Developing a Master Budget for a Manufacturing Organization Jacobs Incorporated manufactures a product with a selling price of $50 per unit. Units and monthly cost data follow:

Variable:
Selling and administrative	$5 per unit sold
Direct materials	10 per unit manufactured
Direct labor	10 per unit manufactured
Variable manufacturing overhead	5 per unit manufactured
Fixed:
Selling and administrative	$20,000 per month
Manufacturing (including depreciation of $10,000)	30,000 per month

Jacobs pays all bills in the month incurred. All sales are on account with 50 percent collected the month of sale and the balance collected the following month. There are no sales discounts or bad debts. Jacobs desires to maintain an ending finished goods inventory equal to 20 percent of the following month's sales and a raw materials inventory equal to 10 percent of the following month's production. January 1, 2011, inventories are in line with these policies. Actual unit sales for December and budgeted unit sales for January, February, and March of 2011 are as follows:

Sales - Units	5,250	7,000	7,000	8,000
Sales - Dollars	$262,500	$350,000	$350,000	$400,000

Additional information:

• The January 1 beginning cash is projected as $4,000.
• For the purpose of operational budgeting, units in the January 1 inventory of finished goods are valued at variable manufacturing cost.
• Each unit of finished product requires one unit of raw materials.
• Jacobs intends to pay a cash dividend of $6,000 in January.

NOTE: For the entire problem - do not use any negative signs with your answers unless appropriate for net income(loss) or ending balance.

(a) A production budget for January and February.

Requirements for current sales	Answer	Answer	Answer
Desired ending inventory	Answer	Answer
Total requirements	Answer	Answer
Less beginning inventory	Answer	Answer
Production requirements	Answer	Answer

(b) A purchases budget in units for January.

Current requirements (units)	Answer	Answer
Desired ending inventory	Answer
Total requirements	Answer
Less beginning inventory	Answer
Purchases (units)	Answer
Purchases (dollars at $10 each)	$Answer

(c) A manufacturing cost budget for January.

Variable costs
Direct materials	$Answer
Direct labor	Answer
Variable manufacturing overhead	Answer
Total variable costs	Answer
Fixed manufacturing overhead	Answer
Total manufacturing overhead	$Answer

(d) A cash budget for January.

Beginning balance		$Answer
Receipts:
December sales	$Answer
January sales	Answer	Answer
Total cash available		Answer
Disbursements:
Purchases	Answer
Direct labor	Answer
Variable manufacturing overhead	Answer
Fixed manufacturing overhead (exclude depreciation)	Answer
Variable selling and administrative	Answer
Fixed selling and administrative	Answer
Dividend	Answer	Answer
Ending Balance		$Answer

(e) A budgeted contribution income statement for January.

Sales		$Answer
Less variable costs:
Cost of goods sold	$Answer
Selling and administrative	Answer	Answer
Contribution		Answer
Less fixed costs:
Manufacturing overhead	Answer
Selling and administrative	Answer	Answer
Net income		$Answer

(f) Prepare a cash budget for January assuming management plans to increase the January end raw materials inventory to 100 percent of February's production needs.

Beginning balance		$Answer
Receipts:
December sales	$Answer
January sales	Answer	Answer
Total cash available		Answer
Disbursements:
Purchases	Answer
Direct labor	Answer
Variable manufacturing overhead	Answer
Fixed manufacturing overhead (exclude depreciation)	Answer
Variable selling and administrative	Answer
Fixed selling and administrative	Answer
Dividend	Answer	Answer
Ending Balance		$Answer

(g) Actions management might consider to resolve the problem indicated in the revised cash budget in part (f) include:

Delaying the cash dividend.If possible, pay for fifty percent of each month's purchases in during the month and pay for the other fifty percent in the following month, an average of fifteen to sixteen days after receipt.Obtain a line of credit with a financial institution.All of the above.