Problem 7-4A 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 $ 99,000 500,250 101,000 402,500 1,102,750 618,000 159,000 Cash Accounts receivable Raw materials inventory Finished goods inventory Total current assets Equipment, gross Accumulated depreciation Equipment, net 459,000 $1,561,750 Total assets Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities $ 209,700 21,000 230,700 505,000 Long-term note payable Total liabilities 735,700 344,000 482,050 Common stock Retained earnings Total stockholders' equity 826,050 $1,561,750 Total liabilities and equity To prepare a master budget for April, May, and June of 2017, management gathers the following information: a. Sales for March total 23,000 units. Forecasted sales in units are as follows: April, 23,000; May, 19,000; June, 18,800; and July, 23,000. Sales of 249,000 units are forecasted for the entire year. The product's selling price is $29.00 per unit and its total product cost is $25.00 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 5,050 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,500 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 16,100 units, which complies with the policy d. Each finished unit requires 0.50 hours of direct labor at a rate of $24 per hour e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.60 per direct labor hour Depreciation of $24,320 per month is treated as fixed factory overhead f. Sales representatives' commissions are 10% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,900 g. Monthly general and administrative expenses include $10,000 administrative salaries and 0.8% monthly interest on the long-term note payable h. 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) 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 $110,000. 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 $19,000 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 m. Equipment purchases of $139,000 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.) 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. S. 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. 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 Required 10 Cash budget. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign.) Calculation of Cash receipts from customers: May April June $ 667,000551,000$ 545,200 Total budgeted sales Cash sales 166,750 137,750 136,300 25% 75% $ 500,250 $ 413,250 $ 408,900 Sales on credit Total cash receipts from customers April May June $166,750 $137,750 136,300 Current month's cash sales Collections of receivables 500,250 500,250 413,250 $667,000 $ 638,000$549,550 Total cash receipts ZIGBY MANUFACTURING Cash Budget April, May, and June 2017 May April June $ 99,000$ 171,690S 262,082 Beginning cash balance Cash receipts from customers 667,000 638,000 549,550 809,690 Total cash available 766,000 811,632 Cash payments for: 209,700 1 24240001 226.3 36,36033,94839,132 66,70055,100 39003,9003,900 0010,00010,000 203,000 260,880 Raw materials Direct labor Variable overhead 54,520 Sales commissions Sales salaries General & administrative salaries 19,000 Dividends 210 Loan interest 4,040 4,040 4,040 Long-term note interest Purchases of equipment 139,000 Variable overhead 547,608 714,472 Total cash payments 573,310 92,690 262,08297,160 12,840 262,082 $110,000 Preliminary cash balance (21,000) $ 171,690 Additional loan (loan repayment) Ending cash balance Loan balance April May June $ 21,000$ Loan balance - Beginning of month 12,840 Additional loan (loan repayment) (21,000) 0 $12,840 Loan balance End of month K Required 7 Required 9 Answer is not complete. Complete this question by entering your answers in the tabs below Required 1Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Requ Budgeted income statement for the entire second quarter (not for each month separately). nearest whole dollar.) ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30, 2017 $ 1,763,200 (1,520,000) Sales Cost of goods sold Gross profit 243,200 Operating expenses General administrative salaries $30,000 340 Bank loan interest expense 12,120 Long-term note interest Sales commissions 176,320 Sales salaries 11,700 Total operating expenses 230,480 12,720 Income before taxes 5,088 Income tax $7,632 Net income K Required 8 Required 10 Budgeted balance sheet. (Round your final answers to the nearest whole dollar.) ZIGBY MANUFACTURING Budgeted Balance Sheet June 30, 2017 Assets $ 408,900 Accounts receivable 90,000 Raw materials inventory 402,500 Finished goods inventory $ 901,400 Total current assets $ 757,000 Equipment Accumulated depreciation (231,960) 525,040 Equipment, net $1,426,440 Total assets Liabilities and Equity Liabilities 198,700 Accounts payable 13,000 Income taxes payable Common stock Total current liabilities 211,700 Long-term note payable 505,000 Stockholders' Equity 344,000 Common stock 470,682 Retained earnings Total Stockholders' Equity 814,682 $1,531,382 Total Liabilities and Equity Required 9 Required 10