Managerial Accounting: Master Budget Question

Zigby Manufacturing prepared the following estimated balance sheet for March 2017:

To prepare a master budget for April, May, and June of 2017, management gathers the following information:

1. Sales for March total 25,000 units. Forecasted sales in units are as follows: April 25,000: May, 16,300, June 21,100; July, 25,000. Sales of 244,000 units are forecasted for the entire year. The products selling price is $25.00 per unit and the total product cost is $22.20 per unit.
2. Company policy calls for a given months ending raw materials inventory to equal 50% of the next months materials requirements. The March 31 raw materials inventory is 4,510 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,400 units. Raw materials cost $20 per unit. Each finished unit requires .50 units of raw materials.
3. Company policy calls for a given months ending finished goods inventory to equal 80% of the next months expected unit sales. The March 31 finished goods inventory is 20,000 units, which complies with the policy.
4. Each finished unit requires .50 hours of direct labor at a rate of $19 per hour.
5. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.10 per direct labor hour. Depreciation of $23,920 per month is treated as fixed factory overhead.
6. Sales representatives commissions are 6% of sales and are paid in the month of the sales. The sales managers monthly salary is $3,400 per month.
7. Monthly general and administrative expenses include $16,000 administrative salaries and .8% monthly interest on the long-term note payable.
8. The company expects 20% of sales to be for cash and the remaining 80% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of the sale)
9. All raw materials purchases are on credit, and no payables arise from any other transactions. One months raw materials purchases are fully paid in the next month.
10. The minimum ending cash balance for all months is $44,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.
11. Dividends of $14,000 are to be declared and paid in May
12. No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 40% in the quarter and paid in the third calendar quarter.
13. Equipment purchases of $134,000 are budgeted for the last day of June.

REQUIRED: Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter (April, May, June) except as otherwise noted. Round calculations to the nearest whole dollars, and submitted in Excel via Canvas.

1. Sales Budget
2. Production Budget
3. Raw Materials Budget
4. Direct Labor Budget
5. Factory Overhead Budget
6. Selling Expense Budget
7. General and Administrative Expense Budget
8. Schedule of Expected Cash Receipts and Expected June 30 Balance of Accounts Receivable
9. Schedule of Expected Cash Payments and Expected June 30 Balance of Accounts Payable
10. Cash Budget
11. Budgeted Income statement for the entire second quarter (not for each month separately)
12. Budgeted Statement of Retained Earnings
13. Budgeted Balance Sheet

You can use areas on these budget tabs or separate tabs to document any supporting calculations or assumptions needed to come up with the above information.

Problem Answer Checks:

Schedule 2. Units to be Produced: April 18,040; May 20,140

Schedule 3. Cost of raw (direct) material purchases: April $190,900

Schedule 5. Total overhead cost, May $55,137

Schedule 10. Ending Cash Balance April $181,258, May $287,421

Schedule 13 Budgeted Total Assets: June 30 $1,514,240

Hint: Set up the March 31,2017 Balance Sheet in Excel as your first tab