Arragon Ltd. is a company that manufactures and sells a single product called Zoltar. For planning and control purposes they utilize a monthly master budget, which is developed in advance of the budget year. Their fiscal year end is April 30. The sales forecast consisted of these few lines:

For the year ended April 30, 2023: 600,000 units at $27.00 each*

For the year ended April 30, 2024: 630,000 units at $28.00 each

For the year ended April 30, 2025: 660,000 units at $29.00 each

*Sales for the year ended April 30, 2023 are based on actual sales to date and budgeted sales for the duration of the year. Your investigations of the companys records have revealed the following information:

1. Sales are seasonal with January, May, July and September being the slowest months with only 5% of sales for each month. February, March, August and December each contribute 8% to the total sales. April and June each account for 10% of total sales. Sales in October account for 13% of the total and peak at 15% in November. This pattern of sales is not expected to change in the next two years.

2. Sales are on a cash and credit basis, with 40% collected during the month of the sale, 45% the following month, and 14% the month thereafter, with 1% of total sales considered uncollectible (bad debt expense). Sales in March and April 2023 are expected to be $1,296,000 and $1,620,000 respectively. Based on the above collection pattern this will result in Accounts Receivable of $1,137,240 at April 30, 2023, which will be collected in May and June 2023.

3. From previous experience, management has determined that an ending inventory equal to 25% of the next months sales is required to fit the buyers demands.

4. There is only one type of raw material used in the production of Zoltar: Zoltar Acrylic (ZAC) is a very compact material that is purchased in powder form. Each Zoltar requires 0.6 kilogram of ZAC, at a cost of $16.00 per kilogram. The supplier of ZAC tends to be somewhat erratic so Arragon finds it necessary to maintain an inventory balance equal to 30% of the following months production needs as a precaution against stock-outs.

5. Arragon pays for 35% of a months purchases in the month of purchase, 45% in the following month and the remaining 20% two months after the month of purchase. There is no early payment discount. Beginning accounts payable will consist of $403,668 arising from the following estimated direct material purchases for March and April of 2023: ZAC purchases in March, 2023: $495,000 ZAC purchases in April, 2023 $468,720

6. Arragons manufacturing process is highly automated, but also requires highly skilled labour. Employees are paid at an average rate of $35.00 per hour. This rate already includes the employers portion of employee benefits. All payroll costs are paid in the period in which they are incurred. On average, each unit spends a total of 9 minutes in production. However, due to the fluctuations in actual sales, the company maintains a workforce of 40 full-time employees who are guaranteed a minimum of 160 hours each. During months in which production is low, these workers perform other tasks such as equipment maintenance. In months when additional workers are needed, Arragon hires temporary workers at $35 per hour. For simplicity, include all labour costs in the labour budget.

7. Variable manufacturing overhead is allocated based on units produced. The variable overhead manufacturing rate is $5 per unit.

8. The fixed manufacturing overhead costs for the entire year is estimated to be $1,080,000, including depreciation of $264,000 on the existing manufacturing equipment. Fixed manufacturing overhead costs are incurred evenly over the year and paid as incurred, except for depreciation, calculated using the straight-line method of depreciation.

9. Arragon plans to purchase new manufacturing equipment for which they will need to pay cash. The bid that was accepted totaled $1,000,000, of which $400,000 will be paid in September 2023, and the remaining balance in 3 equal monthly instalments of $200,000 beginning in October 2023. The depreciation on this additional equipment will amount to $20,000 per month, beginning from September 2023.

10. Because sales are seasonal, Arragon must rent an additional warehouse for October and November to house the additional inventory on hand, at a cost of $20,000 per month, payable in full at the beginning of October.

11. Selling and administrative expenses are largely fixed and are estimated to be $1,260,000 for the year. These costs are paid in the month in which they occur, with the exception of the only non-cash item: a monthly depreciation of office equipment in the amount of $17,500. Starting from May 2023, Arragon intends to pay salespeople a commission of $2 per unit sold. This cost is not included in the estimate above, nor are bad debt expenses (see point 2) or warehouse rental (see point 10).

12. Arragon has a corporate tax rate of 30%. During the fiscal year ended April 30, 2024 Arragon will be required to make monthly income tax installment payments of $50,000. Outstanding income taxes from the year ended April 30, 2023 must be paid in October 2023. Income taxes for the year ended April 30, 2024, in excess of installment payments, will be paid in October 2024.

13. An arrangement has been made with the local bank that if Arragon maintains a minimum balance of $30,000 in their bank account, they will be given a line of credit at a preferred rate of 9% per annum (i.e., 0.75% per month). All borrowing is considered to happen on the first day of the month, repayments are on the last day of the month. All borrowings and repayments from the bank must be in multiples of $1,000 and interest must be paid at the end of each month. Interest is calculated on the balance at the beginning of the month, which includes any amounts borrowed that month (i.e., any borrowing for a month must occur at the beginning of that month). Arragon has a loan balance of $120,000 at April 30, 2023.

15. Arragon has a policy of paying dividends at the end of each month. The President tells you that the board of directors plans to continue their policy of declaring dividends of $20,000 per month.

16. A listing of the estimated balances in the companys ledger accounts as of April 30, 2023 is given below: Cash $30,985 Accounts payable $ 403,668 Accounts receivable 1,137,240 Loan 120,000 Inventory-raw materials 113,400 Income tax payable 60,000 Inventory-finished goods 165,375 Capital stock 2,500,000 Capital assets (net) 2,553,000 Retained earnings 916,332 $4,000,000 $4,000,000 Required: Prepare a monthly master budget for Arragon for the year ended April 30, 2024, including the following schedules:

1. Sales Budget and Schedule of Cash Receipts 2. Production Budget

3. Direct Materials Budget and Schedule of Cash payments for raw materials purchases

4. Direct Labour Budget

5. Manufacturing Overhead Budget 6. Selling and Administrative Expense Budget

7. Cash Budget