Master Budget - Cocoas produces chocolate bars and sells them by the case (1 unit =

1 case). Information to be used for the operating budget the next two months is as follows:

Average sales price for each case is estimated to be $25. Sales units for this year are expected to be:

January 80,000

February 84,000

March 88,000

Finished goods inventory is maintained at a level equal to 15 percent of the next months sales.

Each unit of product requires 5 pounds of cocoa beans for direct materials, at a cost of $3 per pound.

Management prefers to maintain ending raw materials inventory equal to 10 percent of next months

materials needed in production.

Each unit of product requires 0.10 direct labor hours at a cost of $14 per hour.

Variable manufacturing overhead costs are

Indirect materials $0.20/unit

Indirect labor $0.15/unit

Other $0.10/unit

Fixed manufacturing overhead costs per month are

Salaries $80,000

Other $70,000

Depreciation $55,625

Monthly selling and administrative cost estimates for the coming year are:

Salaries $170,000

Rent 65,000

Advertising 120,000

Depreciation 75,000

Other 36,000

All sales are made on credit. The company expects to collect 60 percent of sales in the month of sale and

40 percent the month following the sale. Accounts receivable at the end of last year totaled $770,000, all

of which will be collected during the first month of this coming year.

All direct materials purchases are on credit. The company expects to pay 80 percent of purchases in the

month of purchase and 20 percent the following month. Accounts payable at the end of last year totaled

$257,000, all of which will be paid during the first month of this coming year.

The company plans to purchase machinery with cash totaling $150,000 in the first month.

Cocoa Manufacturing has a policy that the monthly beginning cash balance must be at least $200,000.

The company has a line of credit with a local bank with an interest rate of 1% per month. Interest will

be paid in the month following when it was incurred. The company will pay down the line of credit each

month if it has excess funds. Its current loan balance is $500,000.

Prepare the following budgets for just the first 2 months:

1. Sales budget

2. Production budget

3. Direct material purchases budget

4. Direct labor budget

5. Manufacturing overhead budget

6. Operating expense budget

7. Budget for cash collections from sales.

8. Budget for cash payments for purchases of materials.

9. Cash budget

10. Budgeted income statement

PLEASE READ QUESTION CAREFULLY AS ITS DIFFERENT THAN OTHER POSTED! PLEASE EXPLAIN AND SHOW WORK THANK YOU!