Master Budget for a Manufacturer ABC Manufacturing Ltd. produces and distributes a special type of chemical compound called CGX. The information below about ABC's operations has been assembled to assist budget preparation. The company is preparing its master budget for the first quarter of 2016. The budget will detail each month's activity and the activity for the quarter in total. The master budget will be based on the following information: a. Selling price is expected to be $74 per unit in 2016 and will not change for the first two quarters of 2016. Price in 2015 is $73.00 per unit. Actual and estimated sales are as follows: Actual 2015 Estimated 2016 November: 10,500 units January: 11,500 units December: 10,500 units February: 10,500 units March: 13,000 units April: 11,000 units May: 10,000 units b. The company produces enough units each month to meet that month's sales plus a desired inventory level equal to 20% of next month's estimated sales. Finished Goods inventory at the end of 2015 consisted of 2,100 units. c. The company purchases enough raw materials each month for the current month's production requirement and 30% of next month's production requirements. Each unit of product requires 6 kilograms of raw material at $0.50 per kilogram. There were 9,500 kilograms of raw materials in inventory at the end of 2015. ABC pays 45% of raw material purchases in the month of purchase and the remaining 55% in the following month. d. Each unit of finished product requires 1.25 labour-hours. The average wage rate is $20 per hour. e. Variable manufacturing overhead is 60% of the direct labour cost. Credit sales are 60% of total sales. The company collects 70% of the credit sales during the first month following the month of sale and 30% during the second month. f. g. Fixed overhead costs (per month) are as follows: 14,000 65,000 Factory manager and supervisors' salary Factory insurance Factory rent Depreciation of factory equipment 4,200 3,600 Total fixed selling and administrative expenses (per quarter) are as follows: Advertising 3,000 Depreciation 6,000 Insurance 350 Salaries Other 12,000 2,650 i. h. Variable selling and administrative expenses consist of $3 for shipping and 4.5% of sales for commissions. The company will acquire assets for use in the sales office at a cost of $300,000, which will be paid at the end of January 2016. The monthly depreciation expense on the additional capital assets will be $6,000 per month. j. The company will borrow all short-term loans at the beginning of the month and will payback all short-term loans, at end of the month. In addition, the company aims to payback 50,000 (principle) of Notes Payable at the end of February if there is enough cash available. k. The balance sheet as of December 31, 2015, is as follows: $80,000 $21,600 Liabilities and Equity Accounts payable 6% long-term notes payable 597,870 800,000 Assets Cash Accounts receivable Inventory: Raw materials Finished goods Plant and equipment $5,700 Common shares 750,000 90,200 102,170 95,900 Retained earnings Total liabilities and 1,000,000 shareholders' equity $1,673,770 -100,000 Less: accumulated depreciation Total assets $1,673,770 Additional information is as follows: Cash for Accounts Receivables from Dec 31 Balance Sheet will be collected equally in January and February. All cash payments except purchases of raw materials are made monthly as incurred. All borrowings occur at the beginning of each month, and all repayments occur the end of the month. All interest on borrowed funds is paid at the end of each month at a rate of 0.5% per month (including Notes Payable). A minimum cash balance of $30,000 is required at the end of each month. Any excess cash over 30,000 is used to pay off short term loans to the bank. The company will not incur or pay any income tax during the quarter. . . Required: 1. Prepare the following budgets for each of the first three months (Jan, Feb and March) of 2016: Sales budget. Production budget. Raw materials purchase budget. Direct labour and manufacturing overhead budget. Selling and administrative budget. Cash budget. 2. Prepare a budgeted income statement for each of the first three months of 2016 and a budgeted balance sheet as at March 31, 2016. 3. Use Microsoft Excel with linked cells and formula. Without formula, submission will not be considered complete. 