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 (20X1). 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 20X0 are 55,000 units.

Unit sales by quarter (for 20X1) 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, 20X1. 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, 20X0, 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.

Please complete Schedule 9 Cash Budget and Create and Income Statement & Balance sheet.

Schedule 1 - Sales Budget Units Unit price Total Sales stus 01 65.000 $ 400 $26,000,000 02 70.000 $ 400 $28,000,000 03 75.000 $ 400 $30,000,000 04 Total 90.000 300.000 $_ 400$_ $36,000,000 $120.000.000 Schedule 2 - Production Budget QI Q2 Q3 04 Total Sales in UNITS Plus: Desired finished goods ending inventory Total needs Less: Beginning finished goods inventory Finished goods production needs 65,000 13.000 78,000 70,000 15.000 85,000 13.000 71.000 75,000 20.000 95,000 15.000 80,000 90,000 10.000 100,000 20.000 80,000 300,000 58.000 358,000 48.000 310,000 78,000 Schedule 3: Direct Materials Purchases Budget Q3 Production units x Materials per unit Production needs for direct materials Plus: Desired ending inventory of direct materials Total needs Less: Beginning direct materials inventory Purchases of direct materials x Cost per unit Direct materials purchases cost 78,000.0 3.0 234.000.0 64.800.0 298,800.0 65.700.0 233.100.0 Q2 72,000.0 3.0 216,000.0 72.000.0 288.000.0 64,800.0 223,200.0 80,000.0 3.0 240,000.0 72.000.0 312,000.0 72.000.0 240.000.0 80 80,000.0 3.0 240,000.0 65.700.0 305,700.0 72.000.0 233,700.0 Total 310,000.0 3.0 930.000.0 274,500.0 1,204,500.0 274.500.0 930,000.0 80 74,400,000 80 80 80 18,648,000 17,856,000 19,200,000 18,696,000 Schedule 4: Direct labor Budget Q2 Q3 04 Q1 78,000 Total 310,000 72,000 80,000 80,000 Production units x Labor Hours per unit Labor hours needed x Cost per labor hour Total direct labor cost 390,000 10 $_ 360,000 10 3,600,000 400,000 10 4,000,000 $ $ 400,000 10 4,000,000 $ $ 1,550,000 10 15,500,000 3,900,000 $ $ Q2 Q1 390,000 Q3 400,000 Total 1,550,000 360,000 400,000 6. Schedule 5: Overhead Budget Budgeted hours x Variable rate per hour Budgeted variable overhead Budgeted fixed overhead Total Overhead $ $ $ $ $ 2.340,000 1.000.000 3,340,000 2,160,000 1.000.000 3,160,000 2,400,000 1.000.000 3,400,000 2,400,000 1,000,000 3,400,000 9,300,000 4.000.000 13,300,000 S $ $ $ Schedule 6: Selling and Administrative Expense Budget Q1 Q3 Q2 70,000 Total 300,000 10 $ 10 Planned sales (units) x variable rate per unit Variable expenses Fixed expenses Total selling and administrative expenses 65,000 10 650,000 250.000 900,000 $ $ $ $ $ $ 75,000 10 750,000 250,000 1,000,000 700,000 250.000 950,000 90,000 10 900,000 250.000 1,150,000 $ $ _ $ 3,000,000 1.000.000 4.000.000 $ $ $ Schedule 7: Ending Finished Goods Inventory Budget 240.00 50.00 Unit cost computation: Direct materials (number of units of material/FG* cost per unit) Direct labor (number of units/FG * cost per unit) Overhead: Variable overhead (number of units * cost per unit) Fixed overhead (Total overhead total units needed) Total cost per unit of finished goods Total finished goods ending inventory (note: multiply total cost x units) 30.00 12.90 332.90 $ 3,329,000.00 Schedule 8: Cost of Goods Sold Budget 74,400,000 15,500,000 13,300,000 103,200,000 Direct materials used (Schedule 3) Direct labor used (Schedule 4) Overhead (Schedule 5) Budgeted