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. 69,000 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-term note payable Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and equity $ 432,000 86,000 348, 480 935,480 614,000 (157,000) 457,000 $1,392,480 178, 700 19,000 197,700 515,000 712, 700 342,000 337,780 679, 780 $ 1,392, 480 To prepare a master budget for April, May, and June of 2019, management gathers the following information. a. Sales for March total 18,000 units. Forecasted sales in units are as follows: April, 18,000; May, 17,000; June, 20,700; and July, 18,000. Sales of 247,000 units are forecasted for the entire year. The product's selling price is $30.00 per unit and its total product cost is $24.20 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 4,300 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,700 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 14,400 units, which complies with the policy. d. Each finished unit requires 0.50 hours of direct labor at a rate of $22 per hour. e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.40 per direct labor hour. Depreciation of $27,850 per month is treated as fixed factory overhead. f. Sales representatives' commissions are 8% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,700. g. Monthly general and administrative expenses include $19,000 administrative salaries and 0.6% 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). i. All raw materials purchases are on credit, and no payables arise from any other transactions. One month's raw materials purchases are fully paid in the next month. j. The minimum ending cash balance for all months is $55,000. 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 $17,000 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 quarter and paid in the third calendar quarter. m. Equipment purchases of $137,000 are budgeted for the last day of June. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Required 8 Sales budget. (Round Budgeted unit price to 2 decimal places.) ZIGBY MANUFACTURING Sales Budget April, May, and June 2019 Budgeted Budgeted Unit Sales Unit Price Budgeted Sales Dollars April 2019 18,000 $ 30.00 $ 540,000 May 2019 17,000 30.00 510,000 June 2019 20,700 30.00 621,000 $ 1,671,000 Totals for the second quarter 55,700 Required 1 Required 2 Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Required 8 Required 9 F Production budget. ZIGBY MANUFACTURING Production Budget April, May, and June 2019 April May June Total 17,000 20,700 18,000 80% 80% 80% 1,370 16,560 14,400 Next month's budgeted sales (units) Ratio of inventory to future sales Budgeted ending inventory (units) Budgeted units sales for month Required units of available production Beginning inventory (units) Units to be produced 18,000 17,000 20,700 19,370 33,560 35,100 1,440 1,656 1,360 32,200 17,930 33,444 83,574 Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Require Direct labor budget. (Round per unit values to 2 decimal places.) ZIGBY MANUFACTURING Direct Labor Budget April, May, and June 2019 April May June Total 17,930 32,200 33,444 Budgeted production (units) Direct labor rate (per hour) 0.50 0.50 0.50 Total labor hours needed 8,965 16,100 25,065 Budgeted direct labor cost Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Required 8 RE Selling expense budget. ZIGBY MANUFACTURING Selling Expense Budget April, May, and June 2019 April May June Budgeted sales Sales commissions Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Required 8 General and administrative expense budget. ZIGBY MANUFACTURING General and Administrative Expense Budget April, May, and June 2019 April May June Total budgeted G&A expenses Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Required 8 Required 9 Required 10 Cash budget. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign.) Calculation of Cash receipts from customers: April May June Total budgeted sales Cash sales 20% Sales on credit 80% Total cash receipts from customers April May June Current month's cash sales Collections of receivables Total cash receipts ZIGBY MANUFACTURING Cash Budget April, May, and June 2019 April May June Beginning cash balance Cash Budget April, May, and June 2019 April May June Beginning cash balance Total cash available Cash payments for: 0 0 0 Total cash payments Preliminary cash balance Ending cash balance Budgeted income statement for the entire second quarter (not for each month separately). (Round your fin nearest whole dollar.) ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30, 2019 Operating expenses Total operating expenses 0 0 $ 0 Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Required 8 Required 9 Required 10 Budgeted balance sheet. (Round your final answers to the nearest whole dollar.) ZIGBY MANUFACTURING Budgeted Balance Sheet June 30, 2019 Assets Total current assets $ 0 Equipment, net 0 Total assets Liabilities and Equity Liabilities Total current liabilities Equipment, net 0 Total assets Liabilities and Equity Liabilities Total current liabilities Stockholders' Equity Total Stockholders' Equity Total Liabilities and Equity