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. Klandon's sales manager reported that the company sold 15,000 bags of rocks in March. He has developed the following sales forecast. The expected sales price is $25 per bag. April 18,000 bags May 22,000 bags June 20,000 bags July 24,000 bags 16,000 bags August 2. Sales personnel receive a 4% 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 (see part 7). Monthly Fixed Selling and Administrative Costs Variable Cost/Unit Depreciation $10,000 Salaries of sales personnel 25,000 $1.00 Advertising 1,000 Management salaries 10,000 Miscellaneous 500 Bad debts Total costs $46,500 $1.00 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% of the following month's budgeted sales, in units. On March 31, 4,000 bags were on hand. 4. Eight pounds of direct materials are required to fill each bag of finished rocks. The company wants to have direct materials on hand at the end of each month equal to 10% of the following month's production needs. On March 31, 13,000 pounds of materials were on hand. 5. The direct materials used in production cost $1.25 per pound. Sixty percent of the month's purchases are paid for in the month of purchase; the remaining 40%, in the following month. No discount is available. 6. The standard labor allowed for one bag of rocks is 30 minutes. The current direct labor rate is $12 per hour. 7. On June 1, the company plans to spend $60,000 to upgrade its office equipment that is fully depreciated. The new equipment is expected to have a five-year life, with no residual value. While full-depreciated, the old equipment will be retained in service. 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 420,000 bags. Monthly Fixed Overhead Variable Cost/Unit Depreciation $8,000 Indirect materials 2,500 $0.08 Indirect labor 13,000 0.27 Utilities 18,000 0.15 Property taxes 4,000 Maintenance 7,000 0.25 Total costs $52,500 $0.75 9. All sales are made on account. Historically, the company has collected 70% of its sales in the month of sale and 25% in the month following the sale. The remaining 5% of sales is uncollectible (and is included in the previous selling and administrative bad debt expense information). 10. Klandon must maintain a minimum cash balance of $40,000. 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 any time a principal payment is made. The interest rate is 12% per year. 12. A quarterly dividend of $53,000 will be declared and paid in April. 13. Income taxes payable for the first quarter will be paid on April 15. Klandon's tax rate is 30%. 14. The March 31 balance sheet is as follows: March 31 Cash $40,000 Accounts receivable 93,750 Raw materials inventory 21,600 73,000 Finished goods inventory Plant & equipment 200,000 Accumulated depreciation (50,000) Total assets $378,350 Accounts payable $12,000 Income taxes payable 24,000 Common stock 52,000 Retained earnings 290,350 Total liabilities and equities $378,350 (a) Prepare all components of Klandon's master budget for the second quarter. (Enter negative amounts using either a negative sign preceding the number eg. -45. Do not leave any answer field blank. Enter for amounts.) Sales Budget April May June Quarter Budgeted units sold 18,000 22,000 20,000 60,000 Budgeted sales price 25 25 25 25 Budgeted sales revenue $450,000 $550,000 $500,000 $1,500,000 May $ June June $ Quarter $ Selling and Administrative Expense Budget April Depreciation $10,000 Sales personnel salaries 25,000 Advertising 1,000 Management salaries 10,000 Miscellaneous 500 Sales commissions Bad debts Total budgeted expenses $ Less: Non-cash expenses Depreciation Bad debts Total cash costs $ $ $ $ $ $ $ $ $ $ Production Budget April May June Quarter July Budgeted unit sales Budgeted ending inventory Total units required Beginning inventory Budgeted production Materials Purchases Budget April May June Quarter July Budgeted production Standard pounds per unit Production needs Budgeted ending inventory (pounds) Total pounds required Beginning inventory Budgeted purchases (pounds) Standard price per pound Budgeted purchases cost $ $ $ $ $ $ $ $ $ SO Direct Labor Budget April May June Quarter $ $ $ $ $ $ $ $ Budgeted production Standard DLH per unit Total direct labor hours required Standard wage rate Budgeted direct labor cost Manufacturing Overhead Budget Budgeted production Variable overhead per unit Total variable overhead Fixed overhead Total budgeted manufacturing overhead Less: Non-cash items Depreciation Total cash costs April May June Quarter $ $ $ $ $ $ Ending Inventory and Cost of Goods Sold Budget Raw materials Purchases of raw materials $ Beginning balance Less: Ending raw materials inventory Raw materials used Finished goods Unit costs Direct materials $ Direct labor Overhead Total standard unit cost Ending inventory units Ending finished goods inventory $ Cost of goods sold Beginning work in process inventory Direct materials used Direct labor Manufacturing overhead Total manufacturing costs Less: Ending work in process inventory Cost of goods manufactured Add: Beginning finished goods inventory Less: Ending finished goods inventory Cost of goods sold $ May June Total Cash Receipts $ Bad Debts $ Accounts Receivable $ $ $ Cash Receipts Budget April March sales $ April sales May sales June sales Totals $ $ $ $ $ $ $ Ending Inventory and Cost of Goods Sold Budget Raw materials Purchases of raw materials $ Beginning balance Less: Ending raw materials inventory Raw materials used Finished goods Unit costs Direct materials $ Direct labor Overhead Total standard unit cost Ending inventory units Ending finished goods inventory $ Cost of goods sold Beginning work in process inventory Direct materials used Direct labor Manufacturing overhead Total manufacturing costs Less: Ending work in process inventory Cost of goods manufactured Add: Beginning finished goods inventory Less: Ending finished goods inventory Cost of goods sold $ May June Total Cash Receipts $ Bad Debts $ Accounts Receivable $ $ $ Cash Receipts Budget April March sales $ April sales May sales June sales Totals $ $ $ $ $ $ Cash Payments for Inventory Budget April $ May $ Total Cash Payments $ June $ Accounts Payable $ $ A/P from March April purchases May purchases June purchases Totals $ $ $ Cash Budget April $ May June $ Quarter Beginning cash balance select a cash budget item Collections from sales Total cash available to spend Less: Disbursements Materials purchases Direct labor Manufacturing overhead Selling & administrative expenses Income taxes Equipment purchase Dividends Total cash disbursements Cash excess (deficiency) Minimum cash balance Cash excess (needed) Financing: Borrowings Repayments Interest Total financing Ending cash balance $ $ $ $