Garden Manufacturing Ltd$.$ produces and distributes a special type of chemical compound

called Compound WX$.$ The information below about Garden's operations has been

assembled to assist budget preparation. The company is preparing its master budget for the

first quarter of $2024.$ The budget will detail each month$$s activity and the activity for the

quarter in total. The master budget will be based on the following information:

$1.$ Selling price is $$60$ per unit in $2024$ and will not change for the first two quarters of $2024.$

Actual and estimated sales are as follows:

Actual $2023$ Estimated $2024$

November: $10,000$ units January: $11,000$ units

December: $12,000$ units February: $10,000$ units

March: $13,000$ units

April: $11,000$ units

May: $11,000$ units

$2.$ The company produces enough units each month to meet that month$$s sales plus a

desired inventory level equal to $20\%$ of next month$$s estimated sales.

Finished Goods inventory at the end of December $2020$ consisted of $2,200$ units at a variable

cost of $$33$ each.

$3.$ The company purchases enough raw materials each month for the current month$$s

production requirement and $25\%$ of next month's production requirements. Each unit of

product requires $5$ kilograms of raw material at $$0\mathrm{.}60$ per kilogram. There were $13,500$

kilograms of raw materials in inventory at the end of December $2023.$

Garden pays $40\%$ of raw material purchases in the month of purchase and the remaining

$60\%$ in the following month.

$4.$ Each unit of finished product requires $1\mathrm{.}25$ labour$-$hours. The average wage rate is $$16$ per

hour. All salaries and wages are paid at the current month in cash.

$5.$ Variable manufacturing overhead is calculated and applied at $50\%$ of the direct labour

cost$.$

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$6.$ Fixed overhead costs $($per month$)$ are as follows:

Factory supervisor's salary $$75,000$

Factory insurance $1,400$

Factory rent $8,000$

Depreciation of factory equipment $1,200$

$7.$ Credit sales on account for the month are $60\%$ of the total sales.

The company collects $50\%$ of the credit sales during the first month following$/$after the month

of sale and the next $50\%$ of the credit sales during the second month.

$8.$ Variable selling and administrative expenses consist of $$4$ for shipping and $10\%$ of sales

for commissions.

$9.$ Total fixed selling and administrative expenses are as follows:

Advertising $$300$

Depreciation $9,000$

Insurance $250$

Salaries $4,000$

Other $14,550$

$10.$ The company will purchase assets for use in the sales office at a cost of $$300,000,$ which

will be paid cash on January $02,2024.$ The monthly depreciation expense on the additional

capital assets will be $$6,000,$ starting from January, $2024.$

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$11.$ The balance sheet as of December $31,2023,$ is as follows:

Assets

Cash $$80,000$

Accounts receivable $612,000$

Inventory: Raw materials $$8,100$

Finished goods $72,60080,700$

Plant and equipment $1,000,000$

Less: accumulated depreciation $-100,000900,000$

Total assets $$1,672,700$

Liabilities and Equity

Accounts payable $$24,000$

$6\%$ long$-$term notes payable $900,000$

Common shares $735,000$

Retained earnings $13,700$

Total liabilities and shareholders' equity $$1,672,700$

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Additional information available follows:

All cash payments except purchases of raw materials are made monthly as incurred.

All borrowings occur at the beginning of each month, and all repayments occur at the end of

the month. Borrowings and repayments may occur in any amount.

All interest on borrowed funds is paid at the end of each month at a rate of $0\mathrm{.}5\%$ per month.

A minimum cash balance of $$30,000$ is required at the end of each month.

Required:

Calculation Part

Prepare the following budgets for each of the first three months of $2024$:

$1.$ Schedule of expected cash collections