Master Budget Case Wacky Widgets Inc Wacky Widgets Inc. is a toy company that manufactures and sells a single product, the kadoodle. For planning and control purposes they utilize a quarterly master budget, which is usually developed at least six months in advance of the budget year. Their fiscal year end is December 31. Early in 2021, Katrina Kyle, the Wacky Widgets controller, spent some time putting together a sales forecast for the next budget year (January to December, 2022). In April, however, Katrina decided to follow her dream and sail around the world. She left Wacky Widgets with minimal notice. Susan Alexander, the president of Wacky Widgets, desperately needing the budget completed, has approached you, a management accounting student, for help in preparing the budget for the coming scal year. Your conversations with Susan and your investigations of the company's records have revealed the following information: 1. Katrina's sales forecast consisted of these few lines: For the year ended Dec. 31, 2021: 125,000 units at $19.00 each For the year ended Dec. 31, 2022: 140,000 units at $19.50 each For the year ended Dec. 31, 2023: 145,000 units at $20.00 each 2. Because the product is a toy, sales are very seasonal, with 65% of sales taking place in the last quarter of their scal year (Oct-Dec) as their customers, primarily retail stores, ramp up for the holiday season. 5% of sales take place in their first quarter, 10% in the second quarter, and 20% in their third quarter. . Because sales are seasonal, Wacky Widgets must rent an additional storage facility from August to November to house the additional finished toys on hand. The only related cost is a at $1,500 per month, payable at the beginning of the month. . Sales are on a cash and credit basis, with 85% collected during the quarter of the sale, and 15% the following quarter. 5. From previous experience, management has determined that an ending nished goods inventory equal to 10% of the next quarter's sales is required to meet customer demand. Opening finished goods inventory consists of 700 kadoodles. 6. The primary raw material used is a newly designed plastic. Each kadoodle requires 250 g (.25 kg) of plastic (including a wastage allowance), which the company purchases for $30.00 per kg. Wacky Widgets nds it necessary to maintain an inventory balance equal to 15% of the following quarter's production needs of plastic as a precaution against stock-outs. Wacky Widgets pays for 80% of a quarter's purchases in the quarter of purchase and 20% in the following quarter. . Much of the manufacturing process is done by hand. Employees are paid an average of $27 per hour, including the employer's portion of employee benefits. All payroll costs are paid in the period in which they are incurred. Each kadoodle spends a total of 15 minutes in production. . Due to the company's concentration on a single product, manufacturing overhead is allocated based on volume (i.e. the units produced). The variable overhead manufacturing rate is $1.25 per unit. 9. The xed manufacturing overhead costs for the entire year are as follows: Supervisor's salary 98,400 Depreciation on equipment 80,000 Insurance 28,000 Other 15,000 m The annual insurance premium is paid at the beginning of October each yeah All other \"cash-related" xed manufacturing overhead costs are incurred evenly over the year and paid as incurred. . Wacky Widgets uses the straight line method of depreciation. 10.Selling and administrative expenses are known to be a mixed cost; however, there is a lot of uncertainty about the portion that is xed. The previous year's experience has provided the following information: Unit Sales Selling and Admin Cost 01 6,250 1 6,500 02 12,500 29,000 03 25,000 54,000 Q4 81,250 166,500 These costs are paid in the quarter in which they occur. 11.During the fiscal year ended Dec. 31, 2022, Wacky Widgets will be required to make quarterly income tax installment payments of $12,000. Outstanding income taxes from the year ended Dec. 31, 2021 must be paid in April, 2022. Income tax expense is estimated to be 25% of net income. Income taxes for the year ended December 31, 2022, in excess of installment payments, will be paid in April, 2023. 