P9-61A: Solve a comprehensive budgeting problem. Cieck Manufacturing Is preparing its Master budget for the first quarter of the upcoming year the following data pertains Cieck Manufacturings operations:

Current assets as of December 31st (prior year)
Cash	$4,500
Accounts receivable, net	$49,000
Inventory	$15,320
Property, plant and equipment, net	$121,500
Accounts payable	$42,400
Capital stock	$125,000
Retained earnings	$22,920

1. Actual sales in December we're $70,000. Selling price per unit is projected to remain stable at $10 per unit through the budget. Sales for the first five months of the upcoming year are budgeted as follows:

January	$80,000
February	$92,000
March	$99,000
April	$97,000
May	$85,000

2. Sales are 30% cash and 70% credit. all credit sales are collected in the month following the sale.

3. Cieck Manufacturing has a policy that states that each months ending inventory of finished goods should be 25% of the following month sales. (in units)

4. Of each month direct materials purchase, 20% are paid for in the month of purchase while the remainder is paid for in the month following purchase 2 kg of direct material is needed per unit at $2/kg. Ending inventory of direct materials should be 10% of next month's production needs

5. Monthly manufacturing conversion costs are $5,000 for factory rent, $3,000 for other fix manufacturing expenses and $1.20 per unit for variable manufacturing overhead no depreciation is included in these figures all expenses are paid in the month in which they are incurred.

6. computer equipment for the administrative offices will be purchased in the upcoming quarter. In January, Cieck Manufacturing will purchase equipment for $5,000 (cash) while February cash expenditure will be $12,000 and Marchs cash expenditure will be $16,000.

7. Operating expenses are budgeted to be $1 per unit sold + fixed operating expenses of $1,000 per month. all operating expenses are paid in the month in which they are incurred.

8. depreciation on the building and equipment for the general and administrative offices is budgeted to be $6,000 for the entire quarter which includes depreciation on new acquisitions.

9. Cieck Manufacturing has a policy that the ending cash balance in each month must be at least $4,000. It has a line of credit with a local bank. the company can borrow in increments of $1,000 at the beginning of each month, up to total outstanding loan balance of $100,000. the interest rate on these loans is 1% per month simple interest. (not compounded) Cieck Manufacturing pays down on the line of credit balance if it has excess funds at the end of the quarter. The company also pays the accumulated interest at the end of the quarter on the funds borrowed during the quarter.

10. The company's income tax rate is projected to be 30% of operating income less interest expense. the company pays $10,000 cash at the end of February and estimated taxes.

Requirements

1. Prepare a cash payments budget for conversion costs using the following format.

Cash payments for conversion cost budget

	January	February	March	Quarter
Variable conversion cost
Rent (fixed)
Other Fixed MOH
Total payments for conversion cost

2. Prepare a cash payments budget for operating expenses using the following format.

Cash payments for operating expenses budget

	January	February	March	Quarter
Variable operating expenses
Fixed operating expenses
Total payments for operating expenses

3. Prepare a combined cash budget using the following format.

Combined Cash Budget

	January	February	March	Quarter
Cash balance beginning
add cash collections
total cash available
Less cash payments:
direct materials purchases
conversion cost
operating expenses
equipment purchases
Tax Payments
total cash payments
Ending cash balance before financing
Financing:
borrowings
repayments
interest payments
Ending cash balance

4. Calculate the budgeted manufacturing cost per unit using the following format ( assume that fixed manufacturing overhead is budgeted to be $0.80 per unit for the year)

Budgeted manufacturing cost per unit

Direct materials cost per unit
Conversion cost per unit
Fixed manufacturing overhead per unit
Budgeted cost of manufacturing each unit

5. Prepare a budgeted income statement for the quarter ending March 31st using the following format.

Budgeted income statement

For the quarter ending March 31st

Sales
Cost of goods sold
Gross profit
Operating expenses
Depreciation
Operating income
Less interest expense
Less provision for income tax
Net income

6. Prepare a partial budgeted balance sheet for March 31st follow the same format as the original balance sheet provided for December 31st adding loans payable and income tax payable.