PREPARATION OF OPERATING AND FINANCIAL BUDGETS Donahue Company is preparing budgets for the third quarter ending Sept 30, 2019. Budgeted sales for the next five months July 20,AAA units Aug 50 BBB units Sept 30 CCC units Oct 25 DDD units Nov 15.000 units See instructions in table below: ID Number First Name Last Name Group Member No. 1 2 Mouse Duck SO0003206 SI 1036589 S90250055 SI1011034 Mickey Donald Yogi Scooby Doo July 20.AAA units becomes 20,206 units. AAA is the last three digits of Member I'ID Aug 50,BBB units becomes 50,589 units. BBB is the last three digits of Member's ID Sept 30.CCC units becomes 30,055 units. CCC is the last three digits of Member 3's ID Oct 25,DDD units become 25,034 units. DDD is the last three digits of Member 4's ID NOTE that if your group has three members only, then use the value of 25,000 units for Oct. Now remains a 15,000 units The selling price is SIS per unit. All sales are on account. Donahue's collection poflcm is 60% collected in the month of sale and remaining amount in the month following sale. The June 30 Accounts Receivable balance of $50,000 will be collected in full. Smer 2.20.30 page: 2 The management at Denahuc Company wants ending Finished Goods Inventory to be equal to 25% of the following month's budgeted sales in units At Donahue Company, five pounds of material are required per unit of product Management wants materials on hand at the end of each month equal to 15% of the following month's production Material cost is $0.50 per pound. 30% of a month's purchases is paid for in the month of purchase and the remainder is paid in the following month. The June 30 Accounts Payable balance is $20,000 At Donahue, cach unit of product requires 0.06 hours (3.6 minutes) of direct labor. The company has ane layotr policy and in exchange for the layod policy, workers agree to a wage rate of SIS per hour regardless of the hours worked (no overtime pay). For the next three months, the direct labor workforce will be paid for a minimum of 2,000 hours per month At Donahue, manufacturing overhead is applied to units of product on the basis of direct labor hours. The variable manufacturing overhead rate is $25 per direct laber hour. Fixed manufacturing overhead is $40,000 per month and includes $10,000 of non-cash costs At Donahue, the selling and administrative expenses budget is divided into variable and fixed components. The variable selling and administrative expenses are $0.55 per unit sold. Fixed selling and administrative expenses are 560,000 per month. The fixed selling and administrative expertise include $15,000 in costs that are not cash outflows of the current month. The company: Has a July 1 cash balance of $55,000 Maintains a minimum cash balance of $35,000 Borrows on the first day of the month and repays loans on the last day of the quarter Maintains a 12% open line of credit for $95,000 Pays a cash dividend of $45,000 in Aug Cash purchases of equipment, $155,200 in July and $54,800 in Sept, respectively Donahue reported the following account balances prior to preparing its budgeted financial statements: Land - $65,000 Equipment - $180,000 Ordinary shares - $195,000 Retained earnings - $X* *This Retained earnings figure will be the amount needed to balance off your balance sheet on June 30 i.e. the closing balances on June 30th before you step into the third quarter. Required: Semester 2,2020 page: 3 With the information provided, assist Donahue Company in setting up their Master Budget'. To do this, you will need to prepare the following budgets for the third quarter of the year: 1. Sales Budget 2. Expected Cash Collections 3. Production Budget