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.

3. Direct Materials Purchases Budget (in thousands. except for per unit hour data) If required, round answers to on Optima Company Direct Materials Purchases Budget For the Year Ending December 31, 20Y1 Qtr. 1 Qtr.2 Qtr. 3 Qtr. 4 Total 1. Sales Budget (units and budgeted sales in thousands) Production 78,000 72,000 80,000 80.000 310,000 Optima Company Sales Budget For the Year Ending December 31, 20Y1 Materals unt 3 Production needs 234.000 216,000 240,000 240,000 930,000 Qtr. 1 Qtr. 4 Qtr. 2 Qtr. 3 Total 72,000 65,700 274,500 Desired ending inventory 64800 72.000 Units 65,000 70,000 75,000 90,000 300,000 288.000 305.700 Total needs 298800 312.000 1.204.500 Unit price 400 400 400 400 65,700 64,800 72000 72.000 274,500 Less: Beginning inventory Purchases 233.100 223,200 240,000 233,700 930,000 26,000,000 28,000,000 30,000,000 36,000,000 120,000,000 Total sales 8C 80 80 Cost per unt 19,200,000 Purchase cost 18.648.000 17.856,000 18.696.000 74400,000 2. Production budget (amounts in full, not in thousands) If an amount is zero, enter "O Optima Company Production Budget For the Year Ending December 31, 20Y1 4. Direct Labor Budget (in thousands, except per unithour data) Optima Company Direct Labor Budget Qtr.1 Qtr. 2 Qtr. 3 Qtr. 4 Total For the Year Ending December 31, 20Y1 Qtr. 1 65,000 Qtr. 2 Qtr. 3 Qtr. 4 Total Sales 70,000 75,000 90,000 300,000 Production 310,000 78,000 72000 80.000 80,000 13,000 15,000 20,000 10,000 58,000 Desired ending inventory Hours per unt 85,000 Total needs 78,000 95,000 100,000 358,000 Hours needed 390,000 360000 400,000 400,000 1,550,000 13.000 15,000 20,000 48,000 Less: Beginning inventory 10 10 10 10 10 Cost per hour 78,000 72,000 80,000 80,000 310,000 Production 3900,000 3600000 4000,000 4000,000 15,500,000 Total cost 5. Overhead Budget (in thousands, except per unit/hour data) Optima Company Overhead Budget For the Year Ending December 31, 20Y1 Total Qtr. 3 Qtr. 1 Qtr. 2 Qtr. 4 Budgeted hours 1,550,000 390,000 360,000 400,000 400,000 6 6 6 6 Variable rate Budgeted VOH 2,340,000 2,160,000 2,400,000 2,400,000 9,300,000 1,000,000 1,000,000 1,000,000 1,000,000 4,000,000 Budgeted FOH 3,400,000 3,340,000 3,160,000 3,400,000 13,300,000 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. 2 Total Qtr. 1 Qtr. 3 Qtr. 4 300,000 Planned sales 65,000 70,000 75,000 90,000 10 10 10 10 10 Variable rate Variable expenses 650,000 700,000 750,000 900,000 3,000,000 250,000 250,000 250,000 250,000 1,000,000 Foxed expenses 1,500,000 90,000 950,000 1,000,000 4,000,000 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 "O" 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 Total Qtr. 4 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 Total assets Liabilities and stockholders' equity Total liabilities and stockholders' equity 3. Direct Materials Purchases Budget (in thousands. except for per unit hour data) If required, round answers to on Optima Company Direct Materials Purchases Budget For the Year Ending December 31, 20Y1 Qtr. 1 Qtr.2 Qtr. 3 Qtr. 4 Total 1. Sales Budget (units and budgeted sales in thousands) Production 78,000 72,000 80,000 80.000 310,000 Optima Company Sales Budget For the Year Ending December 31, 20Y1 Materals unt 3 Production needs 234.000 216,000 240,000 240,000 930,000 Qtr. 1 Qtr. 4 Qtr. 2 Qtr. 3 Total 72,000 65,700 274,500 Desired ending inventory 64800 72.000 Units 65,000 70,000 75,000 90,000 300,000 288.000 305.700 Total needs 298800 312.000 1.204.500 Unit price 400 400 400 400 65,700 64,800 72000 72.000 274,500 Less: Beginning inventory Purchases 233.100 223,200 240,000 233,700 930,000 26,000,000 28,000,000 30,000,000 36,000,000 120,000,000 Total sales 8C 80 80 Cost per unt 19,200,000 Purchase cost 18.648.000 17.856,000 18.696.000 74400,000 2. Production budget (amounts in full, not in thousands) If an amount is zero, enter "O Optima Company Production Budget For the Year Ending December 31, 20Y1 4. Direct Labor Budget (in thousands, except per unithour data) Optima Company Direct Labor Budget Qtr.1 Qtr. 2 Qtr. 3 Qtr. 4 Total For the Year Ending December 31, 20Y1 Qtr. 1 65,000 Qtr. 2 Qtr. 3 Qtr. 4 Total Sales 70,000 75,000 90,000 300,000 Production 310,000 78,000 72000 80.000 80,000 13,000 15,000 20,000 10,000 58,000 Desired ending inventory Hours per unt 85,000 Total needs 78,000 95,000 100,000 358,000 Hours needed 390,000 360000 400,000 400,000 1,550,000 13.000 15,000 20,000 48,000 Less: Beginning inventory 10 10 10 10 10 Cost per hour 78,000 72,000 80,000 80,000 310,000 Production 3900,000 3600000 4000,000 4000,000 15,500,000 Total cost 5. Overhead Budget (in thousands, except per unit/hour data) Optima Company Overhead Budget For the Year Ending December 31, 20Y1 Total Qtr. 3 Qtr. 1 Qtr. 2 Qtr. 4 Budgeted hours 1,550,000 390,000 360,000 400,000 400,000 6 6 6 6 Variable rate Budgeted VOH 2,340,000 2,160,000 2,400,000 2,400,000 9,300,000 1,000,000 1,000,000 1,000,000 1,000,000 4,000,000 Budgeted FOH 3,400,000 3,340,000 3,160,000 3,400,000 13,300,000 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. 2 Total Qtr. 1 Qtr. 3 Qtr. 4 300,000 Planned sales 65,000 70,000 75,000 90,000 10 10 10 10 10 Variable rate Variable expenses 650,000 700,000 750,000 900,000 3,000,000 250,000 250,000 250,000 250,000 1,000,000 Foxed expenses 1,500,000 90,000 950,000 1,000,000 4,000,000 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 "O" 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 Total Qtr. 4 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 Total assets Liabilities and stockholders' equity Total liabilities and stockholders' equity