Prepare a master budget for Optima Company for each quarter of 2008 and for the year in total. Please include supporting schedules for: 1. Sales Budget 2. Production Budget 3. Direct materials purchases budget 4. Direct labor budget 5. Overhead budget 6. Selling and administrative expenses budget 7. Ending finished goods inventory budget 8. Cost of goods sold budget 9. Cash budget ? 10 points 10. Budgeted income statement 11. Budgeted balance sheet ? * ignore income taxes Optima Company is a high-technology organization that produces a mass-storage system. The design of Optima?s system is unique and represents a breakthrough in the industry. The units Optima produces combine positive features of both floppy and hard disks. The company is completing its fifth year of operations and is preparing to build its master budget for the coming year (2008). The budget will detail each quarter?s activity and the activity for the year in total. The master budget will be based on the following information: a) Fourth quarter sales for 2007 are 55,000 units b) Unit sales by quarter for 2008 are projected as follows: First Quarter 65,000 Second Quarter 70,000 Third Quarter 75,000 Fourth Quarter 90,000 The selling price is $400 per unit. All sales are credit sales. Optima collects 85% of all sales within the quarter in which they are realized; the other 15% are collected in the following quarter. There are no bad debts. c) There is no beginning inventory of finished goods. Optima is planning the following ending finished goods inventories for each quarter: First Quarter 13,000 units Second Quarter 15,000 units Third Quarter 20,000 units Fourth Quarter 10,000 units d) Each mass-storage unit uses 5 hours of direct labor and three units of direct materials. Laborers are paid $10 per hour, and one unit of direct materials costs $80. e) There are 65,700 units of direct materials in beginning inventory as of January 1, 2008. At the end of each quarter, Optima plans to have 30% of direct materials needed for next quarter?s unit sales. Optima will end the year with the same level of direct materials found in this year?s beginning inventory. f) Optima buys direct materials on account. Half of the purchases are paid for in the quarter of acquisition, and the remaining half are paid for in the following quarter. Wages and salaries are paid on the 15th. And 30th. Of each month. g) Fixed overhead totals $1 million each quarter. Of this total, $350,000 represents depreciation. All other fixed expenses are paid for in cash in the quarter incurred. The fixed overhead rate is computed by dividing the year?s total fixed overhead by the year?s expected actual units produced. h) Variable overhead is budgeted at $6 per direct labor hour. All variable overhead expenses are paid for in the quarter incurred. i) Fixed selling and administrative expenses total $250,000 per quarter, including $50,000 depreciation j) Variable selling and administrative expenses are budgeted at $10 per unit sold. All selling and administrative expenses are paid for in the quarter incurred. k) The balance sheet as of December 31, 2007, is as follows: BALANCE SHEET DECEMBER 31, 2007 Assets: Liabilities and Stockholders? Equity Cash $250,000 Accounts Payable $7,248,000* Direct Materials inventory 5,256,000 Capital Stock 27,500,000 Accounts Receivable 3,300,000 Retained Earnings 9,058,000 Plant and Equipment 33,000,000 Total Assets $43,806,000 Total Liabilities and S/E Equity $43,806,000 *For purchases of direct materials only l) Optima will pay quarterly dividends of $300,000. At the end of the fourth quarter, $2 million of equipment will be purchased.

Prepare a master budget for Optima Company for each quarter of 2008 and make sure you show the totals for the year in each schedule. ( I will reduce your points if you omit this step) Please use Excel spreadsheets to complete this project. Properly label and include the following supporting schedules: (points will be taken off if not properly labeled) 1. Sales Budget - 4 points 2. Production Budget - 4 points 3. Direct materials purchases budget - 5 points 4. Direct labor budget - 4 points 5. Overhead budget - 5 points 6. Selling and administrative expenses budget - 5 points 7. Ending finished goods inventory budget - 5 points 8. Cost of goods sold budget - 8 points 9. Cash budget - 10 points 10. Budgeted income statement - 10 points 11. Budgeted balance sheet - 15 points * ignore income taxes * Please check all your calculations carefully since one wrong calculation will affect all supporting schedules. Late projects will not be accepted. Bring a hard copy to class and upload one copy in Connect. Optima Company is a high-technology organization that produces a mass-storage system. The design of Optima's system is unique and represents a breakthrough in the industry. The units Optima produces combine positive features of both floppy and hard disks. The company is completing its fifth year of operations and is preparing to build its master budget for the coming year (2008). The budget will detail each quarter's activity and the activity for the year in total. The master budget will be based on the following information: a) Fourth quarter sales for 2007 are 55,000 units b) Unit sales by quarter for 2008 are projected as follows: First Quarter 65,000 Second Quarter 70,000 Third Quarter 75,000 Fourth Quarter 90,000 The selling price is $400 per unit. All sales are credit sales. Optima collects 85% of all sales within the quarter in which they are realized; the other 15% are collected in the following quarter. There are no bad debts. c) There is no beginning inventory of finished goods. Optima is planning the following ending finished goods inventories for each quarter: First Quarter 13,000 units Second Quarter 15,000 units Third Quarter 20,000 units Fourth Quarter 10,000 units d) Each mass-storage unit uses 5 hours of direct labor and three units of direct materials. Laborers are paid $10 per hour, and one unit of direct materials costs $80. e) There are 65,700 units of direct materials in beginning inventory as of January 1, 2008. At the end of each quarter, Optima plans to have 30% of direct materials needed for next quarter's unit sales. Optima will end the year with the same level of direct materials found in this year's beginning inventory. f) Optima buys direct materials on account. Half of the purchases are paid for in the quarter of acquisition, and the remaining half are paid for in the following quarter. Wages and salaries are paid on the 15th. And 30th. Of each month. g) Fixed overhead totals $1 million each quarter. Of this total, $350,000 represents depreciation. All other fixed expenses are paid for in cash in the quarter incurred. The fixed overhead rate is computed by dividing the year's total fixed overhead by the year's expected actual units produced. h) Variable overhead is budgeted at $6 per direct labor hour. All variable overhead expenses are paid for in the quarter incurred. i) Fixed selling and administrative expenses total $250,000 per quarter, including $50,000 depreciation j) Variable selling and administrative expenses are budgeted at $10 per unit sold. All selling and administrative expenses are paid for in the quarter incurred. k) The balance sheet as of December 31, 2007, is as follows: Assets: Equity Cash Direct Materials inventory Accounts Receivable Plant and Equipment Total Assets $43,806,000 BALANCE SHEET DECEMBER 31, 2007 Liabilities and Stockholders' $250,000 5,256,000 3,300,000 35,000,000 $43,806,000 Accounts Payable Capital Stock Retained Earnings $7,248,000* 27,500,000 9,058,000 Total Liabilities and S/E Equity *For purchases of direct materials only l) Optima will pay quarterly dividends of $300,000. At the end of the fourth quarter, $2 million of equipment will be purchased