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

$ $4$ 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

$$15,000$ 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 $1,2014,$ inventories are in line with these policies. Actual unit sales for December and budgeted unit sales for January, February, and March of $2014$ are as follows:

JACOBS INCORPORATED

Sales Budget

For the Months of January, February, and March $2014$

Month

December

January

February

March

Sales $-$ Units

$6,250$

$5,000$

$10,000$

$8,000$

Sales $-$ Dollars

$$312,500$

$$250,000$

$$500,000$

$$400,000$

Additional information:

The January $1$ beginning cash is projected as $$5,000.$

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 $$10,000$ 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.Additional information:

The January $1$ beginning cash is projected as $$5,000.$

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 $$10,000$ 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.

$($b$)$ A purchases budget in units for January.