Comprehensive Budget Project

To be completed using Excel.

The Highlander Corporation

Balance Sheet

December 31, 2013

Assets

Cash		$ 4,595
Accounts Receivable		10,000
Finished Goods (575 units x $7.00 per unit		4,025
Raw Materials (2760 square inches @ $0.50 per square inch)		1,380
Plant and Equipment	$ 60,000
Less: Accumulated Depreciation	10,000	50,000
Total Assets		$ 70,000

Liabilities

Trade Accounts Payable	14,000
		14,000

Stockholders Equity

Common Stock	30,000
Retained Earnings	26,000
Total Stockholders Equity		56,000
Total liabilities & Stockholders equity		$ 70,000

In preparation for developing the master budget for the first three months of 2014, the following has been extracted from the companys accounting records

All sales are made on account at $20 per unit. Sixty Percent of the sales are collected in the month of sale, the remaining 40% are collected in the following month. Forecast sales for the first five months of 2014 are: January, 1,500 units; February, 1,600 units; March, 1,800 units; April, 2,000 units; May 2,100 units.

Management wants to maintain the finished goods inventory at 30% of the following months sales.

3.Watson uses four square inches of direct materials in each finished unit. The direct material prices

have been stable and is expected to remain so over the next six months. Management wants to maintain the ending direct materials inventory at 60% of the following months production needs.

70% of all purchases are paid in the month of purchase; the remaining 30% are paid in the subsequent month.

Watsons product requires 30 minutes of direct labor time. Each hour of direct labor costs $8. Additionally factory overhead is charged to products at a rate of $4 per labor hour.

Equipment depreciation for 2014 (already included in the factory overhead) will be $4,800 ($400 per month).

No new equipment will be purchased and no new common stock will be issued during 2014.

Operating expenses paid in cash are expected to be $1,400 in January and grow 1% each month after that.

Beginning and ending Work In Process inventories are insignificant and can be ignored.

Prepare the following for January, February and March (exclude Quarter Totals):

a schedule of cash disbursements for materials purchased

a combination direct labor and factory overhead budget

a cash budget (you may combine items B and E with this budget)

a budgeted income statement

I.a budgeted balance sheet

Each schedule should show budgets by month for January, February, and March (e.g. dont put each month on a separate sheet, but each schedule, A to I, should be on a separate worksheet). To the degree possible, each sheet should be linked to all related sheets. For example, the sales figures on your production budget should come from (be linked to) your sales budget.