Quaint Stem Company is a high-end glassware manufacturer that produces fine stemware of the highest quality. The company is completing its fourth year of operations and is preparing to build its master budget for the coming year (2021). The budget will detail each quarter's activity and the activity for the year in the total. The master budget will be based on the following information: a. Fourth-quarter sales for 2020 are 82,000 units and 65,000 for the first quarter of 2022. I b. Unit sales by quarter (for 2021) are projected as follows: First quarter 68,000 Second quarter 70.000 Third quarter 76,000 Fourth quarter 86,000 The selling price is $85 per unit. Cash sales make up 25% of all sales. Quaint collects 75 percent of the credit sales within the quarter in which they are realized; the other 25 percent are collected in the following quarter. There are no bad debts. c. The beginning inventory of finished goods is 16,000 units. Required ending inventory is 25% of the next quarter's sales in units. d. Each stemware unit uses one and a half hours of direct labor and two units of direct materials, Laborers are paid $24.00 per hour, and one unit of direct materials costs $11. e. There are 10,400 units of direct materials in beginning inventory as of January 1, 2020. At the end of each quarter, Quaint plans to have 10 percent of the direct materials needed for next quarter's unit sales. The ending unit of direct materials on hand at the end of the year was 19,500. f Quaint buys direct materials on account. Half of the purchases are paid for in the quarter of acquisition, and the remaining half are paid for in the following quarter. Wages and salaries are paid on the 15th and 30th of each month g. Fixed overhead totals $678,600 for each of the first three quarters. Of this total, $255,000 represents depreciation. During the fourth quarter, the depreciation increases by $19,575 and total fixed overhead increases by $24,650. All fixed expenses other than depreciation are paid for in cash in the g. Fixed overhead totals $678,600 for each of the first three quarters. Of this total, $255,000 represents depreciation. During the fourth quarter, the depreciation increases by $19,575 and total fixed overhead increases by $24.650. All fixed expenses other than depreciation are paid for in cash in the quarter incurred. The fixed overhead rate is computed by dividing the year's total fixed overhead by the year's expected actual units produced. h. Variable overhead is budgeted at $5.00 per direct labor hour. All variable overhead expenses are paid for in the quarter incurred. i. Fixed selling and administrative expenses total $305,000 per quarter, including $50,000 depreciation. j. Variable selling and administrative expenses are budgeted at S6 k per unit sold. All selling and administrative expenses are paid for in the quarter incurred. 1. The balance sheet as of December 31, 2020, is as follows: ASSETS LIABILITIES and STOCKHOLDERS'EQUITY $ 680,000 Cash Accounts Receivable Raw Materials Inventory Finished Goods Inventory Plant and equipment, net Total Assets $ 52,000 Accounts Payable 1,275,000 114,400 808,000 Capital Stock 9,360,000 Retained Earnings $11.609,400 Total Liab. & Equity 9,890,000 1,039,400 $11.609 400 m. Quaint has a required cash balance of $25,000. An operating line of credit is available up to $250,000 at 8% interest. All borrowings and payments must be made in increments of $10,000 and interest is paid when principal is paid. All borrowings take place at the beginning of the quarter and all payments take place at the end of the quarter. n. Quaint will pay quarterly dividends of $35,000. At the end of the third quarter, $550,000 of equipment will be purchased and at the end of the fourth quarter, $355,000 of equipment will be purchased. 