Problem 22-4A Manufacturing: Preparation of a complete master budget LO P1, P2, P3

The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2017:

ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2017
Assets
Cash	$	53,000
Accounts receivable		392,400
Raw materials inventory		96,600
Finished goods inventory		313,920
Total current assets		855,920
Equipment, gross		626,000
Accumulated depreciation		(163,000	)
Equipment, net		463,000
Total assets	$	1,318,920
Liabilities and Equity
Accounts payable	$	204,800
Short-term notes payable		25,000
Total current liabilities		229,800
Long-term note payable		520,000
Total liabilities		749,800
Common stock		348,000
Retained earnings		221,120
Total stockholders equity		569,120
Total liabilities and equity	$	1,318,920

To prepare a master budget for April, May, and June of 2017, management gathers the following information:

Sales for March total 21,800 units. Forecasted sales in units are as follows: April, 21,800; May, 18,700; June, 21,000; and July, 21,800. Sales of 253,000 units are forecasted for the entire year. The products selling price is $22.50 per unit and its total product cost is $18.00 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 4,830 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,300 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 17,440 units, which complies with the policy.

Each finished unit requires 0.50 hours of direct labor at a rate of $9 per hour.

Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $4.00 per direct labor hour. Depreciation of $30,750 per month is treated as fixed factory overhead.

Sales representatives commissions are 8% of sales and are paid in the month of the sales. The sales managers monthly salary is $4,300.

Monthly general and administrative expenses include $25,000 administrative salaries and 0.7% monthly interest on the long-term note payable.

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).

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 $53,000. 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 $23,000 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 $143,000 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.

part2

Chapter 22 Homework 6 Help Save & Exit Submit Savrcd 6 Check my work Exercise 22-2 Master budget definitions LO C2 Select each of the terms with the best description of its purpose. points Definitions Terms eBook A comprehensive business plan that includes specific plans for expected sales, the units of product to be produced, the merchandise or materials to be purchased, the expenses to be Incurred, the long-term assets to be purchased, and the amounts ot cash to be borrowed or loans to be repaid, as well as a budgeted income statement and balance sheet. Pint 2. A quantity of inventory or materials over the minimum to reduce the risk of running short 3A plan showing the units of goodstobe sold and the sales to be derived, the usual starting point in the budgeting process. An accounting report that presents predicted amounts of the company's revenues and expenses for the budgeting period. An accounting report that presents predicted amounts of the company's assets, liabllities, and equity balances at the end of the budget perilod. Apn that shows the units or costs of merchandise to be purchased by a merchandising 7. A formal statement of a company's future plans, usually expressed in monetary terms. . A plan that shows predicted operating expenses not included In the selling expenses budget. 9. including receipts from any loans needed to maintain a minimum cash balance and company during the budget period A plan that shows the expected cash inflows and cash outriows during the budget period, repayments of such loans. Graw Hill Prey1 of 2 Next>