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Blue Fish Corporation is preparing its budget for the coming year, 2022. The first step is to plan for the first quarter of that coming year. The company has gathered information from its managers in preparation of the budgeting process. Blue Fish Corporation Blue Fish Corporation Income Statement Balance Sheet For the year ended December 31, 2021 December 31, 2021 Sales Cost of Goods Sok Gross project Selling and Administrative Expenses Income from Operations Interest Expense Income Before Taxes Income Tax Expense Net Income 16,662,000 5.980,904 10,681,096 7,386,000 3,295,096 111,020 3,184,076 668,656 2,515,420 Cash Accounts Receivable, net Raw Materials Inventory Finished Goods Inventory Machinery and equipment, net Total Assets 93,000 198,300 15,416 91,838 920,000 1,318,554 Accounts Payable Income Taxes Payable Total Liabilities Common Stock Retained earnings Total liabilities and Stockhokler's equity 106,885 668,656 775,541 250,000 293,013 1.318,554 Sales Unit sales for November 2021 115,000 Expected unit sales for March 2022 117,100 Unit sales for December 2021 100,500 Expected unit sales for April 2022 126,800 Expected unit sales for January 2022 114,500 Expected unit sales for May 2022 135,300 Expected unit sales for February 2022 116,200 Unit selling price $13 Blue Fish likes to keep 15% of the next month's unit sales in ending inventory. All sales are on account. 80% of the Accounts Receivable are collected in the month of sale, and 20% of the Accounts Receivable are collected in the month after sale. Direct Materials Direct materials cost 82 cents per pound. 2.5 pounds of direct materials are required to produce each unit. Blue Fish likes to keep 10% of the materials needed for the next month in its ending inventory. Raw Materials on December 31, 2021, totaled 18,800 pounds. Payment for materials is made within 15 days. 60% is paid in the month of purchase, and 40% is paid in the month after purchase. There was no beginning or ending work-in- process inventory for the 1* quarter. Direct Labor Labor requires 9 minutes per unit for completion and is paid at $13 per hour. Manufacturing Overhead Indirect materials Indirect labor Utilities Maintenance Salaries 35 per labor hour 60 per labor hour 55 per labor hour 35 per labor hour $49,000 per month Depreciation Property taxes Insurance Maintenance $16,200 per month $2,300 per month $1,450 per month $1,525 per month Selling and Administrative Variable selling and administrative cost per unit is $1.82 Advertising $13,500 a month Insurance $1,375 a month Salaries $76,000 a month Depreciation $2,300 a month Other fixed costs $3,100 a month a Other Information Management has decided it would like to maintain a cash balance of at least $850,000 beginning on January 31, 2022. Dividends are paid each month at the rate of $2.25 per share for 6,000 shares outstanding. The company has an open line of credit with Romney's Bank. The terms of the agreement require borrowing to be in $1,000 increments at 8% interest. If the company pays back any part of the loan, all interest owed will be paid first during that money. If a company borrows money, no interest payment will be made and that interest will accrued into the next month. Blue Fish borrows on the first day of the month and repays on the last day of the month. A $520,000 equipment purchase is planned for February. The taxes owed from December 31, 2021 will be paid March 15, 2022. The company has a 21% income tax rate. Notes: Be sure you use