Manufacturing: Preparation of the Master Budget
The management of Zigby Manufacturing prepared the following estimated Balance Sheet for March 2017.
Assets Cash Accounts receivable Raw materials inventory Finished goods inventory Total current assets Equipment Accumulated depreciation Equipment, net Total assets ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2017 Liabilities and Equity $ 40,000 Accounts payable 342,248 98.500 325.540 806.288 600,000 (150.000) 450,000 $1,256,288 $ 200.500 Short-term notes payable 12,000 Total current liabilities 212.500 Long-term note payable 500,000 Total liabilities 712,500 Common stock 335,000 Retained earnings 208,788 Total stockholders' equity 543.788 Total liabilities and equity $1,256,288 a. Sales for March total 20.500 units. Forecasted sales in units are as follows: April, 20,500; May, 19,500; June, 20,000; and July, 20,500. Sales of 240,000 units are forecasted for the entire year. The product's selling price is $23.85 per unit and its total product cost is $19.85 per unit. Page 925 b. Company policy calls for a given month's ending raw materials inventory to equal 50% of the next month's materials requirements. The March 31 raw materials inventory is 4,925 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,000 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials. c. Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's expected unit sales. The March 31 finished goods inventory is 16.400 units, which complies with the policy. d. Each finished unit requires 0.50 hours of direct labor at a rate of $15 per hour. e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $20,000 per month is treated as fixed factory overhead. f. Sales representatives' commissions are 8% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,000. g. Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long- term note payable. 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, except as otherwise noted below. Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar. 1. Sales budget. 2. Production budget. Check (2) Units to produce: April, 19,700; May, 19,900 3. Raw materials budget. (3) Cost of raw materials purchases: April, $198,000 4. Direct labor budget. 5. Factory overhead budget. (5) Total overhead cost: May, $46,865 6. Selling expense budget. 7. General and administrative expense budget. Part 1 April 2015. May 2015 ZIGBY MANUFACTURING Sales Budgets April, May, and June 2017 June 2015 Total for the second quarter.. Part 2 ZIGBY MANUFACTURING Production Budget April, May, and June 2017 April Next month's budgeted sales (in units)... Ratio of inventory to future sales ....... Budgeted ending inventory....... Add budgeted sales (units)............. Required units to be produced. Deduct beginning inventory............. Units to be produced X Budgeted Units 80% Budgeted Unit Price May X 80% X June Budgeted Total Dollars 80% Total 60,000 Part 3 ZIGBY MANUFACTURING Raw Materials Budget April, May, and June 2017 April Production budget (units). Materials requirement per unit... Materials needed for production........ Add budgeted ending inventory. Total materials requirements (units). Deduct beginning inventory..... Materials to be purchased... Material price per unit... Total cost of raw material purchases..... X I Xen $ 20 0.50 X $ 20 May 0.50 X $ 20 June 0.50 Total 29.075 $ 20 $581.500 Part 4 Budgeted production (units) Labor requirements per unit (hours). X 0.50 Total labor hours needed Labor rate (per hour).. Labor dollars Part 5 ZIGBY MANUFACTURING Direct Labor Budget April, May, and June 2017 April Labor hours needed. Variable factory overhead rate Budgeted variable overhead.. Fixed overhead Budgeted total overhead.. Part 6 *********. Budgeted sales Sales commission percent. Sales commissions expense Sales salaries Total selling expenses **** May ZIGBY MANUFACTURING Factory Overhead Budget April, May, and June 2017 April ZIGBY MANUFACTURING Selling Expense Budgets April, May, and June 2017 April x 0.50 $149,250 May May June X 0.50 June June Total 30,000 Total $141.000 Total $123,480 Part 7 ZIGBY MANUFACTURING General and Administrative Expense Budgets April, May, and June 2017 April May Salaries.. Interest on long-term note...(.009)........ Total expenses June. Total