12.Wacky Widgets is planning to acquire additional manufacturing equipment for $148,300 cash. 60% of this amount is to be paid in March, 2022, the rest, in April, 2022. The manufacturing overhead costs shown above already include the depreciation on this equipment. 13.Wacky Widgets Inc. has a policy of paying dividends at the end of each quarter. The president tells you that the board of directors is planning on continuing their policy of declaring dividends of $10,000 per quarter. 14.Wacky Widgets has negotiated with the bank for a line of credit at a rate of 9% per annum (i.e. 2.25% per quarter). Amounts can be borrowed or repaid in increments of $1,000. Amounts are assumed to be borrowed at the beginning of the quarter when needed and repaid at the end of the quarter when cash is available. A minimum cash balance of $20,000 must be maintained. 15.A listing of the estimated balances in the company's ledger accounts as of December 31, 2021. Cash $20,345 Accounts receivable 231,563 Inventory-raw materials 8,663 Inventory-finished goods 11,900 Prepaid insurance 14,000 Capital assets (net) 1,050,000 m Accounts payable $ 95,859 Income tax payable 26,200 Capital stock 800,000 Retained earnings 414 411 $41M Required: Prepare a quarterly master budget for Wacky Widgets for the year ended December 31, 2022, including the following schedules: Sales Budget 8: Schedule of Cash Receipts Production Budget Direct Materials Budget & Schedule of Cash Disbursements Direct Labour Budget Manufacturing Overhead Budget Selling and Administrative Expense Budget Cash Budget Please refer to the instruction sheet posted on D2L for further direction in completing this assignment. Part 1 Wacky Widgets Inc Sales Budget & Schedule of Cash Receipts Year ended Dec 31, 2022 Q1 Q2 Q3 Q4 Total Q4 2021 Estimated sales in units 7,000 14,000 28,000 91,000 140,000 81250 Selling price per unit $ 19.50 19.50 19.50 19.50 19.50 19.50 Budgeted sales ($) $ 136,500 $ 273,000 $ 546,000 $ 1,774,500 $ 2,730,000 $ 1,584,375 Part 2 Wacky Widgets Inc Production Budget Year ended Dec 31, 2022 Q1 Q2 Q3 Q4 Total Q1 2023 Q2 2023 Q3 2021 Q4 2021 Estimated sales in units 7,000 15% 14,000 28,000 91,000 140,000 7,250 14,500 25000 81,250 Add: Read ending inventory (units) 2, 100 4,200 13,650 1,088 1,088 2, 175 12,188 1,050 Reqd total units available 9,100 18,200 41,650 92,088 141,088 9,425 37,188 82,300 Less: Beginning inventory (units) 1,050 2, 100 4,200 13,650 1,050 1,088 3750 12, 188 Units to be produced 8.050 16, 100 37,450 78,438 140,038 8,338 33,438 70, 113 Part 3 Wacky Widgets Inc Direct Materials Budget & Schedule of Cash Disbursements Year ended Dec 31, 2022 Q1 Q2 Q3 Q4 Total Q1 2023 Q3 2021 Q4 2021 Units to be produced 8,050 16, 100 37,450 78,438 140,038 8,338 33,438 70,113 Raw materials per unit (kg) 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 Raw materials read for production (kg) 2,013 4,025 9,363 19,609 35,009 2,084 8,359 17,528 Add: Read Ending inventory of RM (kg) 604 1,404 2,941 313 313 2,629.22 302 Total RM reqd to be available (kg) 2,616 5,429 12,304 19,922 35,322 10,989 17,830Year ended Dec 31, 2022 Q1 Q2 Q3 Q4 Total Q1 2023 Q3 2021 Q4 2021 Units to be produced 8,050 16, 100 37,450 78,438 140,038 8,338 33,438 70,113 Raw materials per unit (kg) 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 Raw materials read for production (kg) 2,013 4,025 9,363 19,609 35,009 2,084 8,359 17,528 Add: Read Ending inventory of RM (kg) 604 1,404 2,941 313 313 2,629.22 302 Total RM reqd to be available (kg) 2,616 5,429 12,304 19,922 35,322 10,989 17,830 Less: Beginning RM inventory (kg) 302 604 1,404 2,941 302 1,253.91 RM to be purchased (kg) 2,314 4,826 10,900 16,981 35,020 9,735 Cost per kg ($) $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 Cost of RM purchases ($) $ 69,431 $ 144,769 $ 326,986 $ 509,419 $ 1,050,605 $ 292,041 Part 4 Wacky Widgets Inc Direct Labour budget Year ended Dec 31, 2022 Q1 Q2 Q3 Q4 Total Units to be produced 8,050 16, 100 37,450 78,438 140,038 DLH reqd per unit 0.25 0.25 0.25 0.25 0.25 Total DLH required for production 2,013 4,025 9,363 19,609 35,009 DL wage rate per hour ($) $ 27.00 $ 27.00 $ 27.00 $ 27.00 $ 27.00 Budgeted DL cost ($) $ 54,338 $ 108,675 $ 252,788 $ 529,453 $ 945,253 Part 5 Wacky Widgets Inc Manufacturing overhead budget Year ended Dec 31, 2022 Q1 Q2 Q3 Q4 Total Variable MOH ($) @ $1.25 of Units Produced