Prepare a master budget, by month, for the first quarter including quarterly totals and the pro- forma income statement and balance sheet as of June 30th.
Dye-Aspora, Inc manufactures a red industrial dye. The company is preparing its master budget for the second quarter and has presented you with the following information. 1. The March 31, 20XX, balance sheet for the company follows. DYE-ASPORA, Incorporated Balance Sheet March 31, 20XX Assets Cash $8,080 26,500 2000 Accounts Receivable Raw Materials Inventory Finished Goods Inventory Prepaid Insurance 2,680 Liabilities and Stockholder Equity Notes Payable $28,000 Accounts 2,148 Payable Dividends Payable 10,000 Total Liabilities 40,148 Common Stock 100,000 Paid-in 50,000 Capital Retained 280, 312 Earnings 130, 312 Total Liabilities and $320, 460 Equity 1,200 Building 300,000 Acc Depreciation 280,000 (20,000) Total ssets $320, 460 2. The Accounts Receivable balance at March 31st represents the remaining balances of January and February credit sales: $70,000 and $65,000, respectively. 3. Estimated sales in gallons of dye for April through August follow: April 8,000 May 10,000 June 15,000 July 12,000 August 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: Quanti Cost/ra Std ty te Cost Ga Mordant (DM) 1.20 1 $2.00 $2.40 Direct labor 0.25 Hr $12.00 $3.00 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 finished 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 April. A new piece of equipment costing $12,000 will be purchased on June 1. Payment of 80 percent will be made in June and 20 percent in July. 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. 11. Dye-Aspora's management has set a minimum cash balance at $8,000. Investments and borrowings are made in $100 increments. Investments are expected to earn 9% per year. 12. The ending finished goods inventory should include 15 percent of the next month's needs. This is not true at the beginning of April due to a miscalculation in sales for March. 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 600 Office Rent 8,000 Required: Prepare a master budget, by month, for the first quarter including quarterly totals and the pro- forma income statement and balance sheet as of June 30th
