Pikachu Manufacturing is preparing its master budget for the first quarter of the upcoming year. The following data pertain to Pikachu Manufacturing's operations:

Current Assets as of December 31 (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

Actual sales in December were $70,000

Selling price per unit is projected to remain stable at $10 per unit throughout the budget period

Sales for the first five months of the upcoming year are budgeted to be as follows:

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

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

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

Of each month's direct material purchases, 20% are paid for in the month of purchase, while the remainder is paid for in the month following purchase:

• 2 kilograms of direct material is needed per unit at $2/kg

Ending inventory of direct materials should be 10% of next month's production needs.

Monthly manufacturing conversion costs are $5,000 for factory rent, $3,000 for other fixed 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.

Computer equipment for the administrative offices will be purchased in the upcoming quarter.

In January, Pikachu Manufacturing will purchase equipment for $6,000 (cash), while February's cash expenditure will be $12,000 and March's cash expenditure will be $16,000

Operating expenses are budgeted to be $1.00 per unit sold plus fixed operating expenses of $1,000 per month.

(All operating expenses are paid in the month in which they are incurred.)

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.

Pikachu 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 a total outstanding loan balance of $100,000. The interest rate on these loans is 1% per month simple interest (not compounded).

Pikachu 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.

The company's income tax rate is projected to be 30% of operating income less interest expense. The company pays $10,000

Requirements:

1. Prepare a schedule of cash collections for January, February, and March, and for the quarter in total.

2. Prepare a production budget. (Hint: Unit sales = Sales in dollars / Selling price per unit.)

3. Prepare a direct materials budget.

4. Prepare a cash payments budget for the direct material purchases from Requirement 3.

5. Prepare a cash payments budget for conversion costs.

6. Prepare a cash payments budget for operating expenses.

7. Prepare a combined cash budget.

8. Calculate the budgeted manufacturing cost per unit.

(Assume that fixed manufacturing overhead is budgeted to be $0.80 per unit for the year)