ANSWERS TO 1-8 BELOW, PLEASE ANSWER 9 AND 10

Endless Mountain Company manufactures a single product that is popular with outdoor recreation enthusiasts. The company sells its product to retailers throughout the northeastern quadrant of the United States. It is in the process of creating a master budget for 2019 and reports a balance sheet at December 31, 2018 as follows: Endless Mountain Company Balance Sheet December 31, 2018 Assets Current assets: Cash $ 46,200 Accounts receivable (net) 260,000 Raw materials inventory (4,500 yards) 11,250 Finished goods inventory (1,500 units) 32,250 Total current assets $349,700 Plant and equipment: Buildings and equipment 900,000 Accumulated depreciation (292,000) Plant and equipment, net 8,000 Total assets $957,700 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $158,000 Stockholders' equity: Common stock $ 419,800 Retained earnings 379,900 Total stockholders' equity 799,700 Total liabilities and stockholders' equity $957,700 The company's chief financial officer (CFO), in consultation with various managers across the organization has developed the following set of assumptions to help create the 2019 budget: 1. The budgeted unit sales are 12,000 units, 37,000 units, 15,000 units, and 25,000 units for quarters 1-4, respectively. Notice that the company experiences peak sales in the second and fourth quarters. The budgeted selling price for the year is $32 per unit. The budgeted unit sales for the first quarter of 2020 is 13,000 units. 2. All sales are on credit. Uncollectible accounts are negligible and can be ignored. Seventy-five percent of all credit sales are collected in the quarter of the sale and 25% are collected in the subsequent quarter. 3. Each quarter's ending finished goods inventory should equal 15% of the next quarter's unit sales. 4. Each unit of finished goods requires 3.5 yards of raw material that costs $3.00 per yard. Each quarter's ending raw materials inventory should equal 10% of the next quarter's production needs. The estimated ending raw materials inventory on December 31, 2019 is 5,000 yards. 5. Seventy percent of each quarter's purchases are paid for in the quarter of purchase. The remaining 30% of each quarter's purchases are paid in the following quarter. 6. Direct laborers are paid $18 an hour and each unit of finished goods requires 0.25 direct labor-hours to complete. All direct labor costs are paid in the quarter incurred. 7. The budgeted variable manufacturing overhead per direct labor-hour is $3.00. The quarterly fixed manufacturing overhead is $150,000 including $20,000 of depreciation on equipment. The number of direct labor-hours is used as the allocation base for the budgeted plantwide overhead rate. All overhead costs (excluding depreciation) are paid in the quarter incurred. 8. The budgeted variable selling and administrative expense is $1.25 per unit sold. The fixed selling and administrative expenses per quarter include advertising ($25,000), executive salaries ($64,000), insurance ($12,000), property tax ($8,000), and depreciation expense ($8,000). All selling and administrative expenses (excluding depreciation) are paid in the quarter incurred. 9. The company plans to maintain a minimum cash balance at the end of each quarter of $30,000. Assume that any borrowings take place on the first day of the quarter. To the extent possible, the company will repay principal and interest on any borrowings on the last day of the fourth quarter. The company's lender imposes a simple interest rate of 3% per quarter on any borrowings. 10. Dividends of $15,000 will be declared and paid in each quarter. 11. The company uses a last-in, first-out (LIFO) inventory flow assumption. This means that the most recently purchased raw materials are the "first-out" to production and the most recently completed finished goods are the "first-out" to customers. Requireu. The company's CFO has asked you to prepare the 2019 master budget. To fulfill this request, prepare the following budget schedules and financial statements. 1. Quarterly sales budget including a schedule of expected cash collections. 2. Quarterly production budget. 3. Quarterly direct materials budget including a schedule of expected cash disbursements for purchases of materials. 4. Quarterly direct labor budget. 5. Quarterly manufacturing overhead budget 6. Ending finished goods inventory budget at December 31, 2019. 7. Quarterly selling and administrative expense budget 8. Quarterly cash budget. 9. Income statement for the year ended December 31, 2019. 