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 Cash Accounts receivable Raw materials inventory Finished goods inventory Total current assets Equipment, gross Accumulated depreciation Equipment, net Total assets S 48,e00 438,750 87,980 383,760 958,410 616,000 158,000 458,800 S 1,416,410 Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities Long-term note payable Total 1iabilities Common stock Retained earnings Total stockholders' equity Total liabilities and equity S 187,280 20,000 207,200 508,080 715, 200 343,080 358,210 S 1,416,410 To prepare a master budget for April, May, and June of 2017, management gathers the following information: a. Sales for March total 19,500 units. Forecasted sales in units are as follows: April, 19,500; May, 17100; June, 21,300; and July, 19,500 Sales of 248,000 units are forecasted for the entire year. The product's selling price is $30.00 per unit and its total product cost is $24.60 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 4,395 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,800 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 80% of the next month's expected unit sales The March 31 finished goods inventory is 15,600 units, which complies with the policy. d. Each finished unit requires 0.50 hours of direct labor at a rate of $23 per hour e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.40 per direct labor hour. f. Sales representatives, commissions are 7% of sales and are paid in the month of the sales. The sales manager's monthly salary is g. Monthly general and administrative expenses include $20,000 administrative salaries and 0.5% monthly interest on the long-term 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 i. All raw materials purchases are on credit, and no payables arise from any other transactions. One month's raw materials purchases Depreciation of $27,020 per month is treated as fixed factory overhead $3,800 note payable following the sale (none are collected in the month of the sale). are fully paid in the next month h. lhe company expects 25% ot sales to be tor cash and the remaining /5% on credit. Keceivables are collected in tull in the month i. All raw materials purchases are on credit, and no payables arise from any other transactions. One month's raw materials purchases j. The minimum ending cash balance for all months is $48,000. If necessary, the company borrows enough cash using a short-termm k. Dividends of $18,000 are to be declared and paid in May following the sale (none are collected in the month of the sale). are fully paid in the next month. 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. l. 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 $138,000 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 doller 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 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 Factory overhead budget. (Round per unit values to 2 decimal places.) Selling expense budget. ZIGBY MANUFACTURING Factory Overhead Budget April, May, and June 2017 May ZIGBY MANUFACTURING Selling Expense Budget April, May, and June 2017 May June April June Total Budgeted sales Sales commission percent Sales commissions Labor hours needed le factory overhead rate Budgeted variable overhead Budgeted fixed overhead Budgeted total overhead ales salaries otal budgeted selling expenses