selling and administrative expenses budget 7. Ending finished goods inventory budget 8. Cost of goods sold budget (Nore: Assume that there is no change in work-in-process inventories.) 9. Cash budget 10. Pro forma income statement (using absorption costing) (Nore: Ignore income taxes.) 11. Pro forma balance sheet (Note: Ignore income taxes.)