Decker Manufacturing is preparing its master budget for the first quarter of the upcoming year. The following data pertain to

Decker

Manufacturing's operations:

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(Click the icon to view additional data.)Read the requirements

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.

Requirement 1. Prepare a schedule of cash collections for January, February, and March, and for the quarter in total.

Decker Manufacturing
Cash Collections Budget
For the Quarter Ended March 31
	Month

	January	February	March	Quarter
Cash sales	$24,000	$27,600	$29,700
Credits sales
Total cash collections

Enter any number in the edit fields and then click Check Answer.

12

parts remaining

Data Table

Current Assets as of December 31 (prior year):
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . .	$4,500
Accounts receivable, net. . . . . . . . . . . . .	$47,000
Inventory. . . . . . . . . . . . . . . . . . . . . . . .	$15,500
Property, plant, and equipment, net. . . . . . . . . . . .	$121,500
Accounts payable. . . . . . . . . . . . . . . . . . . . . . .	$42,400
Capital stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$125,000
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . .	$22,800

MORE INFORMATION

a.

Actual sales in December were

$ 70 comma 000$70,000.

Selling price per unit is projected to remain stable at

$ 10$10

per unit throughout the budget period. Sales for the first five months of the upcoming year are budgeted to be as follows:

January. . . . . . . .	$80,000
February. . . . . . . .	$92,000
March. . . . . . . . . .	$99,000
April. . . . . . . . . .	$97,000
May. . . . . . . . . .	$85,000

b.

Sales are

3030%

cash and

7070%

credit. All credit sales are collected in the month following the sale.

c.

DeckerDecker

Manufacturing has a policy that states that each month's ending inventory of finished goods should be

2525%

of the following month's sales (in units).

d.

Of each month's direct material purchases,

2020%

are paid for in the month of purchase, while the remainder is paid for in the month following purchase.

TwoTwo

pounds of direct material is needed per unit at

$ 2.00$2.00

per pound. Ending inventory of direct materials should be

10 %10%

of next month's 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

0.010.01.

The direct labor rate per hour is

$ 12$12

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. . . . . . . .	$996
February. . . . . . . .	$1,125
March. . . . . . . . . .	$1,182

f.

Monthly manufacturing overhead costs are

$ 5 comma 000$5,000

for factory rent,

$ 3 comma 000$3,000

for other fixed manufacturing expenses, and

$ 1.20$1.20

per unit for variable manufacturing overhead. 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,

DeckerDecker

Manufacturing will purchase equipment for

$ 5 comma 000$5,000

(cash), while February's cash expenditure will be

$ 12 comma 000$12,000

and March's cash expenditure will be

$ 16 comma 000.$16,000.

h.

Operating expenses are budgeted to be

$ 1.00$1.00

per unit sold plus fixed operating expenses of

$ 1 comma 000$1,000

per month. All operating expenses are paid in the month in which they are incurred. No depreciation is included in these figures.

i.

Depreciation on the building and equipment for the general and administrative offices is budgeted to be

$ 4 comma 400$4,400

for the entirequarter, which includes depreciation on new acquisitions.

j.

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Manufacturing has a policy that the ending cash balance in each month must be at least

$ 4 comma 000$4,000.

It has a line of credit with a local bank. The company can borrow in increments of

$ 1 comma 000$1,000

at the beginning of each month, up to a total outstanding loan balance of

$ 130 comma 000$130,000.

The interest rate on these loans is

11%

per month simple interest (not compounded). The company would pay down on the line of credit balance

in

increments of

$ 1 comma 000$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 borrowed during the quarter.

k.

The company's income tax rate is projected to be 30% of operating income less interest expense. The company pays

$ 10 comma 000$10,000

cash at the end of February in estimated taxes.

REQUIREMENT

1.

Prepare a schedule of cash collections for January, February, and March, and for the quarter in total.

2.

Prepare a production budget. (Hint: Unit sales = Sales in dollars / Selling price per unit.)

3.

Prepare a direct materials budget.

4.

Prepare a cash payments budget for the direct material purchases from Requirement 3.

5.

Prepare a cash payments budget for direct labor.

6.

Prepare a cash payments budget for manufacturing overhead costs.

7.

Prepare a cash payments budget for operating expenses.

8.

Prepare a combined cash budget.

9.

Calculate the budgeted manufacturing cost per unit (assume that fixed manufacturing overhead is budgeted to be

$ 0.80$0.80

per unit for the year).

10.

Prepare a budgeted income statement for the quarter ending March 31. (Hint: Cost of goods sold = Budgeted cost of manufacturing one unit x Number of units sold.)