goods sold, inventory, and purchases budget for each of the first three quarters of the year. Compute cost of goods sold for the entire nine-month period." PROBLEMS Group A $ 4,500 $ 47,000 $ 15,700 P9-57A Comprehensive budgeting problem (Learning Objectives 2 & 3) Martin Manufacturing is preparing its master budget for the first quarter of the upcoming year. The following data pertain to Martin Manufacturing's operations: Current Assets as of December 31 (prior year): Cash Accounts receivable, net.. Inventory..... Property, plant, and equipment, net $120,000 Accounts payable $ 42,400 Capital stock $124,000 Retained earnings. $ 23,100 a. Actual sales in December were $70,000. Selling price per unit is projected to remain stable at $10 per unit throughout the budget period. Sales for the first five months of the upcoming year are budgeted to be as follows: $ 80,000 January $ 92,000 February $ 99,000 March.... $ 97,000 April $ 85,000 May b. Sales are 30% cash and 70% credit. All credit sales are collected in the month follow- ing the sale. Martin Manufacturing has a policy stating that each mont's ending inventory of 30 The Master Budget 563 shed goods should be 25% of the following month's sales in writi of each month's direct materials purchases, 20% paid for in the month of pur chase, while the remainder is paid for in the month folicing purchase. Tuo pounds of direct material is needed per unit at $2 per pound. Erding inventory of direct mater is should be 10% of next month's production needs Most of the labor at the manufacturing facility is indirect, but there is some directie bor incurred. The direct labor hours per unit is 0.01. The direct laborate per hours 512 per hour. All direct labor is paid for in the month in which the work is performed The direct labor total cost for each of the upcoming three months is as follows: January February March $ 996 $1,125 $1,182 Monthly manufacturing overhead costs $5,000 for factory rent, $3,000 for other foed manufacturing expenses, and $1.20 per unit for variable manufacturing over head. No depreciation is included in these figures. All expenses are paid in the month in which they are incurred. Computer equipment for the administrative offices will be purchased in the upcoming While February's cash expenditures will be $12,000 and March's cash expenditures will be 516,000 Operating expenses are budgeted to be $1.00 per unit sold plus foed operating ex penses of $1,000 per month. All operating expenses are paid in the month in which they are incurred. No depreciation is included in these figures. Depreciation on the building and equipment for the general and administrative offices is budgeted to be $4,600 for the entire quarter, which includes depreciation on new acquisitions. Martin Manufacturing has a policy that the ending cash balance in each month must be at least 54.000. It has a line of credit with a local bank. The company can borrow in increments of $1,000 at the beginning of each month, up to a total outstanding loan balance of $150,000. The interest rate on these loans is 15 per month simple inter est (not compounded). The company would pay down on the line of credit balance in increments of $1,000 if it has excess funds at the end of the quarter. The company would also pay the accumulated interest at the end of the quarter on the funds bor rowed during the quarter. The company's income tax rate is projected to be 30% of operating income less inter- est expense. The company pays $10,000 cash at the end of February in estimated Requirements 1. Prepare a schedule of cash collections for January, February, and March, and for the quarter in total. Use the following format: 1 2 3 Cash Collections Budget For the Quarter Ended March 31 Month Januar February March Quarter 5 Cash Sales 6 Credit sales 7 Total cash collections 8 CHAPTER Hepare a production budget using the following format Prow Budget Per the quarter Ended March Honth Teaty Harth Regimento Leseginning meny er units to de 2. Prepare a direct materials budget, using the following formats Direct Materials Budget For the Quarter Ended March 31 2 Month February January March Us to be produced from Production Budget 6 Multiply by Quantity pounds comeded per unit ? Quantity and needed for production 8 Plus Desired ending inventory of OM 9 Total quantity (pounds needed 10 Less Beginning inventory of OM 11 Quantity pounds) to purchase 12 Multiply byCost per pound u Total cost of purchases 4. Prepare a cash payments budget for the direct material purchases from Requirement 3, using the following format. (Use the accounts payable balance at December 31 prior year for the prior month payment in January) 1 Cash Payments for Direct Materials Budget 2 For the Quarter Ended March 31 3 Month 4 January February 5 Of current month on purchases 6 80% of prior month DM purchases 7 Total cash payments March Quarter 5. Prepare a cash payments budget for direct labor, using the following format: 1 2 3 4 5 Total cost of director 6 Cash Payments for Direct Labor Budget For the Quarter Ended March 31 Month January February March Quarter Prepare a cash payments budget for manufacturing overhead costs, using the follow The Master Budget 565 ing format: 1 Cash Payments for Hanufacturing Overhead Budget For the outer de arch1 Monts V manufacturing over ons Other ferd MOH Cash payments for manufacturing overhead Rent (und March Quarter CHAPTER 7. Prepare a cash payments budget for operating expenses, using the following format: 1 2 4 Cashayments for Operating Lepenses et For the Quarter Ended Hard Month Vale operating expenses Faxed operating expenses Cash payments for operating expenses March Quarter Prepare a combined cash budget, using the following format: March Quarter 1 Combined Cash Budget 2 For the Quarter Ended March 1 3 Month 4 January February 5. Beginning cash balance 6 Plus: Cash collections 7 Total cash available Less cash payments 9 Direct materia purchases 10 Direct labor 11 Manufacturing overhead costs 12 Operating expenses 13 Tax payment 14 Equipment purchases 15 Total cash paymi 16 Ending cash balance before financing 17 Financing 18 Plus: New borrowings 19 Less: Debt repayments 20 Less: Interest payments 21 Ending cash balance 22 9. Calculate the budgeted manufacturing cost per unit using the following format (assume that fixed manufacturing overhead is budgeted to be $0.80 per unit for the year) 1 2 Budgeted Manufacturing Cost per Unit 3 Direct materials cost per unit 6 Direct labor cost per unit 5 Variable manufacturing overhead costs per unit 6 Fixed manufacturing overhead costs per unit 7 Budgeted cost of manufacturing one unit 8 Contribution Margin Road HAPTER 9 10. Prepare a budgeted income statement for the quarter ending March 31, using the fol lowing format: 1 2 Budgeted Income Statement For the Quarter Ended March 31 3 4 Sales revenue 5 Less: Cost of goods sold 6 Gross profit 7 Less: Operating expenses 8 Less: Depreciation expense 9 Operating income 10 Less: Interest expense 11 Less: Income tax expense 12 Net income 13 "Hint: Cost of goods sold Budgeted cost of manufacturing one unit x Number of units sold P9.58A Cash hudante 31