10. Balance sheet at December 31, 2019. Endless Mountain Company Sales Budget For the Year Ended December 31, 2019 Quarter 2 3 4 Year 12,000 37,000 15,000 25,000 89,000 $ 32 $ 32 $ 32/ $ 32 $ 32 $ 384,000 $ 1,184,000 $ 480,000 $ 800,000 $ 2,848,000 1 Budgeted unit sales Selling price per unit Sales Beginning accounts receivable First-quarter sales Second-quarter sales Third-quarter sales Fourth-quarter sales Total cash collections Schedule of Expected Cash Collections $ 260,000 $ 260,000 288,000 96,000 384,000 888,000 296,000 1,184,000 360,000 120,000 480,000 600,000 600,000 $ 548,000 $ 984,000 $ 656,000 $ 720,000 $ 2,908,000 Endless Mountain Company Production Budget For the Year Ended December 31, 2019 Quarter 1 2 3 4 Year 89,000 12,000 37,000 15,000 25,000 5,550 2,250 3,750 1,950 13,500 Budgeted unit sales Add desired units of ending finished goods inventory Total needs Less units of beginning finished goods inventory Required production in units 17,550 1,800 15,750 39,250 5,550 33,700 18,750 2,250 16,500 26,950 3,750 23,200 102,500 13,350 89,150 Quarter 1 2 3 15,750 33,700 3.5 16,500 3.5 23,200 3.5 Year 89,150 3.5 3.5 Required production in units Quantity of raw materials needed per unit Quantity of raw materials needed to meet production Add desired quantity of ending raw materials inventory Total quantity of raw materials needed Less quantity of beginning raw materials inventory Quantity of raw materials to be purchased Cost of raw materials per yard Cost of raw materials to be purchased 55,125 11,795 66,920 5,513 61,407 3 $ 184,221 $ 117,950 5,775 123,725 11,795 111,930 3 $ 335,790 $ 57,750 8,120 65,870 5,775 60,095 81,200 5,000 86,200 78,080 8,120 3 $ 24,360 $ 312,025 30,690 342,715 311,513 31,202 3 93,606 $ 3 $ 180,285 $ Schedule of Expected Cash Disbursements for Purchases of Materials Beginning accounts payable $ 158,000 First-quarter purchases 128,956 55,267 Second-quarter purchases 235,053 100,737 Third-quarter purchases 126,200 Fourth-quarter purchases Total cash disbursements for materials 286,956 $ 290,320 $ 226,937 $ $ 158,000 184,223 335,790 54,086 180,285 163,968 163,968 218,054 $ 1,022,266 $ Prepare the quarterly direct labor budget. (Round "Per Unit" to 2 decimal places.) Endless Mountain Company Direct Labor Budget For the Year Ended December 31, 2019 Quarter 2 15,750 33,700 0.25 0.25 3,937.5 8,425.0 3 Year 16,500 23,200 89,150 0.25 0.25 0.25 Required production in units Direct labor-hours per unit Total direct labor-hours needed Direct labor cost per hour Total direct labor cost 5,800.0 22,287.5 $ 18 $ 18 $ 4,125.0 18 $ 74,250 $ 18 $ 18 $ 70,875 $ 151,650 $ 104,400 $ 401,175 1 3 Year 22,362.5 Endless Mountain Company Manufacturing Overhead Budget For the Year Ended December 31, 2019 Quarter 2 Budgeted direct labor hours 4,012.5 8,425.0 Variable manufacturing overhead per direct labor-hour $ 3 3 $ Variable manufacturing overhead $ 12,038 $ 25,275 $ Fixed manufacturing overhead 150,000 150,000 Total manufacturing overhead 162,038 175,275 Less depreciation 20,000 20,000 Cash disbursements for manufacturing overhead 142,038 155,275 4,125.0 3 $ 3 12,375 $ 150,000 162,375 20,000 142,375 5,800.0 3 $ 17,400 $ 150,000 167,400 20,000 147,400 67,088 600,000 667,088 80,000 587,088 $ Total manufacturing overhead Budgeted direct labor hours Predetermined overhead rate for the year 667,088 22,362.5 $ 29.83 Endless Mountain Company Ending Finished Goods Inventory Budget (absorption costing basis) For the Year Ended December 31, 2019 Quantity Cost Item Total $ 10.50 Production cost per unit: Direct materials Direct labor Manufacturing overhead Unit product cost 3.50 yards 0.25 hours 0.25 hours $ 3.00 per yard $ 18.00 per hour $ 29.83 per hour 4.50 7.46 $ 22.46 Budgeted finished goods inventory: Units from prior year's production Unit product cost Cost from prior year's production $ $ 1,500 21.50 32,250 450 Units from current year's production Unit product cost Cost from current year's production $ 22.46 $ 10,107 Cost of ending finished goods inventory $ 42,357 Endless Mountain Company Selling and Administrative Expense Budget For the Year Ended December 31, 2019 Quarter 1 2 3 4 Year 37,000 15,000 89,000 12,000 1.25 $ 15,000 $ 1.25 $ 1.25 25,000 1.25 $ 31,250 $ 1.25 46,250 $ 18,750 $ 111,250 Budgeted unit sales Variable selling and administrative expense per unit Variable selling and administrative expense Fixed selling and administrative expenses: Advertising Executive salaries Insurance Property taxes Depreciation Total fixed selling and administrative expenses Total selling and administrative expenses Less depreciation Cash disbursements for selling and administrative expenses 25,000 64,000 12,000 8,000 8,000 117,000 132,000 8,000 124,000 $ 25,000 64,000 12,000 8,000 8,000 117,000 163,250 8,000 155,250 $ 25,000 64,000 12,000 8,000 8,000 117,000 135,750 8,000 127,750 $ 25,000 64,000 12,000 8,000 8,000 117,000 148,250 8,000 140,250 $ 100,000 256,000 48,000 32,000 32,000 468,000 579,250 32,000 547,250 $ Year $ $ 46,200 2,908,000 2,954,200 Endless Mountain Company Cash Budget For the Year Ended December 31, 2019 Quarter 1 2 3 Beginning cash balance 46,200 $ 30,000 $ 244,649 $ 314,337 Add cash receipts: Collection from customers 548,000 984,000 656,000 720,000 Total cash available 594,200 1,014,000 900,649 1,034,337 Less cash disbursements: Direct materials 291,287 292,176 226,937 218,054 Direct labor 72,225 151,650 74,250 104,400 Manufacturing overhead 142,038 155,275 142,375 147,400 Selling and administrative 124,000 155,250 127,750 140,250 Dividends 15,000 15,000 15,000 15,000 Total cash disbursements 644,550 769,351 586,312 625,104 Excess or (deficiency) of cash available over disbursements (50,350) 244,649 314,337 409,233 Financing: Borrowings (at the beginnings of quarters) 80,350 Repayment (at end of the year) 80,350 Interest (at 3% per quarter) 9,642 Total financing 80,350 0 0 89,992 Ending cash balance $ 30,000 $ 244,649 $ 314,337 $ 319,241 $ 1,028,454 402,525 587,088 547,250 60,000 2,625,317 328,883 80,350 80,350 9,642 (9,642) 319,241