Optima Company is a high-technology organization that produces a mass-storage system. The design of Optima's system is unique and represents a breakthrough in the industry. The units Optima produces combine positive features of both compact and hard disks. The company is completing its fifth year of operations and is preparing to build its master budget for the coming year (20Y1). 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: Fourth-quarter sales for 20Y0 are 55,000 units. Unit sales by quarter (for 20Y1) are projected as follows: First quarter 65,000 Second quarter 70,000 Third quarter 75,000 Fourth quarter 90,000 The selling price is $400 per unit. All sales are credit sales. Optima collects 85% of all sales within the quarter in which they are realized; the other 15% is collected in the following quarter. There are no bad debts. There is no beginning inventory of finished goods. Optima is planning the following ending finished goods inventories for each quarter: First quarter 13,000 units Second quarter 15,000 units Third quarter 20,000 units Fourth quarter 10,000 units Each mass-storage unit uses 5 hours of direct labor and three units of direct materials. Laborers are paid $10 per hour, and one unit of direct materials costs $80. There are 65,700 units of direct materials in beginning inventory as of January 1, 20Y1. At the end of each quarter, Optima plans to have 30% of the direct materials needed for next quarter's unit sales. Optima will end the year with the same amount of direct materials found in this year's beginning inventory. Optima buys direct materials on account. Half of the purchases are paid for in the quarter of acquisition, and the remaining half are paid for in the following quarter. Wages and salaries are paid on the 15th and 30th of each month. Fixed overhead totals $1 million each quarter. Of this total, $350,000 represents 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 year's budgeted production in units. Variable overhead is budgeted at $6 per direct labor hour. All variable overhead expenses are paid for in the quarter incurred. Fixed selling and administrative expenses total $250,000 per quarter, including $50,000 depreciation. Variable selling and administrative expenses are budgeted at $10 per unit sold. All selling and administrative expenses are paid for in the quarter incurred. The balance sheet as of December 31, 20Y0, is as follows: Assets Cash $ 250,000 Direct materials inventory 5,256,000 Accounts receivable 3,300,000 Plant and equipment, net 33,500,000 Total assets $42,306,000 Liabilities and Stockholders Equity Accounts payable $ 7,248,000* Capital stock 27,000,000 Retained earnings 8,058,000 Total liabilities and stockholders equity $42,306,000 * For purchase of direct materials only. Optima will pay quarterly dividends of $300,000. At the end of the fourth quarter, $2 million of equipment will be purchased. Required: Prepare a master budget for Optima Company for each quarter of 20Y1 and for the year in total. The following component budgets must be included: 1. Sales Budget (units and budgeted sales in thousands) Optima Company Sales Budget For the Year Ending December 31, 20Y1 Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total Units Unit price $ $ $ $ $ Total sales $ $ $ $ $ 2. Production budget (amounts in full, not in thousands) If an amount is zero, enter "0". Optima Company Production Budget For the Year Ending December 31, 20Y1 Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total Sales Desired ending inventory Total needs Less: Beginning inventory Production 3. Direct Materials Purchases Budget (in thousands, except for per unit/hour data) If required, round answers to one decimal place. Optima Company Direct Materials Purchases Budget For the Year Ending December 31, 20Y1 Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total Production Materials/unit Production needs Desired ending inventory Total needs Less: Beginning inventory Purchases Cost per unit $ $ $ $ $ Purchase cost $ $ $ $ $ 4. Direct Labor Budget (in thousands, except per unit/hour data) Optima Company Direct Labor Budget For the Year Ending December 31, 20Y1 Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total Production Hours per unit Hours needed Cost per hour $ $ $ $ $ Total cost $ $ $ $ $ 5. Overhead Budget (in thousands, except per unit/hour data) Optima Company Overhead Budget For the Year Ending December 31, 20Y1 Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total Budgeted hours Variable rate $ $ $ $ $ Budgeted VOH $ $ $ $ $ Budgeted FOH Total OH $ $ $ $ $ 6. Selling and Administrative Expenses Budget (in thousands, except per unit/hour data) Optima Company Selling and Administrative Expenses Budget For the Year Ending December 31, 20Y1 Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total Planned sales Variable rate $ $ $ $ $ Variable expenses $ $ $ $ $ Fixed expenses Total expenses $ $ $ $ $ 7. Ending finished goods inventory budget. Enter amounts in full, not in thousands. Round to the nearest cent. Optima Company Ending Finished Goods Inventory Budget For the Year Ending December 31, 20Y1 Unit cost computation: Direct materials $ Direct labor Overhead: Variable Fixed Total unit cost $ Finished goods $ 8. Cost of goods sold budget (Note: Assume that there is no change in work-in-process inventories.) Enter amounts in full, not in thousands. If an amount is zero, enter "0". Optima Company Cost of Goods Sold Budget For the Year Ending December 31, 20Y1 Direct materials used $ Direct labor used Overhead Budgeted manufacturing costs $ Add: Beginning finished goods inventory Cost of goods available for sale $ Less: Ending finished goods inventory Budgeted cost of goods sold $ 9. Cash Budget (in thousands) Optima Company Cash Budget For the Year Ending December 31, 20Y1 Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total Beginning cash bal. $ $ $ $ $ Collections: Credit sales: Current quarter Prior quarter Cash available $ $ $ $ Less disbursements: Direct materials: Current quarter $ $ $ $ $ Prior quarter Direct labor Overhead Selling and admin. Dividends Equipment Total cash needs $ $ $ $ $ Ending cash $ $ $ $ $ 10. Pro forma income statement (using absorption costing). Enter amounts in full, not in thousands.(Note: Ignore income taxes.) Optima Company Pro Forma Income Statement For the Year Ending December 31, 20Y1 $ $ $ 11. Pro forma balance sheet. Enter amounts in full, not in thousands. List all assets and liabilities in order of liquidity. (Note: Ignore income taxes.) Optima Company Pro Forma Balance Sheet December 31, 20Y1 Assets Cash $ Accounts receivable Direct materials inventory Finished goods inventory Plant and equipment Total assets $ Liabilities and stockholders' equity Accounts payable $ Capital stock Retained earnings Total liabilities and stockholders' equity $