As part of the continued advancement of technology, a drone camera market hasemerged in recent years. The drone camera market has been growing as morephotography enthusiasts have begun adopted this high$-$tech approach to capturing stilimages and video using remotely controlled devices. Eager to capture a share of thisgrowing market, CamDrone entered the market in early $2018.$ CamDrone manufacturescamera drones, selling primarily to retailers.CamDrone is pleased with its financial performance over its first few years ofoperations, optimistic to achieve continued financial success. For planning and controlpurposes the company utilizes a monthly master budget, which is usually developed atleast three months in advance of the budget year. The company has a fiscal year endingDecember $31.$It is now Sept $15,2019.$ You have been asked to prepare the Master Budget for the vearending December $31,2020.$Based on your discussions with the various departments throughout the company, youhave collected the following relevant information for preparing the budget:Sales$1.$The marketing department is forecasting the following anual sales:For the year ended December $31,2019$: $9,000$ units at $$1,000$ each$*$For the year ended December $31,2020$: $10,000$ units at $$1,000$ eachFor the year ended December $31,2021$: $15,000$ units at $$1,000$ each'$*$Expected sales for the vear ended December $31,2019$ were based on actual sales to date and budgeted sales for the duration of the year$\mathrm{.}2.$ Peak months for sales generally correspond with summer weather and gift$-$givingholidays. History shows that January is the slowest month, with only $1\%$ of annualsales, followed closely behind by Feb$-$April with $2\%$ of anual sales for each month.Sales spike during summer months with May, June, July, and August contributing$12\%,15\%,12\%,$ and $10\%$ of anual sales respectively. With the back$-$to$-$school focusin September, there is a significant dip in camera drone sales to $3\%$ of anual sales.As Christmas shopping picks up momentum, winter sales increase to $8\%$ in October,$13\%$ in November, and then peak at $20\%$ in December. This pattern of sales is notexpected to change in the next two years.Manufacturing Costs and Inventory$3.$ Each camera drones spends a total of $3\mathrm{.}5$ hours in production.Due to the highly technical nature of CamDrone's manufacturing process,CamDrone's direct labour rate has averaged $$30\mathrm{.}00$ per hour for $2019.$ This ratealready includes the employer's portion of employee benefits. A new collectiveagreement is being negotiated, with a $3\%$ pay increase anticipated effective January$1,2020\mathrm{.}5.$ Each CamDrone requires $1\mathrm{.}25$kg of direct materials. During $2019,$ the average cost ofdirect materials was $$57/$kg$.$ The supplier of the direct materials tends to besomewhat erratic, so CamDrone finds it necessary to maintain a direct materialsinventory balance equal to $40\%$ of the following month's production needs as aprecaution against stock$-$outs$\mathrm{.}6.$ Due to the similarity of the equipment in each of the production stages and thecompany's concentration on a single product, manufacturing overhead is allocatedbased on volume $(.$e$.$ the units produced$).$ The variable manufacturing overheadrate for $2019$ is $$160/$unit$,$ consisting of:Plant & Equipment Maintenance $$70$Utilities $$40$Indirect Materials $$30$ Other $$20$Total $$1607.$ The fixed manufacturing overhead costs for $2019$ are as follows:Supervisor's salary$181,800$Amortization of Plant & Equipment$ $132,000$Insurance$84,000$Training & Development$54,750$Property and Business Taxes$48,000$Other$30,000$Total $$530,550$Amortization is calculated using the straight$-$line method, with no amortizationcalculated in the year capital assets are acquired$\mathrm{.}8.$ Aside from amortization, all other manufacturing costs are expected to increase by$3\%$ in $2020$ due to inflation$\mathrm{.}9.$ From previous experience, management has determined that an ending finishedgoods inventory equal to $25\%$ of the next month's sales is required to efficientlymeet customer demands.Collections Pattern$10.$ Sales are on a cash and credit basis, with $49\%$ collected during the month of the sale,$33\%$ the following month, and $17\%$ the month thereafter. There are no earlypayment discounts for customers. Bad debt expense $($amounts considereduncollectible$)$ account for $1\%$ of sales$\mathrm{.}11.$ Based on the collection pattern described above, accounts payable as at end ofbusiness day on December $31,2019$ is projected to be $$1,098,899$ arising from thefollawing estimates:Sales $($November $2019)$ $$1,170,000$Sales $($December $2019)$ $$1,800,000$Payments Pattern$12.$ CamDrone pays for $20\%$ of a month's purchases of direct materials in the month ofpurchase, $50\%$ in the following month and the remaining $30\%$ two months after themonth of purchase. There are no early payment discounts offered by suppliers$\mathrm{.}13.$ Based on the payment pattern described above, accounts payable as at end ofbusiness day on December $31,2019$ is projected to be $$78,641$ arising from thefollowing estimates:Direct Material Purchases $($November $2019)$ $$95,888$Direct Material Purchases $($December $2019)$$$62,34414.$ All payroll costs are paid in the period in which they are incurred$\mathrm{.