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 $ 80,000 Accounts receivable 487,500 Raw materials inventory 93,390 Finished goods inventory 438,000 Total current assets 1,098,890 Equipment 640,000 Accumulated depreciation (170,000 ) Equipment, net 470,000 Total assets $ 1,568,890 Liabilities and Equity Accounts payable $ 215,690 Short-term notes payable 32,000 Total current liabilities 247,690 Long-term note payable 520,000 Total liabilities 767,690 Common stock 355,000 Retained earnings 446,200 Total stockholders equity 801,200 Total liabilities and equity $ 1,568,890 To prepare a master budget for April, May, and June of 2019, management gathers the following information. Sales for March total 25,000 units. Forecasted sales in units are as follows: April, 25,000; May, 17,100; June, 22,300; and July, 25,000. Sales of 260,000 units are forecasted for the entire year. The products selling price is $26.00 per unit and its total product cost is $21.90 per unit. Company policy calls for a given months ending raw materials inventory to equal 50% of the next months materials requirements. The March 31 raw materials inventory is 4,670 units, which complies with the policy. The expected June 30 ending raw materials inventory is 6,000 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials. Company policy calls for a given months ending finished goods inventory to equal 80% of the next months expected unit sales. The March 31 finished goods inventory is 20,000 units, which complies with the policy. Each finished unit requires 0.50 hours of direct labor at a rate of $16 per hour. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $4.00 per direct labor hour. Depreciation of $40,790 per month is treated as fixed factory overhead. Sales representatives commissions are 10% of sales and are paid in the month of the sales. The sales managers monthly salary is $5,000. Monthly general and administrative expenses include $21,000 administrative salaries and 0.9% monthly interest on the long-term note payable. The company expects 25% of sales to be for cash and the remaining 75% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale). All raw materials purchases are on credit, and no payables arise from any other transactions. One months raw materials purchases are fully paid in the next month. The minimum ending cash balance for all months is $99,000. 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. Dividends of $30,000 are to be declared and paid in May. 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. Equipment purchases of $150,000 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.

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Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Required 8 Required 9 Selling expense budget. ZIGBY MANUFACTURING Selling Expense Budget April, May, and June 2019 April May June Budgeted sales Sales commissions Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Required 8 Required 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 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 Sales on credit 25% 75% 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 Total cash available Cash payments for DI Total cash payments Preliminary cash balance Ending cash balance Loan balance April May June Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Required 8 Required 9 Require Budgeted income statement for the entire second quarter (not for each month separately). (Round your final answers to nearest whole dollar.) ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30, 2019 Operating expenses Total operating expenses 0 0 $ Required 8 Required 10 > Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 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 Stockholders' Equity Total Stockholders' Equity Total Liabilities and Equity Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Required 8 Required 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 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 Sales on credit 25% 75% 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 Total cash available Cash payments for DI Total cash payments Preliminary cash balance Ending cash balance Loan balance April May June Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Required 8 Required 9 Require Budgeted income statement for the entire second quarter (not for each month separately). (Round your final answers to nearest whole dollar.) ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30, 2019 Operating expenses Total operating expenses 0 0 $ Required 8 Required 10 > Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 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 Stockholders' Equity Total Stockholders' Equity Total Liabilities and Equity