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Information on sales The yarn balls sell for $ 2 5 each. Recent and budgeted sales ( in units ) are as follows: November (

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 months 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 31st,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 $5.00 per yard. It is company policy to keep enough fleece in raw materials to meet 50% of the next months production needs. As of December 31st, 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 0.5 labour hours (30 minutes) to assemble by hand, as most of the work is done by machine. Employees making the yarn are paid $15.00 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 $1.00 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 Companys other monthly operating expenses are given below:
Variable:
Colour licensing $0.50 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 31st,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 31st:
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

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