Northern Illinois Manufacturing is preparing its budget for the coming year. The first step

is to plan for the first quarter of that coming year. Northern Illinois gathered the following

information from its managers.

Sales:

Unit sates for November, prior year $112,500$

Unit sales for December, prior year $102,200$

Expected unit sales for January $113,400$

Expected unit sales for February $112,500$

Expected unit sales for March $116,700$

Expected unit sales for April $125,000$

Expected unit sales for May $137,500$

Unit selling price $$13$

Northern Illinois wants to keep $10\%$ of the next month$$s unit sales in ending inventory. All

sales are on account. $85\%$ of the Accounts Receivable is collected in the month of sale and

$15\%$ of the Accounts Receivable is collected in the month after sale. Accounts receivable on

December $31$ totaled $183,750$ and this total is expected to be collected in January.

Direct Materials:

The product uses metal, plastic, and rubber. In total, each unit requires $2$ pounds of

material at an average cost of $0\mathrm{.}75$ per pound.

Northern Illinois likes to keep $5\%$ of the materials needed for the next month in its ending

inventory. Payment for materials is made within $15$ days. $50\%$ is paid in the month of

purchase and $50\%$ is paid in the month after purchase. Accounts Payable on December $31$

totaled $$120,595$ and the total will be paid in full in January. Raw materials in inventory on

December $31$ totaled $10,355$ pounds.

Direct Labor:

Labor requires $12$ minutes per unit for completion and is paid at a rate of $$18$ per hour.

Manufacturing Overhead:

Indirect materials $30$ cents per labor hour

Indirect labor $50$ cents per labor hour

Utilities $45$ cents per labor hour

Maintenance $30$ cents per labor hour

Salaries $$42,000$ per month

Depreciation $$16,800$ per month

Property taxes $$2,700$ per month

Insurance $$1,300$ per month

Janitorial $$1,400$ per month

Selling and Administrative Expenses:

Variable selling and administrative cost per unit is $$2\mathrm{.}20.$

Advertising $$15,000$ per month

Insurance $$1,500$ per month

Salaries $$71,000$ per month

Depreciation $$2,500$ per month

Other fixed costs $$3,000$ per month

Other Information:

The cash balance on December totaled $$220,000,$ but management has decided that it

wants to maintain a cash balance of at least $$800,000$ beginning January $31.$ Dividends are

paid each month at the rate of $$2\mathrm{.}70$ per share for $5,000$ shares outstanding. The company

has an open line of credit with the First National Bank. The terms of the agreement requires

borrowing to be in $$1,000$ increments at $6\%$ interest. Northern Illinois borrows on the first

day of the month and repays on the last day of the month. Reserve repayment, if required,

until the company can pay the entire amount. A $$245,000$ equipment purchase is planned

for February.

Instructions $($Do all parts$)$:

Note: All budgets and schedules should be prepared by month for the first quarter

$($January$,$ February, and March$).$ Round all figures to the nearest dollar. For labor hours

round to whole hours.

e$.$ Prepare a manufacturing overhead budget.

f$.$ Prepare a selling and administrative budget.

g$.$ Prepare a schedule for expected cash collections from customers.

h$.$ Prepare a schedule for expected payments for materials purchases.

i$.$ Prepare a cash budget.