Question Thres BM2 manufacturing is preparing its master budget for the first quarter of the upcoming year. The following data pertains to the company's operations: $9,640 Current Assets as of Dec 31 (prior year) Cash Accounts Receivable, net Inventory Property, Plant & Equipment, net Accounts Payable Capital Stock Retained Earnings $ 57,600 $ 15,600 $ 121,500 $ 42,800 $ 124,500 $22,800 a. Actual sales in December were $72,000. Selling price per unit is projected to remain stable at $12 per unit throughout the budget period. Sales for the first five months of the upcoming year are budgeted to be as follows: January February March $104,400 $108,000 $112,800 April $109,200 May $105,600 b. Sales are 20% cash and 80% credit. All credit sales are collected in the month following the sale. c. BM2 Manufacturing has a policy that states each months ending inventory of finished goods should be 10% of the following months sales (in units). In bf Yo d. Of each months direct material purchases, 20% are paid for in the month of purchase, material is needed per unit at $2.00 per kilogram. Ending inventory of direct materials while the remaining is paid for in the month following purchase. Three (3) kilograms of should be 30% of next month's production needs. e. Monthly manufacturing costs are $4,500 for factory rent, $2,800 for other fixed manufacturing expenses(FMOH is $0.80 per unit) and $1.10 per unit for variable manufacturing overhead. NO depreciation is included in these figures. All expenses are paid in the month incurred. f. Computer equipment for the Admin offices will be purchased in the upcoming quarter. In January equipment will be purchased for $6,000 (cash), while February's cash expenditure will be $9,800, and March's cash expenditure will be $14,600. g. Operating expenses are budgeted to be $1.30 per unit sold plus fixed operating expenses of $1,800 per month. All operating expenses are paid in the month in which they are incurred. h. Depreciation on the building and equipment for the general and admin offices is budgeted to be $4,600 for the entire quarter, which includes depreciation on new acquisitions. i. BM2 Manufacturing has a policy that the ending cash balance in each month must be at least $4,000. The company has a line of credit with a local bank. It can borrow in increments of $1,000 at the beginning of each month, up to a total outstanding loan balance of $60,000. The interest rate on these loans is 2% per month simple interest. The company pays down on the line of credit balance if there are excess funds at the end of the quarter. Interest will be paid in entirely then principle with remaining funds. j. The company's income tax rate is projected to be 30% of operating income less interest expense. The company pays $10,800 cash at the end of February in estimated taxes. Prepare cach of the following: a. A Schedule of Cash Collections Budget b. Production Budget c. Materials Budget (with Schedule of Cash Disbursements) d. Cash Budget e. A budgeted income statement for the quarter ended March 31 and f. A partial balance sheet for March 31. (use the format provided adding loans payable and income tax payable. This is a partial statement so may not balance exactly)