the costs for ending raw materials and ending finished goods inventory. (not units) Use the cost per unit calculated in partj to assist in calculating the finished goods inventory for the balance sheet. Remember to accrue the interest at quarter end if needed (this may also affect your interest expense). Although there was not a note due at the end of the year, there may be a note due at March 31, 2022. (refer to your Cash budget) To find variable manufacturing overhead cost per unit take the total variable overhead costs divided by the total units produced for the quarter . Sales Budget-Q1 of 2022 January February March Total Expected Unit Sales 114,500 116,200 117,100 347,800 Unit Selling Price $13 $13 $13 $13 Total Expected Sales $ 1,488,500 $ 1,510,600 $ 1,522,300 $ 4,521,400 Production Budget- Q1 of 2022 January February March Unit Sales 114,500 116,200 117,100 Add: Desired Ending Inventory 17,430 17,565 19,020 Total Units 131,930 133,765 136,120 Less: Inventory in Hand 17,175 17,430 17,565 Total Units Required to be Produced 114,755 116,335 118,555 Total 347,800 19,020 401,815 17,175 349,645 April 126,800 20,295 (15% of next months sales) 147,095 19,020 (15% of current month sales) 128,075 Direct Materials Budget- Q1 of 2022 January February March Total April Expected Units to be produced 114,755 116,335 118,555 349,645 128,075 Direct Materials Per Unit (Pounds) 2.5 2.5 2.5 2.5 2.5 Total Pounds Required for Production (Pounds) 286,888 290,838 296,388 874,113 320,188 Add: Desired Ending Inventory 29,084 29,639 32,019 32,019 (15% of next months inventory) Total Materials Required (Pounds) 315,971 320,476 328,406 906,131 Less: Beginning Materials Inventory 18,800 29,084 29,639 18,800 Direct Materials Required to be purchased 297,171 291,393 298,768 887,331 Cost Per Pound (in $) $ 0.82 $ 0.82 $ 0.82 $ 0.82 Total Cost of Direct Material Purchases (in $) $ 243,680 $ 238,942 $ 244,989 $ 727,612 Direct Labor Budget- Q1 of 2022 January February March Total Expected Units to be produced 114,755 116,335 118,555 349,645 Direct Labor Time per Unit (Hours) 0.15 0.15 0.15 0.15 Total Required Direct Labor Hours 17,213 17,450 17,783 52,447 Direct Labor Cost Per Hour (in $) $ 13$ 13$ 13$ Total Expected Direct Labor Cost (in $) $ 223,772 $ 226,853 $ 231,182 $ 681,808 13 Manufacturing Overhead Budget- Q1 of 2022 January February March Total Variable Costs Indirect Materials $ 6,025 $ 6,108$ 6,224 $ 18,356 Indirect Labor $ 10,328 $ 10,470 $ 10,670 $ 31,468 Utilities $ 9,467$ 9,598 $ 9,781 $ 28,846 Maintenance $ 6,025$ 6,108$ 6,224 $ 18,356 Total Variable Costs $ 31,845 $ 32,283 $ 32,899 $ 97,026 Fixed Costs Salaries $ 49,000$ 49,000$ 49,000 $ 147,000 Depreciation $ 16,200 $ 16,200 $ 16,200 $ 48,600 Property Taxes $ 2,300 $ 2,300 $ 2,300 $ 6,900 Insurance $ 1,450 $ 1,450 $ 1,450 $ 4,350 Maintenance $ 1,525 $ 1,525 $ 1,525 $ 4,575 Total Fixed Costs $ 70,475 $ 70,475 $ 70,475 $ 211,425 Total Manufacturing Overhead $ 102,320 $ 102,758 $ 103,374 $ 308,451 Total Manufacturing Overhead Direct Labor Hours Predetermined Overhead Rate for Q1 of 2022 $ 102,320 $ 102,758 $ 103,374 $ 308,451 17,213 17,450 17,783 52,447 $ 5.88 Selling and Administrative Expenses Budget- Q1 of 2022 January February March Total Variable Expenses Expected Budget Sales in Units 114,500 116,200 117,100 347,800 Variable Expenses Per Unit $ 1.82 $ 1.82 $ 1.82 $ 1.82 Total Variable Expense $ 208,390 $ 211,484 $ 213,122 $ 632,996 Fixed Expenses Advertising $ 13,500 $ 13,500 $ 13,500 $ 40,500 Insurance $ 1,375$ 1,375$ 1,375$ 4,125 Salaries $ 