Damon Manufacturing is preparing its master budget for the first quarter of the upcoming year. The following data pertain to Damon Manufacturings operations:

Cash...................................................................................................................... $ 4,600

Accounts receivable, net...................................................................................... $ 46,000 Inventory............................................................................................................... $ 15,600

Property, plant, and equipment, net.................................................................... $ 121,000

Accounts payable................................................................................................... $ 43,000

Capital stock.......................................................................................................... $ 125,000

Retained earnings................................................................................................... $ 23,000

a. Actual sales in December were $ 71,000. Selling price per unit is projected to remain stable at $ 12 per unit throughout the budget period. Sales for the first five months of the upcoming year are budgeted to be as follows:

January..................................................................................................................... $ 99,600 February................................................................................................................... $ 118,800 March....................................................................................................................... $ 115,200 April.......................................................................................................................... $ 108,000 May........................................................................................................................... $ 103,200

b. Sales are 35% cash and 65% credit. All credit sales are collected in the month following the sale.

c. Damon Manufacturing has a policy that states that each months ending inventory of finished goods should be 10% of the following months sales ( in units).

d. Of each months direct materials purchases, 20% are paid for in the month of pur-chase, while the remainder is paid for in the month following purchase. Three pounds of direct material is needed per unit at $ 2 per pound. Ending inventory of direct materials should be 20% of next months production needs.

e. Most of the labor at the manufacturing facility is indirect, but there is some direct labor incurred. The direct labor hours per unit is 0.05. The direct labor rate per hour is $ 9 per hour. All direct labor is paid for in the month in which the work is performed. The direct labor total cost for each of the upcoming three months is as follows: January..................................................................................................................... $ 3,807 February................................................................................................................... $ 4,442 March....................................................................................................................... $ 4,293

f. Monthly manufacturing overhead costs are $ 5,500 for factory rent, $ 2,900 for other fixed manufacturing expenses, and $ 1.10 per unit for variable manufacturing over-head. No depreciation is included in these figures. All expenses are paid in the month in which they are incurred.

g. Computer equipment for the administrative offices will be purchased in the upcoming quarter. In January, Damon Manufacturing will purchase equipment for $ 5,000 ( cash), while Februarys cash expenditure will be $ 12,200 and Marchs cash expenditure will be $ 16,600.

h. Operating expenses are budgeted to be $ 1.25 per unit sold plus fixed operating expenses of $ 1,800 per month. All operating expenses are paid in the month in which they are incurred.

i. Depreciation on the building and equipment for the general and administrative offices is budgeted to be $ 4,800 for the entire quarter, which includes depreciation on new acquisitions.

j. Damon Manufacturing has a policy that the ending cash balance in each month must be at least $ 4,000. It has a line of credit with a local bank. The company can borrow in increments of $ 1,000 at the beginning of each month, up to a total outstanding loan balance of $ 130,000. The interest rate on these loans is 1% per month simple interest ( not compounded). The company would pay down on the line of credit balance in increments of $ 1,000 if it has excess funds at the end of the quarter. The company would also pay the accumulated interest at the end of the quarter on the funds bor-rowed during the quarter.

k. The companys income tax rate is projected to be 30% of operating income less interest expense. The company pays $ 10,000 cash at the end of February in estimated taxes.

Required:

• Prepare a schedule of cash collections for January, February, and March, and for the quarter in total. Use the following format:

Cash Collections Budget
	January	February	March	Quarter
Cash sales (35%)
Credit sales (65%)
Total cash collections

• Prepare a production budget, using the following format:

Production Budget
	January	February	March	Quarter
Unit sales*
Plus: Desired ending inventory
Total needed
Less: Beginning inventory
Units to produce

*Hint: Unit sales = Sales in dollars Selling price per unit

Prepare a direct materials budget, using the following format:Prepare a cash payments budget for the direct material purchases from Requirement 3, using the following format:

Cash Payments for Direct Material Purchases Budget
	January	February	March	Quarter
December purchases (From AP)
January purchases
February purchases
March purchases
Total payments

• Prepare a cash payments budget for direct labor, using the following format:

Cash Payments for Direct Labor Budget
	January	February	March	Quarter
Direct labor

Prepare a cash payments budget for manufacturing overhead costs, using the follow-ing format:

Cash Payments for Manufacturing Overhead Budget
	January	February	March	Quarter
Rent (fixed)
Other MOH (fixed)
Variable manufacturing overhead costs
Total disbursements

Prepare a cash payments budget for operating expenses, using the following format:Calculate the budgeted manufacturing cost per unit, using the following format ( assume that fixed manufacturing overhead is budgeted to be $ 0.70 per unit for the year):

Budgeted Manufacturing Cost per Unit
Direct materials cost per unit
Direct labor cost per unit
Variable manufacturing costs per unit
Fixed manufacturing overhead per unit
Cost of manufacturing each unit