Information on sales

The yarn balls sell for $$25$ each. Recent and budgeted sales $($in units$)$ are as follows:

November $($actual$)10,000$

December $($actual$)11,000$

January $12,000$

February $11,000$

March $11,000$

April $9,000$

May $10,000$

All sales are on credit, with no discount. The company has found that only $25\%$ of a month$$s sales are collected by month$-$end. An additional $70\%$ is collected in the month following the sale, and the remaining $5\%$ is collected in the second month following the sale. Bad debts have been negligible, so they can be ignored for the purposes of the budget.

Information on inventory and production

Inventories of finished goods on hand at the end of each month are to be equal to $10\%$ of the following months budgeted sales. As of December $31$st$,2022,$ the company had $1,200$ balls of yarn in finished goods inventory. The company has no work$-$in$-$process $($WIP$)$ inventory.

Each ball of yarn requires $2$ yards of fleece, which the company purchases for $$5\mathrm{.}00$ per yard. It is company policy to keep enough fleece in raw materials to meet $50\%$ of the next month$$s production needs. As of December $31$st$,$ the Company had $11,900$ yards of fleece in raw materials inventory. Purchases of raw materials are paid for as follows: $50\%$ in the month of purchase and the remaining $50\%$ in the following month.

Each ball of yarn requires only $0\mathrm{.}5$ labour hours $(30$ minutes$)$ to assemble by hand, as most of the work is done by machine. Employees making the yarn are paid $$15\mathrm{.}00$ per hour, and do not work overtime. The Company has enough casual$/$on$-$call workers that they can call in if additional work is required.

Manufacturing overhead includes all the costs of production other than direct materials and direct labour. The variable component of manufacturing overhead is $$1\mathrm{.}00$ per ball of yarn in production, and the fixed component is $$17,000$ per month. The $$17,000$ of fixed manufacturing overhead includes depreciation of $$2,000$ per month on the machines used to manufacture the yarn. Direct labour hours is used as an allocation base for assigning manufacturing overhead to units produced.

The Company$$s other monthly operating expenses are given below:

Variable:

Colour licensing $$0\mathrm{.}50$ per ball of yarn sold $**$

Fixed:

Wages and salaries $$10,000$

Utilities $$2,500$

Insurance $$800$

Depreciation $($S&A$)$ $$1,200$

Misc $$1,000$

All operating expenses are paid during the month in cash, with the exception of the depreciation, as it is not a cash expense.

Balance Sheet as at December $31$st$,2022$:

Assets

Cash $22,500$

Accounts receivable $218,750$

Inventory $-$ Raw Materials $59,500$

Inventory $-$ Finished Goods $24,016$

PP&E $254,000$

Accumulated depreciation $(71,000)$

Total assets $507,766$

Liabilities and Equity

Financing $-$

Accounts payable, purchases $57,500$

Dividends payable $-$

Capital stock, no par $150,000$

Retained earnings $($see below$)300,266$

Total liabilities and equity $507,766$

Additional information on cash requirements and financing

Management of the Company requires a minimum ending cash balance each month of $$10,000.$ The Company can borrow money from its bank at $6\%$ annual interest. All borrowing must be done at the beginning of a month, and repayments must be made at the end of a month. Borrowings and repayments of principal must be in round $$1,000$ amounts. Interest is computed and paid when any repayments occur. Round all interest payments to the nearest whole dollar. Compute interest using whole months, not days. The company wishes to use any excess cash to pay loans off as rapidly as possible.

REQUIRED:

$1-$ Prepare the following for the company for the quarter ending March $31$st:

a$.$ Cash Budget

b$.$ Schedule of Cost of Goods Manufactured

c$.$ Budgeted Income Statement

$($with the cost of goods sold computation included in the income statement$)$

You may ignore income taxes for the purposes of this budget

d$.$ Budgeted Retained Earnings Statement

e$.$ Budgeted Balance Sheet