manufacturing costs Add: Beginning fiished goods inventory (Schedule 7) Cost of goods available for sale Less: Endig finished goods inventory (Schedule 7) Budgeted cost of goods sold 103,200,000 3.329,000 99,871,000 Schedule 1 - Sales Budget Units Unit price Total Sales stus 01 65.000 $ 400 $26,000,000 02 70.000 $ 400 $28,000,000 03 75.000 $ 400 $30,000,000 04 Total 90.000 300.000 $_ 400$_ $36,000,000 $120.000.000 Schedule 2 - Production Budget QI Q2 Q3 04 Total Sales in UNITS Plus: Desired finished goods ending inventory Total needs Less: Beginning finished goods inventory Finished goods production needs 65,000 13.000 78,000 70,000 15.000 85,000 13.000 71.000 75,000 20.000 95,000 15.000 80,000 90,000 10.000 100,000 20.000 80,000 300,000 58.000 358,000 48.000 310,000 78,000 Schedule 3: Direct Materials Purchases Budget Q3 Production units x Materials per unit Production needs for direct materials Plus: Desired ending inventory of direct materials Total needs Less: Beginning direct materials inventory Purchases of direct materials x Cost per unit Direct materials purchases cost 78,000.0 3.0 234.000.0 64.800.0 298,800.0 65.700.0 233.100.0 Q2 72,000.0 3.0 216,000.0 72.000.0 288.000.0 64,800.0 223,200.0 80,000.0 3.0 240,000.0 72.000.0 312,000.0 72.000.0 240.000.0 80 80,000.0 3.0 240,000.0 65.700.0 305,700.0 72.000.0 233,700.0 Total 310,000.0 3.0 930.000.0 274,500.0 1,204,500.0 274.500.0 930,000.0 80 74,400,000 80 80 80 18,648,000 17,856,000 19,200,000 18,696,000 Schedule 4: Direct labor Budget Q2 Q3 04 Q1 78,000 Total 310,000 72,000 80,000 80,000 Production units x Labor Hours per unit Labor hours needed x Cost per labor hour Total direct labor cost 390,000 10 $_ 360,000 10 3,600,000 400,000 10 4,000,000 $ $ 400,000 10 4,000,000 $ $ 1,550,000 10 15,500,000 3,900,000 $ $ Q2 Q1 390,000 Q3 400,000 Total 1,550,000 360,000 400,000 6. Schedule 5: Overhead Budget Budgeted hours x Variable rate per hour Budgeted variable overhead Budgeted fixed overhead Total Overhead $ $ $ $ $ 2.340,000 1.000.000 3,340,000 2,160,000 1.000.000 3,160,000 2,400,000 1.000.000 3,400,000 2,400,000 1,000,000 3,400,000 9,300,000 4.000.000 13,300,000 S $ $ $ Schedule 6: Selling and Administrative Expense Budget Q1 Q3 Q2 70,000 Total 300,000 10 $ 10 Planned sales (units) x variable rate per unit Variable expenses Fixed expenses Total selling and administrative expenses 65,000 10 650,000 250.000 900,000 $ $ $ $ $ $ 75,000 10 750,000 250,000 1,000,000 700,000 250.000 950,000 90,000 10 900,000 250.000 1,150,000 $ $ _ $ 3,000,000 1.000.000 4.000.000 $ $ $ Schedule 7: Ending Finished Goods Inventory Budget 240.00 50.00 Unit cost computation: Direct materials (number of units of material/FG* cost per unit) Direct labor (number of units/FG * cost per unit) Overhead: Variable overhead (number of units * cost per unit) Fixed overhead (Total overhead total units needed) Total cost per unit of finished goods Total finished goods ending inventory (note: multiply total cost x units) 30.00 12.90 332.90 $ 3,329,000.00 Schedule 8: Cost of Goods Sold Budget 74,400,000 15,500,000 13,300,000 103,200,000 Direct materials used (Schedule 3) Direct labor used (Schedule 4) Overhead (Schedule 5) Budgeted manufacturing costs Add: Beginning fiished goods inventory (Schedule 7) Cost of goods available for sale Less: Endig finished goods inventory (Schedule 7) Budgeted cost of goods sold 103,200,000 3.329,000 99,871,000