Create master budget plan based off this:

ToyWorks Ltd. is a company that manufactures and sells a single product, WaterTalkies, which are walkie talkies that can be used in the water. For planning and control purposes they utilize a quarterly master budget, which is usually developed at least six months in advance of the budget year. Their fiscal year end is December 31.

During the summer of 2016, Buzz Lightyear, the ToyWorks controller, spent considerable time with Andy Woody, the Manager of Marketing, putting together a sales forecast for the next budget year (January to December, 2017).

Their sales forecast is expected to consist of:

For the year ended December 31, 2017: 500,000 units at $10.00 each

10% of the sales in Q1

20% in Q2

25% in Q3

45% in Q4

Buzz left the company and the President, desperately needing the budget completed, has approached you, a management accounting student, for help in preparing the budget for the coming fiscal year. Your conversations with the president and your investigations of the companys records have revealed the following information:

1. From previous experience, management has determined that an ending inventory equal to 25% of the next quarters sales is required to fit the buyers demands.

2. There is only one type of raw material used in the production of WaterTalkies. Each toy requires 5 oz material at a cost of $0.45 per ounce. The suppliertends to be somewhat erratic so ToyWorks finds it necessary to maintain an inventory balance equal to 40% of the following quarters production needs as a precaution against stock-outs. ToyWorks pays for 20% of a months purchases in the month of purchase, 45% in the following month and the remaining 35% two months after the month of purchase. There is no early payment discount.

3. Beginning accounts payable will consist of $208,406.50arising from the following estimated direct material purchases for Q4 2016. 50% of purchases are paid for in the current quarter and 50% are paid for in the next quarter.

4. ToyWorkss manufacturing process is highly automated, so their direct labor cost is low. Employees are paid on a per unit basis. Their total pay each quarter is, therefore, dependent on production volumes and averages $9.00 per hour. This rate already includes the employers portion of employee benefits. All payroll costs are paid in the period in which they are incurred.

Each unit spends a total of 18 minutes in production.

5. Due to the similarity of the equipment in each of the production stages and the companys concentration on a single product, manufacturing overhead is allocated based on volume (i.e. the units produced). The unit variable overhead manufacturing rate is $1.30, consisting of: Utilities--$0.60; Indirect Materials--$0.20; Plant maintenance--$0.30; environmental fee--$0.14; and Other--$0.06.

6. The fixed manufacturing overhead costs for the entire year are as follows and incurred evenly throughout the year as follows:

Training and development$ 43,200

Property and business taxes 39,000

Ren120,000

Supervisors salary149,400

Amortization on equipment178,800

Insurance96,000

Other 117,600

$ 744,000

ToyWorks uses the straight line method of amortization.

7. Selling and administrative are budgeted at 5% of sales revenue for variable expenses, fixed administrative expenses are $10,000 per quarter.

8. Sales are on a cash and credit basis, with 55% collected during the quarter of the sale, and 45% the following quarter.

9. Sales in Q4 2016 are expected to be $1,468,000 of which the 50% expected to be collected in Q1 2016 is reflected in the 12/31/16 Account Receivable balance

10. ToyWorks is planning to acquire additional manufacturing equipment for $204,300 cash which is to be paid for in Q4 2017.

11. A listing of the estimated balances in the companys ledger accounts as of December 31, 2016 is given below:

Assets

Cash$ 83,365

Accounts receivable734,000

Inventory-raw materials9,000

Inventory-finished goods9,125

Prepaid Insurance64,000

Prepaid property and business taxes19,200

Capital assets (net) 724,000

Total assets$1,642,690

Liabilities and Shareholders Equity

Accounts payable$ 208,407

Income taxes payable21,500

Capital stock1,000,000

Retained Earnings 412,783

Total liabilities and shareholders equity$1,642,690

Required:

1. Prepare a monthly master budget for ToyWorks for the year ended December 31, 2017, including the following schedules:

Sales Budget

Production Budget

Direct Materials Budget

Direct Labor Budget

Manufacturing Overhead Budget