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 46,000 Accounts receivable 386,925 96,290 327,831 Raw materials inventory Finished goods inventory Total current assets 857,046 Equipment, gross Accumulated depreciation Equipment, net 612,000 (156,000) 456,000 $1,313,046 Total assets Liabilities and Equity 196,190 18,000 214,190 Accounts payable Short-term notes payable $ Total current liabilities 506,000 720,190 341,000 Long-term note payable Total liabilities Common stock Retained earnings 251,856 592,856 Total stockholders' equity Total liabilities and equity $1,313,046 To prepare a master budget for April, May, and June of 2017, management gathers the following information: a. Sales for March total 20,100 units. Forecasted sales in units are as follows: April, 20,100; May, 18,900; June, 19,700; and July, 20,100. Sales of 246,000 units are forecasted for the entire year. The product's selling price is $27.50 per unit and its total product cost is $23.30 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 4,815 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,600 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 70% of the next month's expected unit sales. The March 31 finished goods inventory is 14,070 units, which complies with the policy. d. Each finished unit requires 0.50 hours of direct labor at a rate of $21 per hour e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.00 per direct labor hour. Depreciation of $25,440 per month is treated as fixed factory overhead. f. Sales representatives' commissions are 6% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,600 g. Monthly general and administrative expenses include $18,000 administrative salaries and 0.5% monthly interest on the long-term note payable. h. The company expects 30% of sales to be for cash and the remaining 70% 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 $46,000. 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 $16,000 are to be declared and paid in May. I. 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 $136,000 are budgeted for the last day of June. 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 30% 70% Cash sales Sales on credit Total cash receipts from customers Current month's cash sales Collections of receivables ZIGBY MANUFACTURING Cash Budget April, May, and June 2017 April May June Beginning cash balance Total cash available Cash payments for: Total cash payments Preliminary cash balance Ending cash balance Sales budget. (Round Budgeted unit price to 2 decimal places.) ZIGBY MANUFACTURING Sales Budget April, May, and June 2017 Budgeted Budgeted Unit Sales Budgeted Sales Dollars Unit Price April 2017 May 2017 June 2017 Totals for the second quarter Production budget. ZIGBY MANUFACTURING Production Budget April, May, and June 2017 May June April Next month's budgeted sales (units) 18,900 19,700 20,100 70% 70% Ratio of inventory to future sales 70% Required units of available production Units to be produced Raw materials budget. (Round per unit values to 2 decimal places.) ZIGBY MANUFACTURING Raw Materials Budget April, May, and June 2017 April May June Production budget (units) Materials needed for production Total materials requirements (units) Materials to be purchased Material price per unit Budgeted raw material purchases Screen Shot 2019-11-06 at 12.48.32 PM Q Search Direct labor budget. (Round per unit values to 2 decimal places.) ZIGBY MANUFACTURING Direct Labor Budget April, May, and June 2017 Total April May June Budgeted production (units) Total labor hours needed Budgeted direct labor cost Factory overhead budget. (Round per unit values to 2 decimal places.) ZIGBY MANUFACTURING Factory Overhead Budget April, May, and June 2017 April May June Total Labor hours needed Budgeted variable overhead Budgeted fixed overhead Budgeted total overhead Selling expense budget. ZIGBY MANUFACTURING Selling Expense Budget April, May, and June 2017 April May June Budgeted sales Sales commissions ZIGBY MANUFACTURING General and Ad ministrative Expense Budgets April, May, and June 2017 April May June Total budgeted G&A expenses ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30, 2017 Operating expenses Total operating expenses ZIGBY MANUFACTURING Budgeted Balance Sheet June 30, 2017 Assets Total current assets Equipment, net Total assets Liabilities and Equity Liabilities Total current liabilities Stockholders' Equity Total Stockholders' Equity Total Liabilities and Equity