Mayson Company produces wooden craft table. The company is completing its

fifth year of operations and is preparing to build its master budget for the coming

year (2020). The budget will detail each quarter's activity and the activity for the

year in total. The master budget will be based on the following information:

a Unit sales by quarter (for 2020) are projected as follows:

First-quarter 60 000

Second quarter 75 000

Third-quarter 80 000

Fourth-quarter 95 000

It is expected the sales of the first and second quarter of 2021 will be the

same as the fourth quarter of 2020. The selling price is $950 per unit. 50%

of sales are cash sales, and 50% are credit sales. Mayson collected 60% of

credit sales in the first quarter after the sales, 35% in the following quarter.

Allowance for doubtful debts is 5% of credit sales.

The ending finished good inventory is 20% of the following quarter sales. Last

year, the selling price and product cost/ unit were $900 and $750 respectively.

Mayson uses FIFO inventory costing method.

b Each furniture unit uses four hours of direct labour and six meters of teak wood

and a half slab of marble. The cost of teakwood and marble are the same as

last year. Workers are paid $25 per hour, and one meter of teak wood costs

$80, while one slab of marble costs $600.

c At the end of each quarter, Mayson plans to have 30% of the teak wood and

marble needed for next quarter's unit production.

d Mayson buys teak wood and marble on the account. Half of the purchases are

paid for in the quarter of acquisition, and the remaining half is paid for in the

following quarter. Wages and salaries are paid on the 15th and 30th of each

month.

e Fixed overhead totals $500 000 each quarter. Of this total, $250 000

represents plant and equipment depreciation. All other fixed expenses are paid

for in cash in the quarter incurred. The fixed overhead rate is computed by

dividing the year's total fixed overhead by the total labour hours needed for

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the year.

f Variable overhead is budgeted at $10 per direct labour hour. All variable

overhead expenses are paid for in the quarter incurred.

g Fixed selling and administrative expenses total $50 000 per quarter, including

$5 000 depreciation.

h Variable selling and administrative expenses are budgeted at $10 per unit sold.

All selling and administrative expenses are paid for in the quarter incurred.

i The balance sheet as at 31 December 2019 is as follows:

ASSETS

Cash $ 250 000

Direct materials inventory 14 742 000

Inventory Finished good 9 000 000

Accounts receivable, net 3 300 000

Plant and equipment, net 33 500 000

Total assets $60 792 000

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable $ 7 371 000*

Capital share 25 571,000

Retained earnings 27 850 000

Total liabilities and shareholders' equity $60 792 000

* For purchase of direct materials only.

The ending balance of Account receivable will be paid in the first quarter of

2020.

j Mayson will pay quarterly dividends of $500 000. At the end of the third

quarter, $200,000 of equipment will be purchased and paid in cash. This

equipment is estimated to have five years of useful life, and Mason applies the

straight-line depreciation method. After five years, it is estimated that the

equipment can be sold for $5,000

k Mayson maintains a 12% open line of credit for $20 000 000. Interests are

paid at the end of each quarter. Mayson maintains a minimum cash balance

of $200,000. The company borrows on the first day of the quarter and repays

loans on the last day of the quarter, both in multiples of $ 100,000.

l The tax rate is 30%.

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REQUIRED:

The following component budgets must be included:

1) Sales budget (in thousands)

2) Production budget

3) Direct materials purchases budget

4) Direct labour budget

5) Overhead budget

6) Selling and administrative expenses budget

7) Ending finished goods inventory budget

8) Cost of goods sold budget (Note: Assume that there is no change in work in

process inventories)

9) Cash budget

10) Pro Forma Profit and Loss Statement