Endless Mountain Company manufactures a single product that is popular with outdoor recreation enthusiasts. The company sells its product to retailers throughout the northeastern quadrant of the United States. It is in the process of creating a master budget for 2022 and reports a balance sheet at December 31, 2021 as follows: S Endless Mountain Company Balance Sheet December 31, 2021 Assets Current assets: Cash 46,200 Accounts receivable (net) 260,000 Raw materials inventory (4,500 yards) 11,250 Finished goods inventory (1,500 units) 32,250 Total current assets $349,700 Plant and equipment: Buildings and equipment 900,000 Accumulated depreciation (292,000) Plant and equipment, net 608,000 Total assets $957,700 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $158,000 Stockholders' equity: Common stock $ 419,800 Retained earnings 379,900 Total stockholders' equity 799,700 Total liabilities and stockholders' equity $957,700 The company's chief financial officer (CFO), in consultation with various managers across the organization has developed the following set of assumptions to help create the 2022 budget: 1. The budgeted unit sales are 12,000 units, 37,000 units, 15,000 units, and 25,000 units for quarters 1-4, respectively. Notice that the company experiences peak sales in the second and fourth quarters. The budgeted selling price for the year is $32 per unit. The budgeted unit sales for the first quarter of 2023 is 13,000 units. 2. All sales are on credit. Uncollectible accounts are negligible and can be ignored. Seventy-five percent of all credit sales are collected in the quarter of the sale and 25% are collected in the subsequent quarter. 3. Each quarter's ending finished goods inventory should equal 15% of the next quarter's unit sales. 4. Each unit of finished goods requires 3.5 yards of raw material that costs $3.00 per yard. Each quarter's ending raw materials inventory should equal 10% of the next quarter's production needs. The estimated ending raw materials inventory on December 31, 2022 is 5,000 yards. 5. Seventy percent of each quarter's purchases are paid for in the quarter of purchase. The remaining 30% of each quarter's purchases are paid in the following quarter. 6. Direct laborers are paid $18 an hour and each unit of finished goods requires 0.25 direct labor-hours to complete. All direct labor costs are paid in the quarter incurred. 7. The budgeted variable manufacturing overhead per direct labor-hour is $3.00. The quarterly fixed manufacturing overhead is $150,000 including $20,000 of depreciation on equipment. The number of direct labor-hours is used as the allocation base for the budgeted plantwide overhead rate. All overhead costs (excluding depreciation) are paid in the quarter incurred. 8. The budgeted variable selling and administrative expense is $1.25 per unit sold. The fixed selling and administrative expenses per quarter include advertising ($25,000), executive salaries ($64,000), insurance ($12,000), property tax ($8,000), and depreciation expense ($8,000). All selling and administrative expenses (excluding depreciation) are paid in the quarter incurred. 9. The company plans to maintain a minimum cash balance at the end of each quarter of $30,000. Assume that any borrowings take place on the first day of the quarter. To the extent possible, the company will repay principal and interest on any borrowings on the last day of the fourth quarter. The company's lender imposes a simple interest rate o 3% per quarter on any borrowings. 10. Dividends of $15,000 will be declared and paid in each quarter. 11. The company uses a last-in, first-out (LIFO) inventory flow assumption. This means that the most recently purchased raw materials are the first-out" to production and the most recently completed finished goods are the first-out" to customers. 