I. Master Budget Pedros Pizza makes frozen pizza dough. The company just finished its first year of operation (12 months, Jan-Dec). The following is its traditional income statement and Balance Sheet Sales (15,000 units) $ 300,000 CGS 180,000 Gross Profit $ 120,000 Sales Commissions $ 30,000 Salaries 30,000 Depreciation expense 6,000 Net Income $ 54,000 Cash $5,000 AP $3,000 AR 5,000 Credit Line 7,000 Inventory Raw Mat 9,000 Inventory Finished Goods 3,000 Common Stock 12,000 Equipment 60,000 Retained Earn 54,000 Acc Depreciation ( 6,000) Total Assets $76,000 Total L & Eq $76,000 VCP wants to prepare a cash budget for the first 3 months of the next year. Use the following estimates: - The quantity sold is projected to increase 4% for the year. Price will increase 5%. Sales are spread evenly throughout the year. CGS should be calculated on a FIFO basis. - 25% of sales is collected in the month of sale; the remainder is collected the next month. - Inventory: o Last years Finished Goods and Cost of Goods Sold had a constant cost per unit. o All raw materials is purchased on credit ($1.50 per lb) and is the same price as last year. Each product requires 2.5 lbs). o Ending inventory for both should be 40% of next months activity (activity is constant). o Beginning and ending WIP is zero - 20% of purchases are paid in the month of purchase, 80% in the following. All other expenses are paid with cash. - Direct Labor is 0.2 hours per product at $30 per hour. Variable Overhead is $2.25 per product. Fixed Overhead is zero. - The credit line is used for cash shortfalls. Excess cash will pay down this line. Interest is 1% per month of last months balance. - Projections are to buy $6000 of new equipment at the end of January. Equipment is depreciated straight-line to zero salvage over 5 years. All of this is used in administration. - Sales commission rate will remain the same. Salaries will increase by 4%. - VCP wants to maintain a minimum cash balance of at least $5,000. Excess to repay credit line

i. Credit Line/Borrowing/Repay

	Jan	Feb	March
Credit Line Beginning Balance
Borrowing/(Repayment) of Credit Line
Credit Line Ending Balance
Cash Ending Balance