76,000 $ 76,000 $ 76,000 $ 228,000 Depreciation $ 2,300 $ 2,300 $ 2,300 $ 6,900 Other fixed costs $ 3,100 $ 3,100 $ 3,100 $ 9,300 Total Fixed Expenses $ 96,275 $ 96,275 $ 96,275 $ 288,825 Total S&A Expenses $ 304,665 $ 307,759 $ 309,397 $ 921,821 lu lu un Schedule of Expected Cash Collections- Q1 of 2022 January February March Total Accounts Receivable 12/31/2021 $ 198,300 $ 198,300 January Sales $ 1,190,800 $ 297,700 $ 1,488,500 February Sales $ 1,208,480$ 302,120$ 1,510,600 March Sales $ 1,217,840$ 1,217,840 Total Cash Collection $ 1,389,100 $ 1,506,180 $ 1,519,960 $ 4,415,240 Schedule of Expected Payments for Material Purchases- Q1 of 2022 January February March Total Accounts Payable 12/31/21 $ 106,885 $ 106,885 January $ 146,208 $ 97,472 $ 243,680 February $ 143,365 $ 95,577 $ 238,942 March $ 146,994 $ 146,994 Total Cash Payments $ 253,093 $ 240,837 $ 242,570 $ 736,501 Cash Budget- Q1 of 2022 January February March Total Beginning Cash Balance $ 93,000 $ 850,250 $ 850,516 $ 93,000 Add: Receipts Collections From Customers $ 1,389,100 $ 1,506,180 $ 1,519,960 $ 4,415,240 Total Available Cash $ 1,482,100 $2,356,430 $2,370,476 $ 4,508,240 Less: Disbursements Direct Materials $ 253,093 $ 240,837$ 242,570 $ 736,501 Direct Labor $ 223,772 $ 226,853 $ 231,182 $ 681,808 Manufacturing Overhead $ 86,120 $ 86,558$ 87,174 $ 259,851 Sales and Administrative $ 302,365 $ 305,459 $ 307,097 $ 914,921 Equipment Purchase $ $ 520,000 $ $ 520,000 Income Tax $ $ $ 668,656 $ 668,656 Dividends $ 13,500 $ 13,500 $ 13,500 $ 40,500 Total Disbursements $ 878,850 $ 1,393,207 $1,550,180 $3,822,237 Excess of Available Cash Over Cash Disbursements $ 603,250 $ 963,222 $ 820,296 $ 686,003 Financing Borrowings $ 247,000 $ 30,000$ 277,000 Repayments $ (116,000) $ (116,000) Interest $ 3,293 $ 3,293 Ending Cash Balance $ 850,250 $ 850,516 $ 850,296 $ 850,296 Cost of Goods Sold-Q1 of 2022 Per Unit January February March Beginning Inventory $ 91,838$ 85,305 $ 85,819 Materials 2.05 235,248 238,487 243,037.75 Labor 1.95 223,772 226,853 231,182.25 Variable Overhead 0.28 32,131 32,574 33,195.40 Fixed Overhead $ 70,475$ 70,475 $ 70,475 Total Goods Available for Sale $ 653,464 $ 653,694 $ 663,709 Less: Ending Inventory 85,305 85,819 92,712 Cost of Goods Sold $ 568,160 $ 567,875 $ 570,997 Cost per Unit- Q1 of 2022 Quanitty Rate Per Unit Cost Direct Material 2.5 0.82 2.05 Labor 0.15 13 1.95 Variable Overhead 0.15 1.85 0.28 Total Variable Cost per Unit 4.28 January February March Fixed Cost $ 70,475$ 70,475$ 70,475 Divided by: Units produced 114,755 116,335 118,555 Fixed Cost per Unit 0.61 0.61 0.59 Add: Total Variable Cost Per Unit 4.28 4.28 4.28 Total Cost per Unit 4.89 4.89 4.87 Blue Fish Corporation Budgeted Income Statement For the Quarter Ending 3/31/22 January February Sales $ 1,488,500 $ 1,510,600$ Less: Cost of Goods Sold 568,160 567,875 Gross Profit 920,340 942,725 Less: Selling and Adminstrative Expenses 304,665 307,759 Income from Operations 615,675 634,966 Less: Interest Expense 1,647 1,647 Income before Taxes 614,029 633,320 Less: Income Tax Expense (21%) 128,946 132,997 Net Income 485,083 500,323 March 1,522,300 $ 570,997 951,303 309,397 641,906 1,073 640,832 134,575 506,258 4,521,400 1,707,032 2,814,368 921,821 1,892,547 4,367 1,888,181 396,518 1,491,663 Blue Fish Corporation Budgeted Balance Sheet 3/31/2022 Assets Cash Accounts Receivable Raw Materials Inventory Finished Goods Inventory Machinery and Equipment Total Assets $ 1,082,296 304,460 26,255 92,712 1,384,500 $ 2,890,224 Liabilities Accounts Payable Notes Payable