Hagrid's Manufacturing Co. makes metal desks for offices. They are in the process of preparing an operating budget and a cash budget for 2019. The yearly budget will be broken into quarters to provide more details. The details required for the 2019 budget are given below:

2019 Quarter Budgeted Sales Volume

• Q1 4,300
• Q2 4,600
• Q3 4,500
• Q4 4,800
  • Each desk sells for $500
  • There are estimated to be 800 desks in finished goods inventory at the end of 2018 with a value of $360,000. Hagrid's Manufacturing Co.'s goal is to have 600 units in finished goods inventory at the end of each quarter.
  • Each desk uses 50 sq ft of metal (direct material) during the manufacturing process. The cost of metal for 2019 is estimated to be $8/sq ft.
  • Hagrid's Manufacturing Co. currently has 30,000 sq ft of metal (direct material) in the beginning inventory. At the end of each quarter, Hagrid's Manufacturing Co. wants to have 40,000 sq ft of ending inventory.
  • Each desk requires four machine hours and 2 direct labor hours to manufacture.
  • Direct labor costs is estimated to be $14 per direct labor hour.
  • Hagrid's Manufacturing Co. allocated manufacturing overhead costs based on the estimated number of machine-hours. Estimated manufacturing overhead costs for 2019 are $630,000.
  • For each quarter, it is estimated that 40% of sales will be cash sales and 60% will be credit sales. Of the credit sales, 80% of customers pay in the quarter of the sale and 20% pay in the following quarter. Credit sales for Q4 of 2018 is $1,300,000.
  • Direct labor costs and manufacturing overhead costs are paid for in cash in the quarter they are incurred.
  • Assume operating expenses occur evenly throughout the year and are all paid fully in cash
  • For each quarter, 70% of material purchases are paid for in cash in the quarter of the purchase and 30% are paid for in the following quarter. Purchases of materials from Q4 2018 were $1,500,000.
  • Hagrid's Manufacturing Co. will purchase a new machine worth $700,000 and will make two equal payments. The first payment will be made in Q1 2019 and the second payment will be made in Q3 2019.
  • Hagrid's Manufacturing Co. will pay $60,000 in dividends in Q4 2019.
  • The beginning cash balance is estimated to be $15,000. Hagrid's Manufacturing Co. wants to maintain a minimum cash balance of $10,000 in the bank at the end of each quarter. Use 12% Annual Interest Rate om Financing Borrowing when calculating the interest to be repaid.
  • The sales and administrative expenses will be (occurring evenly throughout the year and all paid fully in cash):
    • Variable Costs
      • Delivery $ 5,200
      • Commissions $ 6,500
      • Office Supplies $ 2,300
    • Fixed Costs
      • Accounting & Professional Services $ 1,800
      • Administrative Salaries $ 35,000
      • Advertising $ 9,000
      • Computer Lease $ 4,200
      • Print Collateral $ 1,400
      • Insurance $ 1,200
      • Interest on Notes Payable $ 500
      • Rent $ 20,000
      • Utilities $ 3,000
      • Sales Salaries $ 42,000

REQUIRED

a) Prepare the following 2019 budgets using the information provided above:

• Sales budget for each quarter
• Production budget for each quarter
• Direct material budget for each quarter
• Direct labor budget for each quarter
• Manufacturing overhead budget for each quarter
• Sales and administrative expense budget

b) Prepare the following reports/budget for 2019 using the information provided above:

• Cost of Goods Sold Schedule
• Budgeted Income Statement
• Cash Collection Schedule for each quarter (remember to break out the cash sales first, then apply the % collected to the credit sales and add the two together to get each quarter's cash collections)
• Cash Payments Schedule for each quarter
• Cash Budget for each quarter