Problem 07-4A Manufacturing: Preparation of a complete master budget LO P1, P2, P3 The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2019, ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2019 Assets Cash Accounts receivable Raw materials inventory Finished goods inventory Total current assets Equipment Accumulated depreciation Equipment, net Total assets Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities Long-tern note payable Total Ilabilities Common stock Retained earnings Total stockholders equity Total liabilities and equity 44,000 500,000 90,200 446,000 1,070,200 600,000 (054.000 454.000 $1,532,200 $ 211,300 16.000 227,300 505,000 732,300 339,000 460,900 799.900 $1,532,200 To prepare a master budget for April May, and June of 2019, management gathers the following information a. Sales for March total 25,000 units. Forecasted sales in units are as follows: April. 25,000May, 16,300 June, 21100; and July 25,000. Sales of 244,000 units are forecasted for the entire year. The product's selling price is $25.00 per unit and its total product cost is $22.20 per unit. b. Company policy colls for a given month's ending raw materials inventory to equal 50% of the next month's materials requirements The March 31 raw materials inventory is 4,510 units, which complies with the policy. The expected June 30 ending raw materials Inventory is 4,400 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials c. Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's expected unit sales The March 31 finished goods inventory is 20.000 units, which complies with the policy d. Each finished unit requires 0.50 hours of direct labor at a rate of $19 per hour e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3,10 per direct labor hout onraristinn 0209 nar month le front surfactanos 25,000. Sales of 244,000 units are forecasted for the entire year. The product's selling price is $25.00 per unit and its total product cost is $22.20 per unit b. Company policy calls for a given month's ending raw materials inventory to equal 50% of the next month's materials requirements. The March 31 raw materials inventory is 4,510 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,400 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials. c. Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's expected unit sales. The March 31 finished goods inventory is 20,000 units, which complies with the policy. d. Each finished unit requires 0.50 hours of direct labor at a rate of $19 per hour e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.10 per direct lobor hour. f. Sales representatives commissions are 6% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,400 9. Monthly general and administrative expenses include $16,000 administrative salaries and 0.8% monthly interest on the long-term note payable. h. The company expects 20% of sales to be for cash and the remaining 80% on credit. Receivables are collected in full in the month following the sale (none-are collected in the month of the sale) 1. All raw materials purchases are on credit, and no payables arise from any other transactions. One month's raw materials purchases J. The minimum ending cash balance for all months is $44.000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance k. Dividends of $14,000 are to be declared and paid in May. 1. No cash payments for income taxes are to be made during the second calendar quarter Income tax will be assessed at 40% in the m. Equipment purchases of $134,000 are budgeted for the last day of June. Required: Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter , except as otherwise noted below. (Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar.) 1. Sales budget 2. Production budget 3. Raw materials budget 4. Direct labor budget. 5. Factory overhead budget 6. Selling expense budget. 7. General and administrative expense budget 8. Cash budget 9. Budgeted Income statement for the entire second quarter (not for each month separately) 10. Budgeted balance sheet May June 181,258 581,500 762,758 $ 287,421 431,500 718,921 ZIGBY MANUFACTURING Cash Budget April, May, and June 2019 April Beginning cash balance $ 44,000 Cash receipts from customers 625.000 Total cash available 669,000 Cash payments for Raw materials 211,300 Direct labor 171,380 Variable overhead 27.962 Rent Dividends Purchases of equipment General & administrative salaries 20,040 Loan interest 160 Sales salaries 40,900 190,900 191,330 31,217 221,800 230,090 37,541 14,000 134,000 20,040 20,040 27,850 35,050 678,521 Total cash payments Preliminary cash balance Additional loan (loan repayment) Ending cash balance 471,742 197 258 (16,000) 181.258 475,337 287.421 40,400 3,600 287421 44,000 Loan balance April S 16.000 May June $ 0 $ 0 Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month (16,000) 3.600 $ $ 0 3,600 Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Budgeted income statement for the entire second quarter (not for each month separate nearest whole dollar.).............. ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30, 2019 $1,560,000 1,385,280 174,720 Cost of goods sold Gross profit Operating expenses Sales salaries General administrative salaries Bank loan interest expense $ 103,800 60,120 X > 160 Total operating expenses Gross profit Income tax X 164,080 10,640 4,256 Net income $ 6,384