Income Taxes Payable Interest Payable Total Liabilities 97,996 393,000 396,518 2,887 890,401 Shareholder's Equity Common Stock Retained Earnings Total Stockholder's Equity Total Liabilities and Stockholder's Equity 250,000 1,744,176 1,994,176 2,884,577 M) Breakeven Point in Units Breakeven Points Fixed Costs/Unit Contribution Margin Breakeven Point= 500,250/11.18 Breakeven Points 44,745 Breakeven Point in Units= 44,745 Units Fixed Costs Variable Costs Unit Contribution Margin= Contribution Margin Ratio= 500,250 730,022 11.18 86% $ Breakeven Point in Dollars Breakeven Points Fixed Costs/Contribution Margin Ratio Breakeven Point= 500,250/86% Breakeven Points $ 581,686 Breakeven Point in Dollars= $581,686 N) Breakeven Point in Units Breakeven Point= (Fixed Costs + Target Net Income) / Unit Contribution Margin Breakeven Point= (500,250+1,850,000)/11.18 Breakeven Points 210,219 Breakeven Point in Units = 210,219 Breakeven Point in Dollars Breakeven Point in Dollars= (Fixed Costs + Target Net Income)/Contribution Margin Ratio Breakeven Point in Dollars= (500,250+1,850,000)/86% Breakeven Point in Dollars= $ 2,732,849 Breakeven Point in Dollars= $2,732,849 o) MPV=Actual Quantity* (Actual Price-Standard Price) MPV= 690,200 * (.84-.82) MPV= $ 13,804 (Unfavorable) Standard Price/Pound= Actual Price/Pound= Standard Quanity= Actual Quantity= 0.82 0.84 747,250 690,200 MQV= Standard Price*(Actual Quantity-Standard Quantity) MQV=.82*(690,200-747,250) MQV= $ (46,781) Favorable Total Materials Variance= Materials Price Variance + Materials Quantity Variance Total Materials Variance= $ (32,977) (Favorable) P) 13 P) Labor Price Variance= Actual Hours* (Actual Rate-Standard Rate) Labor Price Variance= 44,800*(12.95-13) Labor Price Variance= $ (2,240) (Favorable) S $ Standard Rate/Hour= Actual Rate/Houre Standard Labor Hours= Actual Labor Hours= 12.95 44,835 44,800 Labor Quantity Variance= Standard Rate*(Actual Hours-Standard Hours) Labor Quantity Variance= 13*(44,800-44,835) Labor Quantity Variance= $ (455) (Favorable) Total Labor Variances Labor Price Variance + Labor Quantity Variance Total Labor Variance= (2,240)+(455) Total Labor Variance= $ (2,695) (Favorable) 9) Calculate the total overhead variance for the first quarter of 2022 assuming the company had actual Variable Overhead of $102,800 and actual fixed overhead of $185,000. The company actually produced 298,900 Units during the quarter with a predetermined overhead rate of $5.90 per direct labor hour. r) The company is trying to decide between 3 new pieces of equipment. All three will last the company for 5 years. The company's cost of capital is 12%. The information is as follows. a. Machine A has a cost of $175,000 with a salvage value of $5,000 at the end of the 5 years. This machine will need a new overhaul at the end of year 3 for $10,000. It is expected to produce net income over the next 5 years of $20,000 per year. b. Machine B will cost $190,000 with no salvage value. This machine is expected to product net income of $29,000 (year 1), $26,000 (year 2), $24,000(year 3), $19,000(year 4), and $8,000(year 5), over the next 5 years. c. Machine C will cost $140,000 with a salvage value of $10,000 at the end of year 5. This machine will need a new overhaul at the end of year 2 for $15,000. It is expected to produce net income over the next 5 years of $24,000 per year. Calculate the Net Present Value, Rate of Return and Payback Period for each of the 3 machines and make a recommendation to the manager on which machine would be best for the company