P22-42. Developing a Master Budget for a Manufacturing Organization: Challenge Problem Electric Monkey Computer Accessories assembles a computer networking device from kits of imported components. You have been asked to develop a quarterly and annual operating budget and pro forma income statements for next year. You have obtained the following information: Beginning-of-year balances Cash...... Accounts receivable (previous quarter's sales).. Raw materials. Finished goods. Accounts payable (materials) Borrowed funds... Desired end-of-year inventory balances Raw materials. Finished goods Desired end-of-quarter balances Cash. Raw materials as a portion of the following quarter's production. $ 75,000 $245,000 950 kits 1,500 kits $125,000 $ 30,000 1,000 kits 1,600 kits $ 30,000 0.20 quarter's sales... 0.30 Manufacturing costs Standard cost per unit Units Unit price Total 1 kit $75.00 $75.00 Raw materials.. Direct labor hours at rate. 0.50 hour $30.00 15.00 Variable overhead/labor hour 0.50 hour $ 5.00 2.50 $92.50 Total standard variable cost Finished goods as a portion of the following continues continued from previous page Fixed cost per quarter $110,000 Cash.. 15,000 Depreciation $125,000 Total... Selling and administrative costs $8.00 Variable cost per unit Fixed costs per quarter $150,000 Cash Depreciation Total.. Interest rate per quarter Portion of sales collected Quarter of sale Subsequent quarter Bad debts Portion of purchases paid Quarter of purchase 7,500 $157,500 0.015 0.70 0.29 0.01 Subsequent quarter Unit selling price. Sales forecast Quarter... Unit sales Additional information 0.60 0.40 $225.00 First Second Third Fourth 4,400 4,600 4,500 4,800 . All cash payments except purchases are made quarterly as incurred. . All borrowings occur at the start of a quarter. . All repayments on borrowings occur at the end of a quarter. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. Borrowings and repayments may be made in any amount. Required a. A sales budget for each quarter and the year. (Hint: Use of spreadsheet software strongly recom- mended for this problem.) b. A production budget for each quarter and the year. c. A purchases budget for each quarter and the year. d. A manufacturing cost budget for each quarter and the year. e. A selling and administrative expense budget for each quarter and the year. f. A cash budget for each quarter and the year. g. A pro forma contribution income statement for each quarter and the year. continued from previous page Fixed cost per quarter Cash... $110,000 15,000 Depreciation $125,000 Total... Selling and administrative costs $8.00 Variable cost per unit Fixed costs per quarter $150,000 Depreciation Quarter of sale Bad debts Cash Total.. Interest rate per quarter Portion of sales collected Subsequent quarter Portion of purchases paid Quarter of purchase 7,500 $157,500 0.015 0.70 0.29 0.01 Subsequent quarter Unit selling price. Sales forecast Quarter... Unit sales Additional information 0.60 0.40 $225.00 First Second Third Fourth 4,400 4,600 4,500 4,800 All cash payments except purchases are made quarterly as incurred. . All borrowings occur at the start of a quarter. . All repayments on borrowings occur at the end of a quarter. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. Borrowings and repayments may be made in any amount. Required a. A sales budget for each quarter and the year. (Hint: Use of spreadsheet software strongly recom- mended for this problem.) b. A production budget for each quarter and the year. c. A purchases budget for each quarter and the year. d. A manufacturing cost budget for each quarter and the year. e. A selling and administrative expense budget for each quarter and the year. f. A cash budget for each quarter and the year. g. A pro forma contribution income statement for each quarter and the year.