0. The income tax rate is 30%. Required Prepare a master budget for Quaint Stem Company for each quarter of 2021 and for the year in total The following component budgets must be included: a. Sales budget b. Production budget c. Direct materials purchases budget d. Direct labor budget e. Overhead budget f Ending finished goods inventory budget 3. Cost of goods sold budget h. Selling and administrative expenses budget i Cash budget j. Pro forma income statement k Pro forma balance sheet Quaint Stem Company For 2019 Year OPERATING BUDGET Sales Budget Quarter 4 2 3 4 Year Last year next year 1 2 3 4 5 6 7 B 9 Units 10 Unit selling price 11 Budgeted sales 12 13 14 15 16. Sales in units 17 Desired ending inventory 18 Total needs 19 Less Beginning inventory 20 Units to be produced 21 Production Budget Quarter 2 1 3 4 Year B m F G D Direct Materials Purchases Budget Quarter 1 3 4 Year 22 23 24 25 Units to be produced 26 Direct materials per unit 27 Production needs 28 Desired ending inventory 29 Total needs 30 Less. Beginning inventory 31 Direct materials to be purchased 32 Cost per unit 33 Total material purchase cost 34 35 36 37 38 Units to be produced 39 Direct labor time per unit in hours 40 Total hours needed 41 Average wage per hour 42 Total direct labor cost 43 Direct Labor Budget Quarter 2 1 3 4 Year Overhead Budget 45 Quartet 2 1 3 4 Year 47 Budgeted direct labor hours 48 Variable overhead rate 49 Budgeted variable overhead 50 Budgeted fixed overhead 51 Total overhead 52 Master Budget Performance Report D E F G H A B 53 Note: depreciation in fixed overhead 54 55 Unit product cost for ending inventory budget 56 57 Direct materials 58 Direct labor 59 Variable overhead 60 Fixed overhead 61 Total unit cost 62 Total finished goods units for end of year 63 Total ending finished goods inventory 64 65 66 Cost of Goods Sold Budget 67 Quarter 68 1 2 69 Direct materials used 70 Direct labor used 71 Overhead 72 Budgeted manufacturing costs 73 Beginning finished goods 74 Cost of goods available for sale 75 Less: Ending finished goods 76 Budgeted cost of goods sold 77 78 Selling and Administrative Budget 79 Quarter 2 81 Planned sales in units 82 Variable selling and admin exp per unit 83 Total variable expense 3 4 Year 3 4 Year E F G H 3 4 Year A B D 78 Selling and Administrative Budget 79 Quarter 80 1 2 81 Planned sales in units 82 Variable selling and admin exp per unit 83 Total variable expense B4 Fixed selling and admin expense 85 Total selling and admin expenses 86 87 Note: depreciation in fixed selling and admin expense 88 89 Proforma Income Statement 90 Year 91 Sales 92 Less Cost of goods sold 93 Gross margin 94 Less: Seling and admin expenses 95 Operating income 98 Less Interest expense 97 Income before income taxes 98 Less: Income taxes .99 Net income 100 101 End of operating budget B H D E F G FINANCIAL BUDGET Cash Collections Quarter 2 1 3 4 102 103 104 105 106 107 108 Cash Sales 109 Received on account from 110 Quarter 4. prior year 111 Quarter 1 112 Quarter 2 113 Quarter 3 114 Quarter 4 115 Total cash receipts 116 117 118 119 120 Quarter 4. prior year 121 Quarter 1 122 Quarter 2 123 Quarter 3 124 Quarter 4 125 Total cash needed Cash Payments Quarter 2 3 4 E D H F G Cash Budget Quarter 2 1 3 4 Year A B 126 127 128 129 130 Beginning cash balance 131 Cash sales and collections on account 132 Total cash available 133 Less disbursements: 134 Payments for 135 Raw materials 136 Direct labor 137 Overhead 138 Selling and admin expenses 139 Income taxes 140 Dividends 141 Equipment 142 Total disbursements 143 Excess (Deficiency) of cash available over needs 144 Financing 145 Borrowings 146 Repayments 147 Interest 148 Total financing 140 Ending cash balance 150 Pro Forma Balance Sheet ASSETS Cash Accounts receivable Raw materials inventory Finished goods inventory Plant and equipment, net Total Assets LIABILITIES & EQUITY Accounts Payable Notes Payable Capital Stock Retained Earnings Total Liab & Equity F1 1 X G F A H 1 B D E The Children's Hour Theatre Flexible Budget Performance Report 2019 Season ON Actual Results Spending Variance Flexible Budget Activity Variance Static Planning Budget 6 7 8 Production 9 Performances 10 11 Director & actor wages 12 Stagehands wages 13 Ticket Booth & usher wages 14 Scenery, costumes & props 15 Theatre hall rent 16 Printed programs 17 Publicity 18 Administrative expenses 19 Total expenses 20 21 22 23