(DCP) is a company that manufactures and sells a single product, called a "Grinder. For planning and control purposes they utilize a monthly master budget, which is usually developed at a few months in advance of the budget year (January 2021 to December 2021). Their fiscal year end is December 31. The following details are provided to assist you in preparing the required budget. The sales forecasts for three budget years is estimated as follows: For the year ended December 31, 2020: 475,000 units at $9.00 each* For the year ended December 31, 2021: 500,000 units at $9.00 each For the year ended December 31, 2022: 500,000 units at $9.00 each *Expected sales for the year ended December 31, 2020 are based on actual sales to date and budgeted sales for the duration of the year. Your conversations with the president and your investigations of the company's records have revealed the following information: 1. Peak months for sales correspond with gift-giving holidays. History shows that January, March, May and June are the slowest months with only 1% of sales for each month. Sales pick up over the summer with July, August and September each contributing 2% to the total. February sales are 5%, and April accounts for 10%. As Christmas shopping picks up momentum, winter sales start at 15% in October, move to 20% in November and then peak at 40% in December. This pattern of sales is not expected to change in the next two years. 2. From previous experience, management has determined that an ending inventory equal to 25% of the next month's sales is required to fit the buyer's demands. 3. Because sales are seasonal, DCP Ltd. must rent an additional storage facility in the peak period from September to December to house the additional inventory on hand. The only related cost is a flat $35,000 per month, payable at the beginning of the month. 4. There is only one type of raw material used in the production of a "Grinder". Gelacrylic (GELAC) is a very compact material that is purchased in gel form. Each "Grinder" requires 2 kilograms of GELAC, at a cost of $1.55 per kilogram. The supplier of GELAC tends to be somewhat erratic so DCP LTD finds it necessary to maintain an inventory balance equal to 40% of the following month's production needs as a precaution against stock-outs. DCP LTD pays for 30% of a month's purchases in the month of purchase, 35% in the following month and the remaining 35% two months after the month of purchase. There is no early payment discount. 5. Beginning accounts payable in January 2021 will be $331,196 arising from the following estimated direct material purchases for November and December of 2020: GELAC purchases in November 2020: $399,125 GELAC purchases in December 2020: $273,575 6. DCP LTD's manufacturing process is highly automated, so their direct labour cost is low. Employees are paid on a per unit basis. Their total pay each month is, therefore, dependent on production volumes and averages $9.75 per hour. This rate already includes the employer's portion of employee benefits. All payroll costs are paid in the period in which they are incurred. Each unit spends a total of 15 minutes in production. 7. Due to the similarity of the equipment in each of the production stages and the company's 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. 8. The fixed manufacturing overhead costs for the entire year are as follows: Training and development $55,200 Property and business taxes $42,000 Supervisors salary $135,400 Depreciation on equipment $168,800 Insurance $96,000 Other $110,600 Total ..$608,000 The property and business taxes are paid in full on March 30 of each year. The expected payment for 2021 is $42,000. The annual insurance premium is paid at the beginning of December each year for the period December 1 to November 30. There should be no change in the 2021 premium from last year. . All other "cash-related" fixed manufacturing overhead costs are incurred evenly over the year and paid as incurred. DCP LTD uses the straight-line method of depreciation. 9. Selling and administrative expenses are known to be a mixed cost; however, there is a lot of uncertainty about the portion that is fixed. Previous years' experience has provided the following information: Lowest level of sales: 375,000 units Total Operating Expenses: $778,710 Highest level of sales: 550,000 units Total Operating Expenses: $1,022,460 These costs are paid in the month in which they occur. Bad debts expense is not included in the above expense amounts. 10. Sales are on a cash and credit basis, with 45% collected during the month of the sale, 35% the following month, and 19.5% the month thereafter. 12 of 1% of sales are considered uncollectible (bad debts expense). 11. Sales in November and December 2020 are expected to be $855,000 and $1,710,000 respectively. Based on the above collection pattern this will result in Accounts Receivable of $1,098,675 at December 31, 2020 which will be collected in January and February 2021. 12. During the fiscal year ended December 31, 2021, DCP LTD will be required to make monthly income tax installment payments of $15,000. Outstanding income taxes from the year ended December 31, 2020 must be paid in July 2020. Income tax expense is estimated to be 25% of net income. Income taxes for the year ended December 31, 2021, in excess of installment payments, will be paid in July, 2022. 13. DCP LTD is planning to acquire additional manufacturing equipment for $404,300 cash. 40% of this amount is to be paid in February 2021, the rest, in July 2021. The manufacturing overhead costs shown above already include the depreciation on this equipment. 14. An arrangement has been made with the local bank that if DCP LTD maintains a minimum balance of $20,000 in their bank account, they will be given a line of credit at a preferred rate of 2% per annum. All borrowing is considered to happen on the first day of the month, repayments are on the last day of the month. All borrowings and repayments from the bank should be in multiples of $1,000 and interest must be paid at the end of each month. Interest is calculated on the balance at the beginning of the month, which includes any amounts borrowed that month. 15. DCP LTD Ltd. has a policy of paying dividends at the end of each quarter. The president tells you that the board of directors is planning on continuing their policy of declaring dividends of $50,000 per quarter. 16. A listing of the estimated balances in the company's ledger accounts as of March 31, 2020 is given below: Assets Cash Accounts receivable Inventory-raw materials Inventory-finished goods Prepaid Insurance Long-term assets (net) Total assets $ 83,365 1,098,675 6,200 7,658 88,000 724,000 $2,007,898 Liabilities and Shareholders' Equity Accounts payable Income taxes payable Share Capital Retained Earnings Total liabilities and shareholders' equity $331, 196 45,500 1,000,000 631,202 $2,007,898 Required Work: 1. Prepare in Excel, a monthly master budget for DCP LTD for the year ended December 31, 2021, and including the following schedules (with a total column in each): Sales Budget & Schedule of Cash Receipts - Production Budget - Direct Materials Budget & Schedule of Cash Disbursements Direct Labour Budget - Manufacturing Overhead Budget - Ending Finished Goods Inventory Budget - Selling and Administrative Expense Budget - Cash Budget