Prepare a master budget, by month, for the first quarter including quarterly totals and the pro- forma income statement and balance sheet as of March 31st.
DyeAspora, Inc manufactures a red industrial dye. The company is preparing its master budget for the rst quarter and has presented you with the following information. 1. The December 31, 20XX, balance sheet for the company follows. DYE-ASPORA, Incorporated Balance Sheet December 51, 20XX Assets Liabilities and Stockholder Euity Cash $ 5,080 Notes Payable $25,000 Accounts Receivable 26,500 Accounts Payable 2,148 Raw Materials Inventory 2000 Dividends Payable 10 000 Finished Goods Inventory 2,680 Total Liabilities 57,148 Prepaid Insurance 1,200 Common Stock 100,000 Building 500,000 Paid-in Capital 50,000 Acc Depreciation (20,000) 280,000 Retained Earnings 150,512 280,5 12 Total Assets m Total Liabilities and Equity w 2. The Accounts Receivable balance at December 3 1 st represents the remaining balances of November and December credit sales $70,000 and $65,000, respectively. 3. Estimated sales in gallons of dye for January through May follow: January 8,000 February 10,000 March 15,000 April 12,000 May 11,000 Each gallon of dye sells for $12.75. 4. The collection pattern for accounts receivable is as follows: ' 70% in the month of sale, ' 20% the month after sale, and ' 10% the second month after sale. Dye-Aspora expects no bad debts and gives no cash discounts. 5. Each gallon of dye has the following standard quantities and costs for direct materials and direct labor: anntity Gogtrate Std Cost Mordant (DM) 1.20 Gal $2.00 $2.40 Direct labor 0.25 Hr $12.00 $5.00 Some evaporation loss occurs during processing. Variable overhead (VOH) is applied basis machine-hours. The processing of 1 gallon of dye takes 5 MH. The variable overhead rate is $0.06 per MH. VOH is entirely of utility costs. FOH is applied per gallon based on an expected annual capacity of 120,000 gallons. Fixed overhead is incurred evenly throughout the year. Fixed overhead per year is composed of the following costs: Salaries $78,000 Utilities 12.000 Insurance-factory 2,400 Depreciation-factory 27,600 6. There is no beginning work in process inventory. All work in process is completed in the period in which it is started. Raw materials inventory at the beginning of the year consists of 1,000 gallons of Mordant. There are 400 gallons of dye in nished goods inventory at the beginning of the year carried at standard cost. '7. Accounts Payable relates solely to raw material and is paid 60 percent in the month of purchase and 40 percent in the month after purchase. No discounts are given for prompt payment. 8. The dividend will be paid in January. 9. A new piece of equipment costing $9,000 will be purchased on March 1. Payment of 80 percent will be made in March and 20 percent in April. The equipment has a useful life of three years and will have no salvage value. 10. The note payable has a 6% interest rate; interest is paid at the end of each month. The principal of the note is repaid as cash is available to do so. 1 l. Dye-Aspora's management has set a minimum cash balance at $5,000. Investments and borrowings are made in $100 increments. Investments are expected to earn 9% per year. 12. The ending nished goods inventory should include 15 percent of the next month's needs. This is not true at the beginning of January due to a miscalculation in sales for December. The ending inventory of raw materials also should be 25 percent of the next month's needs. 13. Monthly selling and administrative costs are paid in cash. Per month costs are as follows: Salaries $ 18,000 Utilities 800 Ofce Rent r2',000 Reguired: Prepare a master budget, by month, for the rst quarter including quarterly totals and the pro- fonna income statement and balance sheet as of March 3 lst