4. The Excel file will have a Summary Sheet. Submission will not be complete and accepted without the summary sheet. The summary sheet will show the following linked to the other tabs): Sales Budget (units) in 3 columns (Jan, Feb, Mar) b. Sales Budget (dollars) in 3 columns (Jan, Feb, Mar) Production Budget (units) in 3 columns (Jan, Feb, Mar) d. Raw Materials Purchase Budget (dollars) in 3 columns (Jan, Feb, Mar) Manufacturing Overhead Cost (dollars) in 3 columns (Jan, Feb, Mar) f. Selling and Admin Budget (dollars) in 3 columns (Jan, Feb, Mar) g. Ending Cash Balance - in 3 columns (Jan, Feb, Mar) h. Manufacturing Cost per Unit - in 3 columns (Jan, Feb, Mar) a. C. e. Master Budget for a Manufacturer ABC Manufacturing Ltd. produces and distributes a special type of chemical compound called CGX. The information below about ABC's operations has been assembled to assist budget preparation. The company is preparing its master budget for the first quarter of 2016. The budget will detail each month's activity and the activity for the quarter in total. The master budget will be based on the following information: a. Selling price is expected to be $74 per unit in 2016 and will not change for the first two quarters of 2016. Price in 2015 is $73.00 per unit. Actual and estimated sales are as follows: Actual 2015 Estimated 2016 November: 10,500 units January: 11,500 units December: 10,500 units February: 10,500 units March: 13,000 units April: 11,000 units May: 10,000 units b. The company produces enough units each month to meet that month's sales plus a desired inventory level equal to 20% of next month's estimated sales. Finished Goods inventory at the end of 2015 consisted of 2,100 units. c. The company purchases enough raw materials each month for the current month's production requirement and 30% of next month's production requirements. Each unit of product requires 6 kilograms of raw material at $0.50 per kilogram. There were 9,500 kilograms of raw materials in inventory at the end of 2015. ABC pays 45% of raw material purchases in the month of purchase and the remaining 55% in the following month. d. Each unit of finished product requires 1.25 labour-hours. The average wage rate is $20 per hour. e. Variable manufacturing overhead is 60% of the direct labour cost. Credit sales are 60% of total sales. The company collects 70% of the credit sales during the first month following the month of sale and 30% during the second month. f. g. Fixed overhead costs (per month) are as follows: 14,000 65,000 Factory manager and supervisors' salary Factory insurance Factory rent Depreciation of factory equipment 4,200 3,600 Total fixed selling and administrative expenses (per quarter) are as follows: Advertising 3,000 Depreciation 6,000 Insurance 350 Salaries Other 12,000 2,650 i. h. Variable selling and administrative expenses consist of $3 for shipping and 4.5% of sales for commissions. The company will acquire assets for use in the sales office at a cost of $300,000, which will be paid at the end of January 2016. The monthly depreciation expense on the additional capital assets will be $6,000 per month. j. The company will borrow all short-term loans at the beginning of the month and will payback all short-term loans, at end of the month. In addition, the company aims to payback 50,000 (principle) of Notes Payable at the end of February if there is enough cash available. k. The balance sheet as of December 31, 2015, is as follows: $80,000 $21,600 Liabilities and Equity Accounts payable 6% long-term notes payable 597,870 800,000 Assets Cash Accounts receivable Inventory: Raw materials Finished goods Plant and equipment $5,700 Common shares 750,000 90,200 102,170 95,900 Retained earnings Total liabilities and 1,000,000 shareholders' equity $1,673,770 -100,000 Less: accumulated depreciation Total assets $1,673,770 Additional information is as follows: Cash for Accounts Receivables from Dec 31 Balance Sheet will be collected equally in January and February. All cash payments except purchases of raw materials are made monthly as incurred. All borrowings occur at the beginning of each month, and all repayments occur the end of the month. All interest on borrowed funds is paid at the end of each month at a rate of 0.5% per month (including Notes Payable). A minimum cash balance of $30,000 is required at the end of each month. Any excess cash over 30,000 is used to pay off short term loans to the bank. The company will not incur or pay any income tax during the quarter. . . Required: 1. Prepare the following budgets for each of the first three months (Jan, Feb and March) of 2016: Sales budget. Production budget. Raw materials purchase budget. Direct labour and manufacturing overhead budget. Selling and administrative budget. Cash budget. 2. Prepare a budgeted income statement for each of the first three months of 2016 and a budgeted balance sheet as at March 31, 2016. 3. Use Microsoft Excel with linked cells and formula. Without formula, submission will not be considered complete. 4. The Excel file will have a Summary Sheet. Submission will not be complete and accepted without the summary sheet. The summary sheet will show the following linked to the other tabs): Sales Budget (units) in 3 columns (Jan, Feb, Mar) b. Sales Budget (dollars) in 3 columns (Jan, Feb, Mar) Production Budget (units) in 3 columns (Jan, Feb, Mar) d. Raw Materials Purchase Budget (dollars) in 3 columns (Jan, Feb, Mar) Manufacturing Overhead Cost (dollars) in 3 columns (Jan, Feb, Mar) f. Selling and Admin Budget (dollars) in 3 columns (Jan, Feb, Mar) g. Ending Cash Balance - in 3 columns (Jan, Feb, Mar) h. Manufacturing Cost per Unit - in 3 columns (Jan, Feb, Mar) a. C. e