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The management of Zigby Manufacturing prepared the following balance sheet for March 31. Assets Cash Accounts receivable Raw materials inventory Finished goods inventory Equipment Less: Accumulated depreciation 2 IGBY MANUFACTURING Balance Sheet March 31 Liabilities and Equity $ 59,000 Liabilities 455,000 Accounts payable 93,000 Loan payable 433,000 Long-term note payable Equity 469,000 Common stock Retained earnings $ 1,509,000 Total liabilities and equity $ 215,400 31,000 500,000 $ 746,400 $ 638,000 169,000 354,000 408,600 762,600 $ 1,509,000 Total assets To prepare a master budget for April, May, and June, management gathers the following information. a. Sales for March total 25,000 units. Budgeted sales in units follow. April, 25,000; May, 17,000; June, 22,400; and July, 25,000. The product's selling price is $26.00 per unit and its total product cost is $21.65 per unit. b. Raw materials inventory consists solely of direct materials that cost $20 per pound. Company policy calls for a given month's ending materials inventory to equal 50% of the next month's direct materials requirements. The March 31 raw materials inventory is 4,650 pounds. The budgeted June 30 ending raw materials inventory is 5,900 pounds. Each finished unit requires 0.50 pound of direct materials. c. Company policy calls for a given month's ending finished goods Inventory to equal 80% of the next month's budgeted unit sales. The March 31 finished goods inventory is 20,000 units. d. Each finished unit requires 0.50 hour of direct labor at a rate of $15 per hour e. The predetermined variable overhead rate is $4.60 per direct labor hour. Depreciation of $39.713 per month is the only fixed factory overhead item 1. Sales commissions of 5% of sales are paid in the month of the sales. The sales manager's monthly salary is $4,900. 9. Monthly general and administrative expenses include $34,000 for administrative salaries and 0.8% monthly interest on the long- term note payable. h. The company budgets 30% of sales to be for cash and the remaining 70% on credit. Credit sales are collected in full in the month following the sale (no credit sales are collected in the month of sale). 1. All raw materials purchases are on credit, and accounts payable are solely tied to raw materials purchases, Raw materials purchases are fully paid in the next month (none are paid in the month of purchase) J. The minimum ending cash balance for all months is $59,000. If necessary, the company borrows enough cash using a loan to reach the minimum. Loans require an interest payment of 1% at each month-end (before any repayment). If the month-end preliminary cash balance exceeds the minimum, the excess will be used to repay any loans k. Dividends of $29,000 are budgeted to be declared and paid in May. 1. No cash payments for income taxes are budgeted in the second calendar quarter Income tax will be assessed at 35% in the quarter and budgeted to be paid in the third calendar quarter. m. Equipment purchases of $100,000 are budgeted for the last day of June. Required: Prepare the following budgets for the months of April, May, and June: 1. Sales budget 2. Production budget. 3. Direct materials budget. 4. Direct labor budget 5. Factory overhead budget. 6. Selling expense budget. 7. General and administrative expense budget. 8. Schedule of cash receipts. 9. Schedule of cash payments for direct materials. 10. Cash budget. 11. Budgeted income statement for entire second quarter (not monthly). 12. Budgeted balance sheet at June 30. Direct labor budget. (Round per unit values to 2 decimal places.) ZIGBY MANUFACTURING Direct Labor Budget April May Units to produce June Total Direct labor hours needed 0 Cost of direct labor Factory overhead budget. (Round variable overhead rate values to 2 decimal places.) June Total ZIGBY MANUFACTURING Factory Overhead Budget April May Direct labor hours needed Variable overhead rate per direct labor hour Budgeted variable overhead Budgeted fixed overhead Budgeted total factory overhead Selling expense budget. ZIGBY MANUFACTURING Selling Expense Budget April May June Budgeted sales Sales commissions General and administrative expense budget. ZIGBY MANUFACTURING General and Administrative Expense Budget April May June Total general and administrative expenses
