Master budgets assignment Question 10
The management of Zigby Manufacturing prepared the following balance sheet for March 31. ZIGBY MANUFACTURING Balance Sheet March 31 . Assets Liabilities and Equ1ty C35\" $ 88,000 Liabilities Accounts receivable 757,680 Accounts payable $ 4113.333 Raw materials inventory 216,700 Loan payable . . Finished goods inventory 716,188 Long-term note payable 1,100,000 $ 1,554,200 Equipment $ 1,320,000 Equity 737 000 Less: Accumulated depreciation 330,000 990,000 Common stock , 8 1 214 368 Retained earnings 477,36 , , Total assets $ 2,768,568 Total liabilities and equity $ 2,753,563 M 5 To prepare a master budget for April, May, and June, management gathers the following information. a. Sales for March total 45,100 units. Budgeted sales in units follow: April, 45,100; May, 42,900; June, 44,000; and July, 45100 The product's selling price is $24.00 per unit and its total product cost is $19.85 per unit. ' b. Raw materials inventory consists solely of direct materials that cost $20 per pound. Company policy calls for a given month 3 ending materials inventory to equal 50% of the next month's direct materials requirements. The March 31 raw materials inventory is 10,835 pounds. The budgeted June 30 ending raw materials inventory is 8,800 pounds. Each finished unit requires 0.50 pound of direct materials. c. Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's budgeted unit sales. The March 31 nished goods inventory is 36,080 units. d. Each nished unit requires 0.50 hour of direct labor at a rate of $15 per hour. e. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $44,000 per month is the only xed factory overhead item. f. Sales commissions of 8% of sales are paid in the month of the sales. The sales manager's monthly salary is 356,600. 9. Monthly general and administrative expenses include $26,400 for administrative salaries and 0.9% monthly interest on the long- term note payable. ' i1. The company budgets 30% of sales to be for cash and the remaining 70% on credit. Credit sales are collected in full in the month following the sale (no credit sales are collected in the month of sale). i. All raw materials purchases are on credit, and accounts payable are solely tied to raw materials purchases, Raw materials purchases are fully paid in the next month (none are paid in the month of purchase). j. The minimum ending cash balance for all months is $88,000, If necessary, the company borrows enough cash using a loan to reach the minimum. Loans require an interest payment of1% at each month-end (before any repayment). Ifthe month-end preliminary cash balance exceeds the minimum, the excess will be used to repay any loans. it. Dividends of $22,000 are budgeted to be declared and paid in May. I. No cash payments for income taxes are budgeted in the second calendar quarter. Income tax will be assessed at 35% in the ouarter and budgeted to be paid in the third calendar quarter
