ESTIMATED SALES

Del Rey Inc estimates the sales volumes and prices for 2023:

	East Region Sales Volume	West Region Sales Volume	Unit Selling Price
Wallets	287,000	241,000	$12
Handbags	156,000	123,600	25

*Sales fluctuate seasonally. Quarterly sales are projected as 15%, 25%,20%, and

40% (done in the order of quarter)

Del Rey Inc. expects the following inventories of wallets and handbags:

	Est. Inventory 01/01/2023	Estimated Inventory 12/31/2023
Wallets	15,000	15,840
Handbags	8,000	8,388

The estimated beginning inventory is 20% of that quarter estimated sales. The estimated desired ending inventory for each quarter is the estimated beginning inventory of the following quarter.

ESTIMATED DIRECT MATERIAL QUANTITY AND PRICE

Del Rey Inc. uses leather and lining in producing wallets and handbags.

Wallet	Handbag
Leather: 0.30 sq.yd. per unit	Leather: 1.25 sq.yd. per unit
Lining: 0.10 sq.yd. per unit	Lining: 0.50 sq.yd. per unit

The following inventory and unit price information is expected:

	Estimated Direct Materials Inventory 01/01/2023	Estimated Direct Materials Inventory 12/31/2023
Leather	18,000 sq. yds	20,000 sq. yds
Lining	15,000 sq. yds	12,000 sq. yds

Assume the estimated (desired) direct materials inventory at the end of each quarter in 2023 is the same as the estimated direct materials inventory on 12/31/2023. The beginning direct materials inventory for each quarter is the desired ending direct material inventory in the previous quarter.

The estimated price per square yard of leather and lining during 2023 follows:

Leather: $4.50 / sq. yd.

Lining: $1.20 / sq yd.

ESTIMATED WORK IN PROCESS AND FINISHED GOODS INVENTORY

	Estimated Inventory 01/01/2023	Estimated Inventory 12/31/2023
Work in process	$214,400	$220,000
Finished Goods	$1,095,600	$1,565,000

The estimated Work In Process and Finished Goods Inventory at the end of each quarter in 2023 is the same as the estimated Work In Process and Finished Goods Inventory on 12/31/2023.

ESTIMATED DIRECT LABOR QUANTITY AND RATE

Del Rey Inc.'s production managers estimate the following direct labor hours are needed to produce a wallet and handbag:

Wallet	Handbag
Cutting Department: 0.10 hr. per unit	Cutting Department: 0.15 hr. per unit
Sewing Department: 0.25 hr. per unit	Sewing Department: 0.40 hr. per unit

The estimated average direct labor hourly rates for the Cutting and Sewing departments for Fabulous Accessories Inc. during 2023 are as follow:

Cutting Department: $12 per hour

Sewing Department: $15 per hour

FACTORY OVERHEAD BUDGET

Variable Overhead Cost Budget for the year ending December 31, 2023 are as follow:

Indirect factory wages	$732,800
Power & light	306,000
Indirect materials	182,800
Total Variable Overhead Costs	$1,221,600

Fixed Overhead Cost Budget for the year ending December 31, 2023 are as follow:

Supervisor Salaries	$360,000
Maintenance	140,280
Insurance & Property Taxes	79,200
Depreciation on Plant & Equipment	288,000
Total Fixed Overhead Costs	$867,480

SELLING & ADMINISTRATIVE EXPENSE BUDGET

Del Rey Inc has no variable selling and administrative expenses. Fixed selling and administrative expenses for 2023 is as follows:

Estimated Selling expenses for the year 2023:

Salas salaries expense	$715,000
Advertising expense*	$360,000
Travel expense	115,000
Total selling expense	$1,190,000

*Advertising expense is $80,000 in Quarters 1, 2, and 3. However, at the beginning of the holiday season, the sales manager increases advertising; in Quarter 4, advertising expense is $120,000.

Estimated Administrative expenses for the year 2023:

Officers' salaries expense	$360,000
Office staffs' salaries expense	258,000
Office Rent expense	34,500
Office supplies expense	17,500
Miscellaneous administrative expenses	25,000
Total administrative expense	$695,000

CAPITAL EXPENDITURE BUDGET

The company plans to make to following capital expenditure in 2023:

Cutting Machine - to be purchased in January 2023, estimated cost is $400,000.

Sewing Machine - to be purchased in April 2023, estimated cost is $274,000.

CASH BUDGET

Estimated Cash Receipts:

Of the sales on account, 60 percent are collected in the quarter of sale; the remaining 40 percent are collected in the quarter following the sale. Total sales for the fourth quarter of 2020 totaled $1,200,000; Accounts Receivable balance as of 12/31/2022 was $480,000 (40% of 2022 fourth quarter sales).

Estimated Cash Payments:

All materials are purchased on account; 75 percent of purchases are paid for in the quarter of purchase. The remaining 25 percent are paid in the following quarter. The purchases for the fourth quarter of 2022 were $950,000; Accounts Payable balance was $190,000 as of 12/31/2022 (25% of 2022 fourth quarter purchases)

Minimum Cash Balance:

Del Rey Inc. requires a $340,000 minimum cash balance for the end of each quarter. $225,000 is estimated as the cash balance on December 31, 2022.

Money can be borrowed and repaid in multiples of $10,000. Interest is 10 percent per year. Interest payments are made only for the amount of the principal being repaid. All borrowing takes place at the beginning of a quarter, and all repayment takes place at the end of a quarter.

Income Taxes:

Federal Corporate Income Tax rate and State Corporate Income Tax rate are 21% and 9% respectively. Estimated income taxes are paid at the beginning of each quarter for the previous quarter.

$150,000 estimated tax payment for the fourth quarter of 2022 is scheduled for payment at the beginning of the first quarter of 2023.

Construct the following budgets

- A budgeted income statement for the coming year.

- A cash expenditure budget for each quarter of the coming year.

- A cash budget for each quarter of the coming year.