Preparation of a complete master budget The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 20xx ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 20XX Assets Liabilities and Equity Cash S 40,000 Accounts payable S200,500 Accounts receivable 342.243 Short-term notes payable 12.000 Raw materials inventory 95,500 Total current liabilities 212.500 Finished goods inventory 325.540 Long-term note payable 500.000 Total current assets 306,283 Total liabilities 712.500 Equipment 600.000 Common stock 335.000 Accumulated depreciation_(150.000) Retained earnings 203.785 Equipment, net 450.000 Total stockholders' equity 542.755 Total assets S1,256,288 Total liabilities and equity S1,256,235 To prepare a master budget for April, May, and June of 20xx, management gathers the following information: a. Sales for March total 20,500 units. Forecasted sales in units are as follows: April, 20,500; May, 19,500, June, 20,000; and July, 20,500. Sales of 240,000 units are forecasted for the entire year. The product's selling price is $23.85 per unit and its total product cost is $ per unit. b. Company policy calls for a given month's ending raw materials inventory to equal 50% of the next month's materials requirements. The March 31 raw materials inventory is 4,925 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,000 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials. c. Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's expected unit sales. The March 31 finished goods inventory is 16,400 units, which complies with the policy d. Each finished unit requires 0.50 hours of direct labor at a rate of $15 per hour ports e Overhead is allocated based on direct labor hours. The predetermined variable overhead rates $2.70 per direct labor hour. Depreciation of $20,000 per month is treated as fixed factory overhead. f. Sales representatives' commissions are 8% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,000 B. Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable. h. The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of the sale). All raw materials purchases are on credit, and no payables arise from any other transactions. One month's raw materials purchases are fully paid in the next month. Party 1. The minimum ending cash balance for all months is $40,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum, Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance. k Dividends of $10,000 are to be declared and paid in May. No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 35% in the quarter and paid in the third calendar quarter. m Equipment purchases of $130,000 are budgeted for the last day of June. L Required: Prepare the following budgets and other financial information for the second calendar quarter, except as otherwise noted below. Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar. 1. Sales budget 2. Production budget 3. Raw materials budget 4. Direct labor budget 5. Factory overhead budget 6. Selling expense budget 7. General and administrative expense budget 8. Cash budget 9. Budgeted income statement for the entire second quarter (not for each month separately). 10. Budgeted balance sheet as of the end of the second calendar quarter. Part 9 ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30, 20XX Sales Cost of goods sold Gross profit Operating expenses Sales commissions Sales salaries General administrative salaries long-term note interest Interest expense Income before taxes Income taxes Net income Part 10 ZIGBY MANUFACTURING Budgeted Balance Sheet June 30, 20XX ASSETS Cash Accounts receivable Raw materials inventory Finished goods inventory Total current assets Equipment Less accumulated depreciation Total assets $1,299.440 LIABILITIES AND EQUITY Accounts payable Bank loan payable Taxes payable Total current liabilities Long-term note payable Total Liabilities Common stock $335,000 Retained earnings Total stockholders' equity Total liabilities and equity