1. Prepare a Sales Budget; Production Budget, Direct Materials Budget; Direct Labour Budget; Manufacturing Overhead Budget; and Sales and Administration Budget.
2. Prepare Schedules of Expected Cash Collections and Expected Cash Disbursements for Material as well as a Cash Budget.

Early this morning the controller Dave informed you that you would be responsible for preparing the master budget for the quarter ended December 31, 2021. You have assembled the following information:

The statuettes sell for $700 each. Recent and forecasted sales (in units) are as follows:

July (actual) 3,500

August (actual) 3,700

September (actual) 3,800

October 2,200

November 2,800

December 4,500

January 1,000

February 1,500

March 1,800

Inventories of finished goods on hand at the end of each month are to be equal to 50% of the following months budgeted sales. As of September 30^th the company had 1,100 statuettes in inventory.

Each statuette requires 75 ounces of bronze, which the company purchases for $.45 per ounce. Rock Solid keeps an ending inventory of bronze at the end of each month equal to 75% of the next months production needs. As of September 30^th the company had 140,625 ounces of bronze on hand.

Purchases of raw materials are paid for as follows: 50% in the month of purchase and the remaining 50% in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 40% of a months sales are collected by month-end. An additional 45% is collected in the month following, and the remaining 15% is collected in the second month following. Bad debts have been negligible.

Each statuette requires 15 hours to mould and polish. Employees who make the statuettes are paid $25 per hour and never work overtime (i.e. the company has enough casual workers that they can call in if additional work is required).

Manufacturing overhead includes all the costs of production other than direct materials and direct labour. The variable component is $45 per statuette in production and the fixed component is $117,000 per month (this amount includes depreciation of $22,000 per month on the furnaces, moulds and polishing equipment). Manufacturing overhead costs are allocated to statuettes on a per unit basis.

Rock Solids monthly operating expenses are given below:

Variable:

Royalties paid to The Rock $50 per statuette sold

Fixed:

Wages & salaries $82,000

Utilities 8,000

Insurance expired 1,500

Depreciation 11,500

Miscellaneous 23,500

All operating expenses are paid during the month in cash, with the exception of the depreciation and insurance expenses. Due to the popularity of The Rocks movies the company is planning on producing different styles of statuettes with movie tie-ins. To accommodate the expected increase in demand the company will be purchasing a new blast furnace in October for $740,000 and some new moulds in November for $250,000. Rock Solid declares a dividend of $100,000 on the last day of each quarter which is then paid in the first month of the next quarter.

The balance sheet at September 30^th is given below:

Assets

Cash $ 45,000

Accounts receivable 1,984,500

Inventory, raw materials 63,281

Inventory, finished goods 542,507

Unexpired insurance 13,500

Fixed assets 3,462,000

Accumulated depreciation (1,117,000) 2,345,000

Total Assets $ 4,993,788

Liabilities and Shareholders Equity

Accounts payable, purchases $ 44,297

Dividends payable 100,000

Capital stock, no par 2,000,000

Retained earnings 2,848,491

Total liabilities and shareholders equity $ 4,993,788

Management of Rock Solid requires a minimum ending cash balance each month of $20,000. The company can borrow money from its bank at 12% annual interest. All borrowing must be done at the beginning of a month, and repayments must be made at the end of a month. Repayments of principal must be in round $1,000 amounts. Borrowing is also in round $1,000 amounts. Interest is computed and paid at the end of each quarter on all loans outstanding during the quarter. Round all interest payments to the nearest whole dollar. Compute interest using whole months. The company wishes to use any excess cash to pay loans off as rapidly as possible.