Garneau Manufacturing Ltd. produces and distributes a special type of chemical compound called Compound WX. The information below about Garneau's operations has been assembled to assist budget preparation. The company is preparing its master budget for the first quarter of 2019. 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: a. Selling price is $60 per unit in 2018 and will not change for the first two quarters of 2019. Actual and estimated sales are as follows: Actual 2018 Estimated 2019 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 b. 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 2018 consisted of 2.200 units at a variable cost of $33 each. terials 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 $0.60 per kilogram. There were 13,500 kilograms of raw materials in inventory at the end of 2018. Garneau pays 40% of raw material purchases in the month of purchase and the remaining 60% in the following month. d. Each unit of finished product requires 1.25 labour-hours. The average wage rate is $16 per hour. c. Variable manufacturing overhead is 50% of the direct labour cost. f. Credit sales are 60% of total sales. The company collects 50% of the credit sales during the first month following the month of sale and 50% during the second month. Contents 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 h. Total fixed selling and administrative expenses are as follows: Advertising $ 300 Depreciation 9.000 Insurance 250 Salaries 4.000 Other 14.550 1. Variable selling and administrative expenses consist of S4 for shipping and 10% of sales for commissions. j. The company will acquire assets for use in the sales office at a cost of $300,000, which will be paid at the end of January 2019. The monthly depreciation expense on the additional capital assets will be $6,000. k. The balance sheet as of December 31, 2018, is as follows: Page 381 Assets Cash S 80.000 Accounts receivable 612.000 Inventory: Raw materials $ 8.100 Finished goods 72.600 80.700 Plant and equipment 1.000.000 Less accumulated depreciation _(100.000 900.000 $1,672,700 Total assets 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 Additional information is as 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 0.5% per month. A minimum cash balance of $30,000 is required at the end of each month. Required: Prepare the following budgets for each of the first three months of 2019: f. Cash budget 2. Prepare a budgeted contribution format income statement for each of the first three months of 2019 and a budgeted balance sheet as at March 31, 2019. Sales Budget Sales units January February March 11000 10000 13000 s 60s 60s 60 $ 6,60,000 $ 6,00,000 $ 7,80,000 Sales price per unit Sales amount Production Budget January February March April Sales units 11000 13000 11000 10000 2600 Add: Closing Stock Required 2000 2200 2200 Total Goods Required 13000 12600 15200 13200 Less: Opening Stock 2200 10800 2000 10600 2600 12600 2200 11000 Production Required Direct Material Budget January February March April Production Required 10800 10600 12600 11000 Raw Material Per unit Raw Material for Production 54000 53000 63000 55000 13750 Add: Closing Stock Required Total Material units Required 76750 Less: Opening Stock 15750 13250 15750 67250 68750 13500 13250 53750 55500 $ 0.60 $ 0.60 $ 32,250 $ 33,300 Material to be purchased 61000 Rate per yard $ $ 0.60 36,600 Amount Direct Labor Budget January February March Production Required 10800 10600 12600 Labor hours per unit Total Labor Hours Required 1.25 1.25 13500 13250 $ 16 S 16 $ 2,16,000 $2,12,000 1.25 15750 S 16 $ 2,52,000 Labor Rate per hour Labor Amount Manufacturing Overhead Budget January $ 1,08,000 February $ 1,06,000 March 1,26,000 Variable Manufacturing Overhead Fixed Overhead Factory Supervisors Salary $ Factory Insurance Factory rent 75,000 $ 75,000 $ 1,400 $ 1,400 S 8,000 $ 8,000 $ 1,200 $ 1,200 $ 1,93,600 $ 1,91,600 $ 75,000 1,400 8,000 1,200 2,11,600 Depreciation on factory rent Total Manufacturing Overhead $ Selling and administrative Budget January February March Variable Selling and administrative expenses Shipping $ 44,000 66,000 $ $ 40,000 $ 60,000 $ 52,000 78,000 Sales Commission $ Fixed Selling and administrative expenses Advertising Depreciation $ $ $ Insurance 300 S 300 S 9,000$ 9,000 $ 250 S 250 S 4,000 $ 4,000 $ 14,550 $ 14,550 S 1,38,100 $ 1,28,100 $ 300 9,000 250 4,000 14,550 1,58,100 Salaries Other $ $ Total Selling and administrative expenses