Congratulations! You have just been hired as controller for a growing company that manufactures green products. It is October 1 and time for creation of the budget for the next year. The budget will be created in quarters using each month as a period of sales/production. Your first task is to create the budget for the first quarter of 2016. This involves completing budgets for January, February, March and the first quarter in total for 2016. You seek out last years data, recent costing information and follow up on important assumptions. The CFO wants to see the first quarter budget before you complete the rest of the year, as adjustments may be needed. You will need to create the following sub-budgets as part of the overall master budget.

1. Sales Budget for the 1st quarter

2. Production Budget for the 1st quarter

3. Materials Purchases Budget for the 1st quarter

4. Direct Labor Budget for the 1st quarter

5. Overhead Budget for the 1st quarter

6. Cash Receipts of Sales Revenue for the 1st quarter

7. Cash Payments for Material Purchases for the 1st quarter

8. Overall Cash Budget for the 1st quarter

9. Income Statement for the quarter ended March 31, 2016

10. Statement of Cash Flows for the quarter ended March 31, 2016

Several assumptions are needed to work into your models for computation. These are determined as follows and have been approved by the CFO. These are summarized on the following page.

January Unit Sales 21,000

February Unit Sales 22,000

March Unit Sales 23,000

April Unit Sales 24,000

May Unit Sales 20,000

Sales Price $10

Desired Ending Inventory for Finished Goods 20% of next month's unit sales

Desired Ending Inventory for Material Units 10% of next month's materials needed for production

Cost of one lb.of materials (1 lb =1 material unit) $0.25

Units of Direct Materials to make one unit 4

Minutes of Direct Labor to make one unit 12

Direct Labor Costs per Hour $15

Overhead Costs percentage of Direct Labor 150%

Minimum cash balance (Assume you start with this) $10,000

Cash collections in month of sale 65%

Cash collections in first month after sale 25%

Cash collections in second month after sale 10%

Cash Payments in month of purchase 60%

Cash Payments in the first month after purchase 40%

Selling Costs per month (for cash budget) $10,000

Administrative Costs per month (for cash budget) $15,000

Annual Interest Rate for Letter of Credit 12%

Annual Interest Rate Earned on Excess Cash 4%

Sales Revenue for November $300,000

Sales Revenue for December $250,000

Material Purchases for November $35,000

Material Purchases for December $26,000

Depreciation Expense for the quarter (Operating Exp) $5,000

Income Tax Rate 25%