Budgeted Sales: January 1,200 units February 1,225 units March 1,300 units April 1,350 units May 1,400 units Sales Price: Each birdhouse is sold for $70 to retailers on account.

Expected Cash Collections: The company typically collects 75% of the Accounts Receivable in the month of sale, 15% in the month following the sale and 10% in the second month following the sale. The January 1 AR balance is estimated to be $50,050 ($35,350 to be collected in January and $14,700 in February). Production: The company desires to keep 10% of the next months sales in ending finished goods inventory, but they expect to start January with only 100 completed houses due to the Christmas rush. Raw Materials: The following raw materials are needed per birdhouse: Lumber: 4 yards per house @ $3.00 per yard Shingles: 50 shingles per house @ $.20 per shingle It is also the desire of the company to keep 25% of next months budgeted inventory of raw materials in stock. Smith estimates the beginning inventory on January 1 to be 800 yards of lumber and 15,000 shingles. Expected Cash Disbursements: The company purchases all raw materials on account and typically pays for 90% in the month of the purchase and the remaining 10% in the following month. The AP balance at January 1 is estimated to be $3,100. Direct Labor: Much of the detail work on the birdhouses is done by hand in order to ensure a high quality product. The company has established the following standards for the direct labor to manufacture one house: 3 hours per house @ $9.00 per hour Manufacturing Overhead: The company estimates the following overhead costs for next year: Variable overhead per direct labor hour $2.00 Fixed overhead per month: Depreciation on factory equipment $ 800 Factory rent 1,100 Factory supervisors salaries 2,000 Insurance on factory 400 SG&A Expenses: The company estimates the following selling and administrative expenses for next year: Variable SG&A expenses per unit $1.50

Fixed SG&A expenses per month: Advertising $ 600 Executive salaries 3,500 Insurance office 150 Property taxes office 100 Depreciation office 1,000 Cash Information The team wants to maintain a minimum cash balance of $30,000 at all times. The company has established a $100,000 line of credit with a local bank on which borrowing must be made in $1,000 increments. Borrowings are made at the beginning of the month. Any balance on the line of credit is repaid at the end of any month that the cash balance exceeds the minimum amount. Interest is paid at the time of repayment and only on the amount repaid. The interest rate on borrowings is 10%. The cash balance on January 1 is $31,000. The company pays their employees in the month of the work is done (ignore payroll taxes), and also pays for all costs associated with MOH in the month incurred. The company plans to purchase additional factory equipment in February for $32,000 cash. The board of directors has declared a cash dividend of $15,000 to be paid in January. Beginning Balance Sheet for First Quarter 2013: Birdhouse Unlimited Balance Sheet December 31, 2012 Assets Current assets: Cash $ 31,000 Accounts receivable 50,050 Raw materials inventory 5,400 Finished goods inventory 5,843 Total current assets $92,293 Plant and equipment: Land $ 20,000 Buildings and equipment 160,000 Accumulated depreciation (29,000) Plant and equipment, net 151,000 Total assets $243,293

Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 3,100 Stockholders' equity: Common stock $125,000 Retained earnings 115,193 Total stockholders' equity 240,193 Total liabilities and stockholders' equity $243,293 Note: The beginning balance sheet will be used in preparing the budgeted balance sheet for March 31, 2013.

January February March First Qtr. April Sales Budget Budgeted sales (units) Times selling price per unit Total Budgeted sales Schedule of Expected Cash Collections Accounts Receivable, beginning balance January sales February sales March sales Total Cash Collections Production Budget Budgeted sales (units) Plus desired ending inventory Total needs (units) Less beginning inventory Required production (units) Direct Materials Budget Lumber Required production (units) Lumber needed per unit (yards) Lumber needed for production Plus desired ending inventory (yards) Total Lumber Needed Less beginning inventory (yards) Total Lumber to be purchased (yards) Cost of Lumber per yard Total cost of lumber to be purchased Shingles Required production (units) Shingles needed per unit Shingles needed for production Plus desired ending inventory Total Shingles Needed Less beginning inventory Total Shingles to be purchased Total cost of direct materials to be purchased Schedule of Expected Cash Disbursements Accounts Payable, beginning balance January purchases February purchases March purchases Total Cash Disbursements for Materials Direct Labor Budget Required production (units) Direct labor hours per unit Total direct labor hours needed Direct labor cost per hour Total direct labor cost Manufacturing Overhead Budget Variable MOH (based on DL Hours) Budgeted direct labor hours Variable overhead rate (per direct labor hour) Total Variable Manufacturing Overhead Fixed Manufacturing Overhead Depreciation-factory equipment Rent (factory) Supervisors' salaries (factory) Insurance (factory) Total Fixed Manufacturing Overhead Total Manufacturing Overhead Cost Less Depreciation Cash Disbursements for Manufacturing OH POHR Ending Finished Goods Inventory Budget Quantity Cost Total $ Production cost per unit: Direct Materials (lumber) Direct Materials (shingles) Direct Labor Manufacturina Overhead 4 yards 50 each 3 hours 3 hours $ 3.00 per yard $ 0.20 per shingle $ 9.00 per hour $ 3.1436 per hour 12.00 10.00 27.00 94309 Direct Labor Manufacturing Overhead Unit Product Cost 3 hours 3 hours $ 9.00 $ 3.1436 per hour per hour 27.00 9.4309 $ 58.4309 Budgeted Finished Goods Inventory: Ending Finished Goods Inventory in Units Unit Product Cost Ending Finished Goods Inventory in Dollars $ $ $ 135 58 7,888 Selling and Administrative Budget Variable SG&A Expenses Budgeted sales (units) Variable SG&A expense per unit Total budget variable SG&A expenses Fixed SG&A Expenses Advertising Executive salaries Insurance (office) Property taxes (office) Depreciation (office) Total Fixed SG&A Expenses Total SG&A Expenses Less Depreciation Cash Disbursements for SG&A expenses Cash Budget Cash balance, beginning Collections from customers Total cash available before financing Less disbursements: Direct material Direct labor MOH SG&A Equipment purchases Dividends Total disbursements Excess/ Deficit Financing: Borrowings Repayments Interest Total financing Cash Balance, ending