}15.$ The property and business taxes, paid at the beginning of July each year, apply tothe following $12-$month period. Any increases for inflation on property and business taxes do not take effect until the beginning of July each year$\mathrm{.}16.$ Annual insurance premiums, paid at the beginning of April each year, apply to thefollowing $12-$month period. Any increases for inflation on insurance premiums donot take effect until the beginning of April each year$\mathrm{.}17.$ Fixed manufacturing overhead costs are incurred evenly over the year and "cash$-$related" amounts are paid as incurred$\mathrm{.}18.$ Selling and administrative expenses are paid in the month in which they occur.Other$19.$ Anticipating a significant increase in customer demand and market share over thenext few years, CamDrone is planning a significant expansion involving acquiring additional manufacturing equipment for $$3,000,000$ cash. Half of this amount is tobe paid to the equipment supplier in July $2020,$ with the remainder to be paid inOctober $2020\mathrm{.}20.$ Selling and administrative expenses are known to be a mixed cost; however, there isa lot of uncertainty about the portion that is fixed. Based on prior year experience:Lowest level of monthly sales:$80$ units... Total Operating Expenses: $$87,270*$Highest level of monthly sales:$1,600$ unitsTotal Operating Expenses: $$360,780**$ excluding bad debts and amounts described belowThese expenses are expected to increase by $3\%$ in $2020$ due to inflation$\mathrm{.}21.$ To secure and grow its market share, CamDrone is planning to operate "pop$-$up$"$kiosks in various local retail centers during peak sales months $($May$-$Aug, Nov$-$Dec$)$commencing Nov$2019.$ CamDrone is budgeting $$10,900$ per month $($including allrelated fees and taxes$),$ payable at the beginning of each month, to set$-$up andoperate these kiosks. The cost to set$-$up and operate "pop$-$up$"$ kiosks will be inaddition to the normal selling and administrative expenses described above and is not expected to increase during $2020\mathrm{.}22.$ Income tax expense is estimated to be $25\%$ of net income. CamDrone makesmonthly income tax installment payments of $$25,000$ and pays all outstandingincome taxes $($in excess of installment payments$)$ in March of the following year. Assuch, any outstanding income tax balance for the year ended December $31,2019$ it will be paid in March $2020\mathrm{.}23.$ An arrangement has been made with the local bank that if CamDrone maintains aminimum balance of $$50,000$ in their bank account, they will be given a line of creditat a preferred rate of $3\%$ per annum $(0\mathrm{.}25\%$ per month$).$ All borrowing is consideredto happen on the first day of the month, repayments are on the last day of themonth. All borrowings and repayments from the bank should be in multiples of$$10,000$ and interest must be paid at the end of each month. Interest is calculatedon the balance at the beginning of the month, which includes any amountsborrowed that month$\mathrm{.}24.$ CamDrone has a policy of paying dividends at the end of each quarter. ThePresident tells you that the Board of Directors is planning on declaring dividends asfollows:DIVIDENDSMarch $2020$ $$50,000$June $2020$ $$100,000$September $2020$ $$250,000$December $2020$ $$250,00025.$ The company is forecasting the following balances as at the end of business day onDecember$31,2019$:AssetsASSETSCash $$100,000$ accounts receivable $$1,098,899$ inventory direct materials $$3591$ inventory finished goods $$11,640$ prepaid property and business taxes $$24,000$ prepaid insurance $$21,000$ capital assets $($ net $)$ $$571,800$ total assets $ $1,830,930$Liabilities and shareholders equity accounts payable $$78,641$ income taxes payable $$19,700$ capital stock $$500,000$ retained earnings $$1,232,589$ total liabilities and shareholders equity $$1,830,930$QUESTION: Prepare a monthly master budget for CamDrone for the year ending December $31,2020,$ including the following schedules:Sales Budget & Schedule of Expected Cash CollectionsProduction BudgetDirect Material Budget & Schedule of Expected Cash DisbursementsDirect Labour BudgetManufacturing Overhead BudgetEnding Finished Goods Inventory BudgetSelling and Administrative Expense BudgetCash BudgetFor calculation of COGS and ending Finished Goods Inventory, carry the MOHcost$/$unit to $4$ decimal placesFor calculations involving Direct Materials, round all kg to $2$ decimal placesFor calculations involving Direct Labour, round al hours to the nearest hourRound all units of product to full units $($e$.$g$.$ Sales, Finished Goods Inventory,Production, etc.$)$Aside from MOH cost$/$unit$,$ round all other dollar amounts less than $$100$ to thenearest centAside from MOH cost$/$unit$,$ round all other dollar amounts greater than $$1,000$to the nearest dollar$2.$ Prepare a budgeted Income Statement and a budgeted Statement of RetainedEarnings for the year ending December $31,2020,$ using absorption costing$\mathrm{.}3.$ Prepare a budgeted Balance Sheet at December $31,2020,$ using absorption costing$\mathrm{.}4.$ Prepare a budgeted Income Statement for the year ending December $31,2020,$using variable costing. Assume a per unit variable cost of $$443\mathrm{.}2800$ for FinishedGoods Inventory at December $31,2019.$