Jeffrey Vaughn, president of Frame$-$It Company, was just concluding a budget meeting with his senior staff. It was The predetermined overhead rate is $$10$ per direct$-$labor hour. The following production overhead costs are budgeted

for $201.$

All of these costs will be paid in cash during the quarter incurred except for the depreciation charges.

Frame$-$lt$\text{'}$s quarterly selling and administrative expenses are $$116,000,$ paid in cash.

Jackson anticipates that dividends of $$30,000$ will be declared and paid in cash each quarter.

Frame$-$It's projected balance sheet as of December $31,20$x$0,$ follows: Prepare Frame$-$lt$\text{'}$s budgeted statement of retained earnings for $201.$

November of $200,$ and the group was discussing preparation of the firm's master budget for $20$x$1.$ "I've decided to go

ahead and purchase the industrial robot we've been talking about. We'll make the acquisition on January $2$ of next year,

and I expect it will take most of the year to train the personnel and reorganize the production process to take full

advantage of the new equipment."

In response to a question about financing the acquisition, Vaughn replied as follows: "The robot will cost $$1,320,000.$ We'll

finance it with a one$-$year $$1,320,000$ loan from Shark Bank and Trust Company. I've negotiated a repayment schedule of

four equal installments on the last day of each quarter. The interest rate will be $10$ percent, and interest payments will be

quarterly as well." With that the meeting broke up$,$ and the budget process was on$.$

Frame$-$It Company is a manufacturer of metal picture frames. The firm's two product lines are designated as S $($small

frames; $57$ inches$)$ and L $($large frames; $810$ inches$).$ The primary raw materials are flexible metal strips and $9-$inch by

$24-$inch glass sheets. Each $S$ frame requires a $2-$foot metal strip; an $L$ frame requires a $3-$foot strip. Allowing for normal

breakage and scrap glass, Frame$-$lt can get either four S frames or two L frames out of a glass sheet. Other raw materials,

such as cardboard backing, are insignificant in cost and are treated as indirect materials. LaKendra Jackson, Frame$-$It's

controller, is in charge of preparing the master budget for $201.$ She has gathered the following information:

Sales in the fourth quarter of $200$ are expected to be $90,000S$ frames and $85,000L$ frames. The sales manager

predicts that over the next two years, sales in each product line will grow by $8,000$ units each quarter over the previous

quarter. For example, S frame sales in the first quarter of $201$ are expected to be $98,000$ units.

Frame$-$lt$\text{'}$s sales history indicates that $60$ percent of all sales are on credit, with the remainder of the sales in cash. The

company's collection experience shows that $90$ percent of the credit sales are collected during the quarter in which the

sale is made, while the remaining $10$ percent is collected in the following quarter. $($For simplicity, assume the company is

able to collect $100$ percent of its accounts receivable.$)$

The $S$ frame sells for $$11,$ and the $L$ frame sells for $$14.$ These prices are expected to hold constant throughout $201.$

Frame$-$It's production manager attempts to end each quarter with enough finished$-$goods inventory in each product line

to cover $20$ percent of the following quarter's sales. Moreover, an attempt is made to end each quarter with $20$ percent

of the glass sheets needed for the following quarter's production. Because metal strips are purchased locally, Frame$-$It

buys them on a just$-$in$-$time basis; inventory is negligible.

All of Frame$-$It's direct$-$material purchases are made on account, and $90$ percent of each quarter's purchases are paid in

cash during the same quarter as the purchase. The other $10$ percent is paid in the next quarter.

Indirect materials are purchased as needed and paid for in cash. Work$-$in$-$process inventory is negligible.

Projected production costs in $201$ are as follows: