Production Budget

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 $ 80,000 364,000 96,000 364,800 904,800 610,00e 155,000 455,000 $ 1,359,800 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 $ 195,500 17,000 212,500 510,000 722,500 340,00e 297,300 637, 300 $ 1,359,800 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 20,000 units. Forecasted sales in units are as follows: April, 20,000; May, 19,000; June, 19,500; and July 20,000. Sales of 245,000 units are forecasted for the entire year. The product's selling price is $26.00 per unit and its total product cost is $22.80 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 4,800 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 80% of the next month's expected unit sales The March 31 finished goods inventory is 16,000 units, which complies with the policy. d. Each finished unit requires 0.50 hours of direct labor at a rate of $20 per hour e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.20 per direct labor hour f. Sales representatives' commissions are 6% 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 $17,000 administrative salaries and 0.9% monthly interest on the long-term 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 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 $45,000. If necessary, the company borrows enough cash using a short-term Depreciation of $23,400 per month is treated as fixed factory overhead. $3,500 note payable 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 k. Dividends of $15,000 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 35% in the quarter and paid in the third calendar quarter. m. Equipment purchases of $135,000 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. Direct labor budget. (Round per unit values to 2 decimal places.) ZIGBY MANUFACTURING Direct Labor Budget April, May, and June 2017 April May June Total 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 May April 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 May April June Budgeted sales Sales commissions Zigby Manufacturing Production Budget April, May and June 2017 Month Particulars April May June Total Next month budgeted sales (units) Ratio of inventory to future sales Ending inventory requi Sales for current month Required units of available production Beginning inventory units Units to be produced 58,500 80% 16,000 58,500 19,000 19,500 20,000 80% 15,2001 20,000 80% 15,600 16,000 19,500 80% red 19,000 35,200 34,600 35,500 74,500 16,000 58,500 16,000 15,200 15,600 19,200 19,400 19,900