ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30, 2019 Sales $1,555,000 Cost of goods sold 1,275, 100 279,900 IS 77.750 14,100 Operating expenses Sales commissions Sales salaries General administrative salaries Bank loan interest expense Long-term note interest 87,000 290 12,480 191,620 Total operating expenses Income before taxes Income tax 88, 280 35,312 Net income 52,968 I 6) The special order will be on account and the customer is not expected to pay until June. Zigby's management plans to compensate by intensifying collections efforts on their other customers by sending bills out sooner. Management feels these efforts will result in collection of 20% of the credit sales in the month of sale. (This will be in addition to the cash sales for the month). The remainder of credit sales will be collected in the subsequent month. All of March 31 receivables are expected to be collected in April, May special order is expected to be collected in June. Complete the tables below to revise the estimate of credit sales. The one-time sale is considered credit ZIGBY MANUFACTURING Revised Cash Receipts from Customers April May June Current month's cash sales (from connect) 116,000 85,500 109,500 Current month's credit sales collected 92,800 68,400 87,600 (20% of current months credit sales) Previous month's credit sales collected 464,000 371,200 273,600 (80% of previous months sales) Special order collected in June 414,675 Total cash receipts 672,800 525,100 885,375 7) Additionally, to conserve cash, the company has decided to delay payment for their raw material purchases. The company previously paid 100% of their raw material purchases (revised budget in 3) in the month after the purchase was made. Starting with March purchases (Accounts Payable balance at 3/31), Zigby plans to only pay 80% of their purchases in the first month after the purchases are made. The remaining 20% will be paid in the second month after purchase (Example: 80% of accounts payable on March 31 will be paid in April and the remaining 20% will be paid in May. April sales will be paid in May and Junc, etc.) Remember: Purchases budgeted in 3 increased accounts payable (credit) while estimated payments here decreases accounts payable (debit). ZIGBY MANUFACTURING Estimated Payments for Raw Material Purchases June 30 Accounts April May June Payable March 31 Accounts Payable 165,040 41,260 April purchases 206,907 51,727 May Purchases 220,116 55,029 June Purchases 270,851 Total cash payments 165,040 248, 167 271,843 325,880 8) Using the revised bodgets, complete the revised cash budget. Remember, Zigby Manufacturing will need to maintain the indicated minimum cash balance (given on connect) at the end of each month. Outstanding short-term potes require an interest payment of 1% at each month-end (before any repayment). Repayments of short-term notes payable balance will be made only to the extend the ending cash balance exceeds the minimum required. This table is completed similarly to the budget table in connect 1 May 256,746 525,100 781,846 June 200,056 885,375 1,085,431 ZIGBY MANUFACTURING Revised Cash Budget April Beginning cash balance 57,000 Cash receipts from customers 672,800 Total cash available 729,800 Cash payments for: Raw materials 165,040 Direct labor 171,560 Variable overhead 40,304 Sales commissions 29,000 Sales salaries 4,700 General & administrative salaries 29,000 Dividends Loan interest 290 Long-term note interest 4,160 Purchases of equipment Total cash payments 444,054 Preliminary cash balance 285,746 Additional loan (loan repayment) (29,000) Ending cash balance 256,746 248 167 201,320 46,068 21,375 4,700 29,000 27,000 0 4,160 271,843 149,110 50,468 27375 4,700 29,000 581,790 200,056 0 200,056 0 4,160 147,000 683,656 401,775 0 401,775 May June Revised Loan balance: ST note payable April Loan balance - Beginning of month 29,000 Additional loan (loan repayment) (29,000) Loan balance - End of month 0 ololo ODO 9) In Zigby's original budget (connect) the average cost for raw material and finished goods was given. Because of the discount to raw material and the increased volume of production, you will need to calculate the weighted avenge cost per unit to use to value ending inventory, direct material used in production, and cost of goods sold. Start with raw material 2) Usc information from March 31 balance sheet (connect) and the revised purchase budget in 3) to complete the table below. I $91,600 804,630 ZIGBY MANUFACTURING Wolahted Average Cost per Raw Material unit Costs: March 31 Raw Material Balance (connect) Raw Material purchases flotal from 3 net of discount) Total Costs available for use in production (m) Units: Units in 3/31 Raw Material inventory connect) Units purchased during quarter (from 3) Total units available for production) Weighted Average Cost per unit ( @b) show 2 decimal 896,230 4,580 40,770 45,350 19.76 b) Use the weighted average cost per unit to calculate the June 30 raw material inventory balance and the cost of direct material used in production. Use the notes below the table for assistance Total Accounted for ZIGBY MANUFACTURING Raw Material Inventory Allocation of Costs Inventory at Used in 6/30 Production Units 5700 39,650 Weighted average cost per unit 19.76 19.76 Allocated costs $112,632 $783,484 896,116 1) Units in inventory at 6/30 are provided on connect (also used in revised purchase budget in 3). i) Calculate units used in production" as the Units Ailable for production" (table above) minus the units in 6/30 inventory 1) Include the "weighted average cost per unit" from the first table. iv) Calculate the "Allocated costs" as the units times the weighted-average cost per unit in each row 10) Connect gives a total product cost" per unit that is used to calculate the ending inventory value and cost of goods sold. This per unit cost includes fixed overhead costs assuming the quarter's original production and sales levels. This average will change because of the one-time sale, Zigby Manufacturing uses weighted average costing for its inventory. Because Zigby does not have any Work-In-Process inventory, we can assume that all production costs flow to finished goods and then to cost of goods sold. a) Follow the directions below the table to calculate the revised weighted average cost per unit. I ZIGBY MANUFACTURING Welghted Average Cost per Finished Goods Inventory Costs: March 31 Finished Goods Inventory connect) Raw Material used in production (calculated in 9) Budgeted Direct Labor costs calculated in 6 Including wage premium) Budgeted Overhead Costs (calculated in 5. Both variable and fixed) Total Costs of Finished Goods available for use sale (a) Units: Units in 3/31 Finished Goods Inventory (connect) Units produced during quarter (from 2) Total units available for sale (b) Weighted Average Cost per unit (a) (b) show 2 decimals $380,480 783,484 521,990 278,490 1,964,444 18,560 79,300 97,860 20.07 b) Use the weighted average cost per unit to allocate costs between 6/30 finished goods inventory and COGS Total Accounted for ZIGBY MANUFACTURING Finished Goods Inventory Allocation of Costs FG Inventory at Sold 6/30 Units 18,560 79,300 Weighted average cost per unit 20.07 20.07 Allocated costs 372,499 1,591,551 1.964,050 i) Units in Finished Goods Inventory at 6/30 are provided on connect (also used in revised production budget in 2) ii) Calculate units sold as the Units available for sale (table above) minus the units in 6/30 inventory iii) Include the "weighted-average cost per unit from the first table. iv) Calculate the "Allocated costs" as the units times the weighted average cost per unit in each Tow. Use these costs for Finished Goods Inventory on the budgeted 6/30 balance sheet and Cost of Goods Sold in the budgeted income statement for the quarter ending June 30. 11) Using revised budget amounts where appropriate, complete the revised Budgeted Income Statement below. Include amounts in the light blue cells. I 1,969,675 1,591,551 378,124 ZIGBY MANUFACTURING Revised Budgeted Income Statement For Three Months Ended June 30, 2019 Sales, net of discount Cost of goods sold from 10 Gross profit Sales commissions Sales salaries General administrative salaries Long-term note interest Bank loan interest expense Total operating expenses Income before taxes Income tax Net Income 27,375 4,700 29,000 4,160 0 65,235 312,889
