Master Budget Assignment

Washington company is preparing its monthly budget for $2025.$ The following estimates and

information are available.

Selling and Administration expenses are $$12$ per unit and $$30,000$ per month. There is no

depreciation included in this figure.

Dividends of $$500,000$ will be declared in December.

Due to payroll processing times, half of the wages earned by workers is paid in the month of

production, and the other half is paid in the following month

A Company has a very flexible work force that allows them to scale up or down without cost

each month.

The selling price per unit is $$1,700$ except during May to August, inclusive, where increased

competition requires a $$50$ price reduction.

Overhead is $$250,000$ per month plus $$28$ per direct labguc hour. Overhead costs are all paid in

the month they occur, and there is $$100,000$ per month in depreciation included.

Each unit requires $10$ hours of direct Jabgur and $2$ pounds of metal to make.

Customer collections are received $48\%$ in the month of sale, $38\%$ in the next month, and $13\%$ in

The company uses the absorption method of costing to calions are received.

nd cost of goods sold The finished goods inventory

hours.

They have $820$ pounds of metal already in inventory. To prepare for supply disruptions of metal

the company likes to keep monthly ending inventory of metal high enough to meet the next two

month's production requirements. In practice, their attempts at this might not always work out,

but they were successful to end December $2024.$

Direct labgur costs $$28$ per hour.

Accounts payable are paid $60\%$ in the month of purchase and $40\%$ in the following month.

Each pound of metal costs $$18\mathrm{.}50$

In December $2024,1,000$ pounds of metal were purchased and $1,050$ hours of Direct Labeh$5-$

worked.

Sales are estimated as follows:

A Company keeps a minimum amount of the following:

Finished Goods Inventory units from December $2024$ is equal to the targeted inventory policy.

All sales are on account.

Land will be sold in March for $$750,000$

$$400,000$ of equipment will be purchased in June and will not be in service until $2026.$

The company has a line of credit at the bank for up to $$10$ million at an interest rate of $7\%.$

Borrowing happens on the first day of the month and repayments are made, when available, at

each month based on the loan balance outstanding.

Since the interest is deducted from the bank account, it is ok to allow the ending bank balance

to be below the minimum by the amount of interest expense in the month. For example, if

interest expense on the line of credit is $$5,000$ in a month, the ending balance can be left as

$$2,495,000$ after the interest is deducted. That is close enough to the minimum for our

purposes. Complete the monthly master budget including monthly cash projections,with year$-$end balance sheet and income statement.