4 Year 46,200 314,338 $ 720,000 1,034,338 2,908,000 2,954,200 Endless Mountain Company Cash Budget For the Year Ended December 31, 2022 Quarter 1 2 3 Beginning cash balance $ 46,200 $ 30,000 $ 244,649 $ Add cash receipts: Collection from customers 548,000 984,000 656,000 Total cash available 594,200 1,014,000 900,649 Less cash disbursements: Direct materials 291,287 292,176 226,937 Direct labor 72,225 151,650 74,250 Manufacturing overhead 142,039 155,275 142,375 Selling and administrative 124,000 155,250 127,750 Dividends 15,000 15,000 15,000 Total cash disbursements 644,551 769,351 586,312 Excess or deficiency) of cash available over disbursements (50,351) 244,649 314,337 Financing: Borrowings (at the beginnings of quarters) 80,350 0 Repayment (at end of the year) Interest (at 3% per quarter) 0 0 Total financing 80,350 0 0 Ending cash balance $ 29,999 $ 244,649 $ 314,337 $ 218,054 104,400 147,400 140,250 15,000 625,104 409,234 1,028,453 402,525 587,089 547,250 60,000 2,625,317 328,883 0 0 (80,350) (9,642) (89,992) 319,242 $ 80,350 (80,350) (9,642) (9,642) 319,241 Endless Mountain Company Budgeted Balance Sheet December 31, 2022 Assets Current assets: Cash $ 319,243 Accounts receivable 200,000 Raw materials inventory 12,750 Finished goods inventory 42,356 $ 574,349 Total current assets Plant and equipment: Buildings and equipment Accumulated depreciation 900,000 (404,000) 496,000 1,070,349 $ Plant and equipment, net Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Stockholders' equity: $ 70,272 419,800 580,277 Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 1,000,077 1,070,349 $ Endless Mountain Company Sales Budget For the Year Ended December 31, 2022 Quarter 1 2 3 12,000 37,000 15,000 $ 32 $ 32 $ 32 $ 384.000 $ 1.184.000 $ 480,000 4 Year 89,45 Budgeted unit sales Selling price per unit Sales $ $ 23,200 3.5 81,200 5,000 86,200 8,120 78,080 3. 313,07 5,00 318,07 4,50 313,57 Beginning accounts receivable First-quarter sales Second-quarter sales Third-quarter sales Fourth-quarter sales Total cash collections Schedule of Expected Cash Collections $ 260,000 $ of $ 0 $ 288,000 96,000 0 888,000 296.000 0 0 360,000 0 0 $ 548,000 $ 984,000 $ 656,000 $ $ 234,240 $ 940,72 Endless Mountain Company Direct Materials Budget For the Year Ended December 31, 2022 Quarter 4 Year 1 2 3 25,000 89,000 Required production in units 16,050 33,700 16,500 32 $ 32 Quantity of raw materials needed per unit 3.5 3.5 3.51 800,000 $2,848,000 Quantity of raw materials needed to meet production 56,175 117,950 57,750 Add desired quantity of ending raw materials inventory 11,795 5,775 8,120 Total quantity of raw materials needed 67,970 123,725 65,870 0 $ 260,000 Less quantity of beginning raw materials inventory 4,500 11,795 5,775 0 384,000 Quantity of raw materials to be purchased 63,470 111,930 60,095 0 1,184,000 Cost of raw materials per yard $ $ $ 3 $ 120.000 480,000 Cost of raw materials to be purchased $ 190,410 $ 335,790 $ 180,285 $ 600,000 600,000 720,000 $ 2,908,000 Schedule of Expected Cash Disbursements for Purchases of Materials Beginning accounts payable $ 158,000 $ 0 $ of $ First-quarter purchases 133,287 57,123 0 Second-quarter purchases 0 235,053 100,737 Third-quarter purchases 0 0 126,200 4 Year Fourth-quarter purchases 0 0 01 23.200 89.4EC Total cash disbursements for materials $ 291,287 $ 292,176 $ 226,937 $ 0.25 0.25 Endless Mountain Company 5.800.0 22,362.5 Production Budget 18 S 18 104,400 S 102 525 For the Year Ended December 31, 2022 Quarter 1 2 3 Budgeted unit sales 12,000 37,000 15,000 Add desired units of ending finished goods inventory 5,550 2,250 3.750 Total needs 17,550 39,250 18,750 Less units of beginning finished goods inventory 1,500 5,550 