Problem 20-4A (Static) Manufacturing: Preparation of a complete master budget LO P1, P2, P3 The management of Zigby Manufacturing prepared the following balance sheet for March 31. Assets ZIGBY MANUFACTURING Balance Sheet March 31 $ 40,000 344,400 Liabilities Accounts payable Liabilities and Equity $201,000 12,000 500,000 $ 713,000 335,000 Cash Accounts receivable Raw materiala inventory 98,500 Loan payable Finished goods inventory 325,540 Long-term note payable Equipment Less: Accumulated depreciation $ 600,000 150,000 Equity 450,000 Conmon stock Retained earnings Total assets $1,258,440 Total liabilities and equity 210,440 545,440 1,258,440 To prepare a master budget for April, May, and June, management gathers the following information. a. Sales for March total 20,500 units. Budgeted sales in units follow: April, 20,500; May, 19,500; June, 20,000; and July, 20,500. The product's selling price is $24.00 per unit and its total product cost is $19.85 per unit. b. Raw materials inventory consists solely of direct materials that cost $20 per pound. Company policy calls for a given month's ending materials inventory to equal 50% of the next month's direct materials requirements. The March 31 raw materials inventory is 4,925 pounds. The budgeted June 30 ending raw materials inventory is 4,000 pounds. Each finished unit requires 0.50 pound of direct materials. c. Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's budgeted unit sales. The March 31 finished goods inventory is 16,400 units. d. Each finished unit requires 0.50 hour of direct labor at a rate of $15 per hour. e. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $20,000 per month is the only fixed factory overhead item. f. Sales commissions of 8% of sales are paid in the month of the sales. The sales manager's monthly salary is $3,000. g. Monthly general and administrative expenses include $12,000 for administrative salaries and 0.9% monthly interst on the long- term note payable. h. The company budgets 30% of sales to be for cash and the remaining 70% on credit. Credit sales are collected in full in the month following the sale (no credit sales are collected in the month of sale). < Prev 9 of 9 Score answer >