Master Budget, Cash Budget and Budgeted Income Statement

You finally graduate and start a new job as a junior accountant at XYZ Inc. Your department is responsible for the nationwide distribution of men grooming sets. Because of the new fashion style and beard culture, the company has grown rapidly, and the prompt growth forces the management team to improve their capacity and efficiency. You have just been given responsibility for financial planning and budgeting for the west coast region. Today is your first day, you have been assigned to work with the controller and prepare the master budget and cash budget for the manager, who will present the budget and discuss the financial objectives during the management meeting tomorrow. The manager has left you some notes.

Notes:

The XYZs grooming kits are sold at $18 and they are flying off the shelves. The monthly sales forecasts are provided below:

Quarter	Unit
Q1-22	20,000
Q2-22	24,000
Q3-22	68,000
Q4-22	35,000
Q1-23	45,000
Q2-23	55,000

The increased sales volume during June and December is due to Fathers Day and holidays with XYZ being one of the favorite gift options. The production manager demands 30% of the next Quarters sales units. XYZ currently does its assembly production in-house. Each unit consists of 2 grooming units and each unit costs $1.00. Each finished unit needs 0.20 labour hours to assemble. The hourly pay rate of the assembling workers is $15 per hour. The production manager also requires the desired ending direct materials inventory as the 40% of the next quarter's direct material units of the production.

Regarding the cash budget, his notes indicate that the company needs a minimum ending cash balance each month of $15,000. All direct material purchases are paid in the following manner: 50% in the quarter of the purchase and the remaining 50% in the next following quarter. All sales to the distributors are made on credit and are to be payable within 45 days. XYZ collects the 60% of Accounts Receivable by the end of each quarter and the rest 40% in the following quarter. XYZ has not experienced any bad debts as the credit terms are favorable. In third quarter 2022, XYZ is planning to purchase a piece of land, which costs $240,000. XYZ has set up a line of credit account with the local bank, which allows XYZ to borrow up to $50,000. XYZ can pay up its balance anytime without penalty and the unpaid balance be charged at 12% annual interest.

Below is the cost estimation of the XYZ division quarterly manufacture overhead and selling and administrative expenses:

Manufacture Overhead
Variable:
Indirect Materials		$ 0.50	per labour hour
Indirect Labour		$ 0.20	per labour hour
Fixed:
Wages and Salaries			$ 2,000
Utilities			$ 1,000
Insurance			$ 1,000
Depreciation			$ 1,500

Selling and General Administrative Expense
Variable
Sales Commission		$2	per unit
Freight		$1	per unit
Fixed:
Wages and Salaries			$ 22,000
Utilities			$ 14,000
Insurance			$ 1,200
Depreciation			$ 1,500
Miscellaneous			$ 3,000

Balance Sheet
Cash			$15,000
Accounts Receivable			$200,000
Accounts Payable			$85,000

Required:

a) Prepare 2022 quarterly master budget and income statement

b) Cash Budget