Comprehensive budgeting problem; activity-based costing, operating and financial budgets. Tyva makes a very popular undyed cloth sandal in one style, but in Regular and Deluxe. The Regular sandals have cloth soles and the Deluxe sandals have cloth-covered wooden soles. Tyva is preparing its budget for June 2015 and has estimated sales based on past experience. Other information for the month of June follows: Input Prices Direct materials Cloth $5.25 per yard Wood $7.50 per board foot Direct manufacturing labor $15 per direct manufacturing labor-hour Input Quantities per Unit of Output (per pair of sandals) Regular Deluxe Direct materials Cloth 1.3 yards 1.5 yards Wood 0 2 b.f. Direct manufacturing labor-hours 5 hours 7 hours Setup hours per batch 2 hours 3 hours Inventory Information, Direct Materials Cloth Wood Beginning inventory 610 yards 800 b.f. Target ending inventory 386 yards 295 b.f. Cost of beginning inventory $3,219 $6,060 Tyva accounts for direct materials using a FIFO cost flow assumption. Sales and Inventory Information, Finished Goods Regular Deluxe Expected sales in units (pairs of sandals) 2,000 3.000 Selling price $120 $195 Target ending inventory in units 400 600 Beginning inventory in units 250 650 Beginning inventory in dollars $23,250 $92,625 Tyva uses a FIFO cost flow assumption for finished goods inventory. All the sandals are made in batches of 50 pairs of sandals. Tyva incurs manufacturing overhead costs, marketing and general administration, and shipping costs. Besides materials and labor, manufacturing costs include setup, processing, and inspection costs. Tyva ships 40 pairs of sandals per shipment. Tyva uses activity-based costing and has classified all overhead costs for the month of June as shown in the following chart: Cost Type Denominator Activity Rate Manufacturing Setup Setup hours $18 per setup hour Processing Direct man. Labor-hours $1.80 per DMLH Inspection Number of pairs of sandals $1.35 per pair Nonmanufacturing Marketing & general admin Sales revenue 8% Shipping Number of shipments $15 per shipment Questions 1.Prepare each of the following for June: a.Revenues budget b.Production budget in units c.Direct material usage budget and direct material purchases budget in both units and dollars, round to dollars d.Direct manufacturing labor cost budget e.Manufacturing overhead cost budgets for setup, processing, and inspection activities f.Budgeted unit cost of ending finished goods inventory and ending inventories budget g.Cost of goods sold budget h.Marketing and general administration and shipping costs budget Tyvas balance sheet for May 31 follows. TYVA BALANCE SHEET AS OF MAY 31 Assets Cash 9,435 Accounts Receivable 324,000 Less: allowance for bad debts 16,200 307,800 Inventories Direct materials 9,279 Finished goods 115,875 Fixed assets 870,000 Less: accumulated depreciation 136,335 733,665 Total assets 1,176,054 Liabilities and Equity Liabilities and Equity Accounts payable 15,600 Taxes payable 10,800 Interest payable 750 Long-term debt 150,000 Common stock 300,000 Retained earnings 698,904 Total liabilities & equity 1,176,054 Use the balance sheet and the following information to prepare a cash budget for Tyva for June. Round to dollars. All sales are on account; 60% are collected in the month of the sale, 38% are collected the following month, and 2% are never collected and written off as bad debts. All purchases of materials are on account. Tyva pays for 80% of purchases in the month of purchase and 20% in the following month. All other costs are paid in the month incurred, including the declaration and payment of a $15,000 cash dividend in June. Tyva is making monthly interest payments of 0.5% (6%per year) on a $150,000 long-term loan. Tyva plans to pay the $10,800 of taxes owed as of May 31 in the month of June. Income tax expense for June is zero. 30% of processing, setup, and inspection costs and 10% of marketing and general administration and shipping costs are depreciation. Prepare a budgeted income statement for June and a budgeted balance sheet for Tyva as of June 30, 2015