Klandon Company manufactures decorative rocks for aquariums. Kim Klandon is preparing the budget for the quarter ended June 30. She has gathered the following information. 1. Klandons sales manager reported that the company sold 12,000 bags of rocks in March. He has developed the following sales forecast. The expected sales price is $10 per bag. April ......... .20,000 bags May ......... 50,000 bags June......... 30,000 bags July ......... 25,000 bags August ......... 15,000 bags 2. Sales personnel receive a 5 percent commission on every bag of rocks sold. The following monthly fixed selling and administrative expenses are planned for the quarter. However, these amounts do not include the depreciation increase resulting from the budgeted equipment purchase in June.

3. After experiencing difficulty in supplying customers in a timely fashion due to inventory shortages, the company established a policy requiring the ending Finished Goods Inventory to equal 20 percent of the following month's budgeted sales, in units. On March 31, 4,000 bags were on hand. 4. Five pounds of raw materials are required to fi ll each bag of finished rocks. The company wants to have raw materials on hand at the end of each month equal to 10 percent of the following month's production needs. On March 31, 13,000 pounds of materials were on hand. 5. The raw materials used in production cost $0.40 per pound. Half of the month's purchases is paid for in the month of purchase; the other half, in the following month. No discount is available. 6. The standard labor allowed for one bag of rocks is 15 minutes. The current direct labor rate is $10 per hour. 7. On June 1, the company plans to spend $48,000 to upgrade its office equipment that is fully depreciated. The new equipment is expected to have a five-year life, with no residual value. 8. The budgeted monthly variable and fixed overhead amounts are as follows. Variable overhead is based on the number of units produced. The fixed overhead budget is based on an annual production of 400,000 bags.

9. All sales are made on account. Historically, the company has collected 70 percent of its sales in the month of sale and 25 percent in the month following the sale. The remaining 5 percent of sales is uncollectible. 10. Klandon must maintain a minimum cash balance of $30,000. An open line of credit at a local bank allows the company to borrow up to $175,000 per quarter in $1,000 increments. 11. All borrowing is done at the beginning of the month, and all repayments are made at the end of a month in $1,000 increments. Accrued interest is paid only when principal is repaid. The interest rate is 12 percent per year. 12. A quarterly dividend of $49,000 will be declared and paid in April. 13. Income taxes payable for the first quarter will be paid on April 15. Klandons tax rate is 30 percent. 14. The March 31 balance sheet is as follows: March 31 Cash ................. $ 40,000 Accounts receivable.......... 30,000 Finished goods inventory ........ 26,000 Raw materials inventory ........ 5,200 Plant & equipment .......... 200,000 Accumulated depreciation ....... (50,000) Total assets ............. $ 251,200 Accounts payable........... $ 12,000 Income taxes payable ......... 50,000 Common stock............ 52,000 Retained earnings ........... 137,200 Total liabilities and equities ....... $ 251,200 Required a. Prepare all components of Klandons master budget for the second quarter.

1a
Klandon Company
Sales Budget
For the quarter ended June 30
	Month
Particulars	April	May	June	Total
Budgeted Unit sales	20,000	50,000	30,000	1,00,000
Sale Price	10	10	10	10
Budgeted sales	2,00,000	5,00,000	3,00,000	10,00,000
1b.
Klandon Company
Schedule of expected Cash collections
For the quarter ended June 30
	Month
Particulars	April	May	June	Total
Beginning Accounts Receivable
March sales	30,000			30,000
April Credit Sales	1,40,000	50,000	20,000	2,10,000
May Credit Sales		3,50,000	1,25,000	4,75,000
June Credit sales			2,10,000	2,10,000
Total collections	1,70,000	4,00,000	3,55,000	9,25,000
1c.
Klandon Company
Production Budget
For the quarter ended June 30
	Month
Particulars	April	May	June	Total
Budgeted Unit Sales	20,000	50,000	30,000	1,00,000
Add: Desired Ending merchandise inventory	10,000	6,000	5,000	5,000
Total needs	30,000	56,000	35,000	1,05,000
Less: beginning merchandise inventory	4,000	10,000	6,000	4,000
Planned production	26,000	46,000	29,000	1,01,000
3. Raw material Budget
Klandon Company
Raw Material Purchase Budget
For the quarter ended June 30,2015
	Month
Particulars	April	May	June	Total
Planned production units (a)	26,000	46,000	29,000	1,01,000
*Direct Material required per unit (b)	5.0	5.0	5.0	5.0
Direct Material Required for production (c )	1,30,000	2,30,000	1,45,000	5,05,000
Budgeted ending Direct Material (d)	23,000	14,500	11,500	11,500
Beginning Direct Material (e )	13,000	23,000	14,500	13,000
Budgeted direct material purchase f= c+d-e	1,40,000	2,21,500	1,42,000	5,03,500
Cost per pound (g)	$0.4	$0.4	$0.4	$0.4
BudgetedDM purchases	$56,000	$88,600	$56,800	2,01,400
Klandon Company
Schedule of expected Cash payments
For the quarter ended June 30
	Month
Particulars	April	May	June	Total
Beginning Accounts Payable (a)	$12,000			$12,000
April Purchases (b)	$28,000	$28,000		$56,000
May Purchases (c )		$44,300	$44,300	$88,600
June Purchases (d)			$28,400	$28,400
Total payments (a+b+c+d)	$40,000	$72,300	$72,700	$1,85,000
4. Direct labour Budget
Klandon Company
Direct Labour Budget
For the quarter ended June 30,2015
	Month
Particulars	April	May	June	Total
Planned production units (a)	26,000	46,000	29,000	1,01,000
*Direct labour required per unit (b)	0.3	0.3	0.3	0.3
Budgeted Direct labour hours	6,500	11,500	7,250	25,250
Cost per direct labour hour	10	10	10	10
Budgeted Direct labour Cost	$65,000	$1,15,000	$72,500	$2,52,500

b. Prepare a pro-forma income statement for the second quarter. c. Prepare a pro-forma balance sheet as of June30.

b and c?

Depreciation Salaries of sales personnel Advertising Management salaries Miscellaneous Bad debts Total costs Monthly Fixed Selling and Administrative Costs $10,000 25,000 1,000 10,000 500 $46,500 Variable Cost/Unit .50 50 $1.00