December 31, 2021 Balance Sheet ASSETS LIABILITIES AND EQUITY Cash $76,000 Accounts Payable $100,000 Accounts Receivable.net 2,170,000 Salary Payable 420,000 Inventories *** Interest Payable 56,667 Finished Goods 690,000 Bank Line of Credit (6%) 1,000,000 Raw Materials 80,000 770.000 Current Assets 3,016,000 Current Liabilities 1,576,667 Term Debt (10%) 850,000 Fixed Assets, net of accumulated depreciation 925.000 Total Liabilities 2.426,667 Common Stock 400,000 Retained Earnings 1.114,333 Total Equity 1.514.333 Total Assets $3.941,000 Total Liabilities & Equity $3,941,000 Inventory Finished Goods represents 30.000 units of finished goods at a cost of $23 per unit. Raw materials for 20.000 units at $4.00 per units. Work-in process inventory is zero at December 31. The company is now in the process of finishing its projections for the year ended December 2022. Historical sales for the last quarter as well as sales projections for the next thirteen months are shown below: Month Units Sold and Sales Price October 2021 (Actual) (70,000 units at $25.00 each) November 2021 (Actual) (70.000 units at $25.00 each) December 2021 (Actual) (70,000 units at $25.00 each) January, 2022 (78,000 units at $50.00 each) February (83.000 units at $50.00 each) March (86,000 units at $50.00 each April (91,000 units at $50.00 each) May (93.000 units at $50.00 each) June (100,000 units at $50.00 each) July (101,000 units at $50.00 each) August (103,000 units at $50.00 each September (105,000 units at $50.00 each October (107.000 units at $50.00 each) November (109.000 units at $50.00 each) December (110,000 units at $50.00 each) Expected Monthly sales after December 2022 (115,000 units at $50.00 each) The company has had steady sales of 70,000 units per month for the past several years, but the factory has enough capacity to produce 150.000 units per month, without having to invest in significant additional fixed assets. Changes in the economy have resulted in higher sales forecasts For forecasting purposes, the company assumes 5% of sales are collected the month of the sale, 60% in the subsequent month, 32% in the second month after the sale and 3% uncollectible. The percent of sales method is used for allowance for Doubtful Accounts. Bad Debts are written off each month. Desired ending finished goods inventory is 40% of next month's sales. This is higher than the prior level. Purchases of raw materials are made in the month they are used in production and cost $4 each Four units of raw material is needed for each unit produced. Payments for raw materials are made 75% the month of purchase and 25% in the month after purchase. Accounts payable represents unpaid purchases of raw materials. Raw material desired ending inventory is 20% of next month's material required for production. This percent has also changed for this budget. Labor costs are $15 per hour and each unit uses 1/2 hour of direct labor. Direct labor is paid half in the month incurred and half the following month. Direct labor rates have increased from the period just ended to $15 hour for this budget. Production overhead is all variable and is allocated at S6 per unit produced and is paid in the month incurred. All production equipment is leased and therefore no depreciation is necessary as part of overhead Work in Process Inventories equal zero at the end of each month. Selling and administrative total fixed costs are $80.000 per month and sales commissions are 3.00 per unit sold both are paid monthly. In addition, depreciation on Office Fixed assets is $35.000 per month. This is on equipment used in the office. The line of credit interest rate is 6% APR. Interest on the line is paid at the end of each month based on the ending lime balance at the end of the previous month. The interest of 10% on the Term Loan will be paid every May 1. However, interest is accrued on the loan every month Additional office equipment will be purchased at the end of March for $500,000 and the end of October for $5,000,000 will be purchased and will be added to Office fixed assets. The equipment will be depreciated straight-line over four years with depreciation beginning in June. This results in an additional $42.000 per month beginning in June with no change to depreciation for the November purchase. Targeted Cash at each month end is $75,000 beginning January 2022, with any excess cash being used to pay down the Bank line of credit and any shortfall below $75.000 funded by borrowing against the line. Any excess cash above $75,000 will be invested in short term securities once the bank line of credit has been completely paid off. Accumulated short term investment balances can be used to cover cash shortfalls if available. (For simplicity, assume any investment does not yield any monthly cash flow and do not accrue the interest.) The company uses an estimated tax rate of 22%, with estimated payments made monthly a Construct a sales budget and a schedule of cash receipts for each of the months and total for the year. b. Construct a production budget for each month and the year to calculate the number of units to be produced and desired ending finished goods inventory. c. Construct a raw materials budget and a schedule of cash payments for materials for each month and the year. d Construct a direct labor budget for each month and the year including direct labor costs and cash payments. e Construct a Manufacturing Overhead budget for each month and the year. f. Calculate the cost of producing the units each month and the year. g. Compute ending Inventory in Dollars and units for each month of the year for both Finished Goods and Raw Materials inventories. h Compute total adjusted cost of goods sold for each month and the year using FIFO inventory valuation December 31, 2021 Balance Sheet ASSETS LIABILITIES AND EQUITY Cash $76,000 Accounts Payable $100,000 Accounts Receivable.net 2,170,000 Salary Payable 420,000 Inventories *** Interest Payable 56,667 Finished Goods 690,000 Bank Line of Credit (6%) 1,000,000 Raw Materials 80,000 770.000 Current Assets 3,016,000 Current Liabilities 1,576,667 Term Debt (10%) 850,000 Fixed Assets, net of accumulated depreciation 925.000 Total Liabilities 2.426,667 Common Stock 400,000 Retained Earnings 1.114,333 Total Equity 1.514.333 Total Assets $3.941,000 Total Liabilities & Equity $3,941,000 Inventory Finished Goods represents 30.000 units of finished goods at a cost of $23 per unit. Raw materials for 20.000 units at $4.00 per units. Work-in process inventory is zero at December 31. The company is now in the process of finishing its projections for the year ended December 2022. Historical sales for the last quarter as well as sales projections for the next thirteen months are shown below: Month Units Sold and Sales Price October 2021 (Actual) (70,000 units at $25.00 each) November 2021 (Actual) (70.000 units at $25.00 each) December 2021 (Actual) (70,000 units at $25.00 each) January, 2022 (78,000 units at $50.00 each) February (83.000 units at $50.00 each) March (86,000 units at $50.00 each April (91,000 units at $50.00 each) May (93.000 units at $50.00 each) June (100,000 units at $50.00 each) July (101,000 units at $50.00 each) August (103,000 units at $50.00 each September (105,000 units at $50.00 each October (107.000 units at $50.00 each) November (109.000 units at $50.00 each) December (110,000 units at $50.00 each) Expected Monthly sales after December 2022 (115,000 units at $50.00 each) The company has had steady sales of 70,000 units per month for the past several years, but the factory has enough capacity to produce 150.000 units per month, without having to invest in significant additional fixed assets. Changes in the economy have resulted in higher sales forecasts For forecasting purposes, the company assumes 5% of sales are collected the month of the sale, 60% in the subsequent month, 32% in the second month after the sale and 3% uncollectible. The percent of sales method is used for allowance for Doubtful Accounts. Bad Debts are written off each month. Desired ending finished goods inventory is 40% of next month's sales. This is higher than the prior level. Purchases of raw materials are made in the month they are used in production and cost $4 each Four units of raw material is needed for each unit produced. Payments for raw materials are made 75% the month of purchase and 25% in the month after purchase. Accounts payable represents unpaid purchases of raw materials. Raw material desired ending inventory is 20% of next month's material required for production. This percent has also changed for this budget. Labor costs are $15 per hour and each unit uses 1/2 hour of direct labor. Direct labor is paid half in the month incurred and half the following month. Direct labor rates have increased from the period just ended to $15 hour for this budget. Production overhead is all variable and is allocated at S6 per unit produced and is paid in the month incurred. All production equipment is leased and therefore no depreciation is necessary as part of overhead Work in Process Inventories equal zero at the end of each month. Selling and administrative total fixed costs are $80.000 per month and sales commissions are 3.00 per unit sold both are paid monthly. In addition, depreciation on Office Fixed assets is $35.000 per month. This is on equipment used in the office. The line of credit interest rate is 6% APR. Interest on the line is paid at the end of each month based on the ending lime balance at the end of the previous month. The interest of 10% on the Term Loan will be paid every May 1. However, interest is accrued on the loan every month Additional office equipment will be purchased at the end of March for $500,000 and the end of October for $5,000,000 will be purchased and will be added to Office fixed assets. The equipment will be depreciated straight-line over four years with depreciation beginning in June. This results in an additional $42.000 per month beginning in June with no change to depreciation for the November purchase. Targeted Cash at each month end is $75,000 beginning January 2022, with any excess cash being used to pay down the Bank line of credit and any shortfall below $75.000 funded by borrowing against the line. Any excess cash above $75,000 will be invested in short term securities once the bank line of credit has been completely paid off. Accumulated short term investment balances can be used to cover cash shortfalls if available. (For simplicity, assume any investment does not yield any monthly cash flow and do not accrue the interest.) The company uses an estimated tax rate of 22%, with estimated payments made monthly a Construct a sales budget and a schedule of cash receipts for each of the months and total for the year. b. Construct a production budget for each month and the year to calculate the number of units to be produced and desired ending finished goods inventory. c. Construct a raw materials budget and a schedule of cash payments for materials for each month and the year. d Construct a direct labor budget for each month and the year including direct labor costs and cash payments. e Construct a Manufacturing Overhead budget for each month and the year. f. Calculate the cost of producing the units each month and the year. g. Compute ending Inventory in Dollars and units for each month of the year for both Finished Goods and Raw Materials inventories. h Compute total adjusted cost of goods sold for each month and the year using FIFO inventory valuation