2,250 Required production in units 16,050 33,700 16,500 Endless Mountain Company Direct Labor Budget For the Year Ended December 31, 2022 Quarter 1 2 3 16,050 33,700 16,500 0.25 0.25 4,012.5 8.425.0 4,1250 $ 18$ 18$ 13 $ $ 72.225 5 151,650 $ 72.250 $ 0 $ 158,00 0 190,41 0 335,79 54,086 180,28 163,968 163,96 218,054 $ 1,028,45 0.25 Required production in units Drect labor-hours per unit Total direct labor-hours needed Drect labor cost per hour Total direct labor cost 4 25,000 1,950 26.950 3.750 23,200 Year 89,000 1,950 90,950 1,500 89,450 Endless Mountain Company Manufacturing Overhead Budget For the Year Ended December 31, 2022 Quarter 1 2 3 4 Total 4.125.0 $ $ 10.50 $ $ $ 4.50 Budgeted direct labor hours Variable manufacturing overhead per direct labor-hour Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing overhead Less depreciation Cash disbursements for manufacturing overhead 4,012.5 31 $ 12,038 $ 150,000 162,038 20,000 142,038 8,425.0 3 $ 25,275 $ 150.000 175 275 20,000 155, 275 12.375 150,000 162,375 20.000 142,375 5,800.0 31 $ 17,400 $ 150,000 167,400 20,000 147,400 Endless Mountain Company Ending Finished Goods Inventory Budget (absorption costing basis) For the Year Ended December 31, 2022 Year Item Quantity Cost 22,362.5 Production cost per unit: Direct materials 3.50 yards $ 3.00 per yard 67,088 Direct labor 0.25 hours $ 18.00 per hour 600,000 Manufacturing overhead 0.25 hours $ 29.83 per hour 667,088 Unit product cost 80,000 587,088 Budgeted finished goods inventory: Units from prior year's production 667,088 Unit product cost 22,362.5 Cost from prior year's production 29.83 Units from current year's production Unit product cost Cost from current year's production 7.46 22.46 $ 1,500 $ 21.50 Total manufacturing overhead Budgeted direct labor hours Predetermined overhead rate for the year $ $ 32,250 $ AGA 450 22.46 10,107 Cost of ending finished goods inventory $ 42,357 3 Year 15,000 1.25 $ 18,750 $ 4 25,000 1.25 $ 31,250 $ 89,000 1.25 111,250 Endless Mountain Company Selling and Administrative Expense Budget For the Year Ended December 31, 2022 Quartet 1 2 Budgeted unit sales 12,000 37,000 Variable selling and administrative expense per unit $ 1.25 $ 1.25 $ Sales $ 15,000 $ 46,250 $ Fixed selling and administrative expenses: Advertising 25,000 25,000 Executive salaries 64,000 64,000 Insurance 12,000 12,000 Property taxes 8,000 8,000 Depreciation 8,000 8,000 Total fixed selling and administrative expenses 117,000 117,000 Total selling and administrative expenses 132,000 163,250 Less depreciation 8,000 8,000 Cash disbursements for selling and administrative expenses $ 124,000 $ 155,250 $ 100,000 256,000 48.000 25,000 64,000 12,000 8,000 8,000 117,000 135,750 8,000 127,750 $ 25,000 64,000 12,000 8,000 8,000 117,000 148, 250 8,000 140,250 $ Endless Mountain Company Budgeted Income Statement For the Year Ended December 31, 2022 (Absorption costing basis) Sales $ 2,848,000 Cost of goods sold 1,998,732 Gross margin 849,268 Selling and administrative expenses 579,250 Net operating income Interest expense 9,642 Net income $ 260,376 270,018 32,000 32,000 468,000 579 250 32,000 547,250 Required: 1. Calculate the following budgeted figures for 2022: a. The total fixed cost. b. The variable cost per unit sold. c. The contribution margin per unit sold. d. The break-even point in unit sales and dollar sales. e. The margin of safety. f. The degree of operating leverage 2. Prepare a budgeted variable costing income statement for 2022. Stop your computations at net operating income. Required: 1. Using the indirect method, calculate Endless Mountain Company's estimated net cash provided by operating activities for 2022. 2. Prepare the company's budgeted statement of cash flows for the year ended December 31, 2022