Operating and Financial Budgets. Pat has become concerned about the profitability and cash needs for the business as it grows. You have been asked o prepare some budgets for the second quarter of 2020: the three months of April, May, and June and the quarter in otal. Pat would like to begin the process with a production budget and related purchases budgets for materials. Since the first quarter of the year is the slowest in terms of sales, Pat has asked you to also produce a cash budget for ach month and the quarter in total in order to ensure he has adequate cash. He would also like you to prepare a Judgeted quarterly income statement. The following sales-related information is provided: Budgeted 2020 Unit Sales: Pans May June 7,000 11,000 April 6,000 I July 13,000 July Additional information for your budget preparation is as follows: a) Given the sales mix expected for 2020, the weighted average sales price per pan for the budget period will be $42.00 b) All sales are on account (credit) and are collected 45% in the month of sale and 55% in the month following the month of sale. Accounts receivable from March 2020 credits sales is expected to be $394,000 on 3/31/20. Perfect Pans has a policy that each month's ending inventory of finished goods (pans) should be 20% of the following month's sales in units. Ending inventory on March 31, 2020 followed this patter. Ending inventory of materials should be 15% of the next month's production needs in pounds. On average, each pan will take 0 pounds of material. The expected price for material is $0.32 per pound. Considering on schedule, the desired ending inventory of materials in June is 22,500 pounds. e) Materials purchases are paid 40% in the month of purchase and 60% in the month following the month of purchase. Accounts Payable for purchases on 6/30/20 is expected to be $23,100. f) Each unit produced will take 0.25 DLH. The estimated wage rate for the rest of 2020 is $35.00 per hour. Direct labor costs are paid 70% in the month in which the work is performed and 30% in the following month. Amounts owed (wages payable) for direct labor were expected to be $54,000 on 3/31/20. This amount will be paid in March. Overhead estimated for 2020 was revised and is budgeted to be $3,444,000, based on 38,000 DLH, resulting in an overhead rate of $88.00 per direct labor hour. Variable overhead for the plant is budgeted at $20.00 per direct labor hour for April, May, and June respectively. Variable overhead is paid in the month incurred. The budgeted overhead rate for fixed overhead (including depreciation) is $68.00 per DLH. Depreciation on the plant (included in total MOH) is $1,800,000 per year per month. Other fixed overhead, exclusive of depreciation, is paid in the month incurred, and is $884,400 per year or $73,700 per month. h) In addition to the wages described above, Pat will pay his sales representative a salary of $4,500 per month plus 1% of sales, paid in the month incurred. Pat hired someone to take over the plant management duties, tirely devoted to general administration. Pat's 2020 salary will be $12,000 per month. i) Pat will incur a $36,000 cash expenditure in March for trade show travel and registration. i) Pat plans to pay cash of $14,000 each month in the quarter for a series of advertisements in cooking magazines. k) Depreciation on the fixed assets used for selling and administration will be $1,000 per month. Rent on administrative space will be $4,200 per month. The rent for the second AND third quarter of the year (six months) will be prepaid in April. Pat intends to purchase equipment costing $172,000 for packaging pans in June. The equipment will be installed in June but use of the equipment will not begin until July, so no depreciation will be taken on the new equipment in the second quarter of the year. m) Pat will pay a cash dividend of $125,000 in April. n) Perfect Pans has a line of credit with a local bank and a policy that the ending cash balance each month must be at least $20,000. The cash balance on March 31, 2020 was expected to be $20,200. The company can borrow in increments of $1,000 at the beginning of the month. The firm pays accumulated interest of 1% per month at the end of each quarter and will use any excess cash above the minimum balance to pay down on the line of credit balance at the end of the quarter. 0) The tax rate for Perfect Pans is 30% of income before tax (operating income less interest). A tax payment of $22,000 will be made in April. 8. Prepare a budgeted income statement for the second quarter of 2020. Compute cost of goods sold using the budgeted manufacturing cost per unit calculated in 7. above. You do not need to do a separate schedule of cost of goods manufactured and sold. 9. Calculate the following amounts that would appear on the 6/30/2020 balance sheet: Accounts Receivable Accounts Payable for Material and Labor Direct Materials Inventory in Dollars Cash