RAFTS, INC. produces personal use multi-person rafts. The companys fiscal year ends on December 31^st.

The following information for the next year is provided:

Sales and Production-Related Budget Information

• Average sales price for each raft is estimated to be $200. Unit sales for the coming year, ending December 31^st, are expected to be:

1st Quarter	90,000 units
2nd Quarter	140,000 units
3rd Quarter	125,000 units
4th Quarter	95,000 units

• Finished goods inventory is maintained at a level equal to 15 percent of the next quarters sales. Finished goods inventory at the end of the fourth quarter budget period is estimated to be 13,000 units.

• Each unit of product requires 10 pounds of direct materials, at a cost of $2 per pound. Management prefers to maintain ending materials inventory equal to 10% of next quarters materials needed in production. Materials inventory at the end of the fourth quarter budget period is estimated to be 80,000 pounds.

• Each unit of product requires 2.5 direct labor hours at a cost of $18 per hour.

• Variable manufacturing overhead costs are:

Indirect materials	$2.10 per unit
Indirect labor	$1.80 per unit
Other	$1.70 per unit

• Fixed manufacturing overhead costs per quarter are:

Salaries	$250,000
Other	$300,000
Depreciation	$613,250

Schedule of Cash Receipts

• All sales are made on credit. The company expects to collect 80 percent of sales in the quarter of sale and 20 percent the quarter following the sale. Accounts receivable at the end of last year totaled $2,400,000, all of which will be collected during the first quarter of this budgeted year.

Schedule of Cash Disbursements for Materials

• All direct material purchases are on credit. The company expects to pay 70 percent of purchases in the quarter of purchase and 30 percent the following quarter. Accounts payable at the end of last year totaled $600,000, all of which will be paid during the first quarter of this coming year.

Selling and Administrative Budget Information

• Management estimates all selling and administrative costs are fixed.

• Quarterly selling and administrative estimates for the coming year are

Salaries	$3,800,000
Rent	$1,000,000
Advertising	$1,900,000
Depreciation	$1,200,000
Other	$1,600,000

Cash Budget Information

• The company plans to pay cash for selling and administrative equipment totaling $5,000,000 and production equipment totaling $20,000,000 (management plans to fully automate production with new machinery). Both will be purchased at the end of the fourth quarter and will not affect depreciation expense for the budgeted year.

• The cash balance at the beginning of this coming year is expected to be $3,000,000. The company desires a minimum ending Cash Balance of $2,500,000 each quarter.

Budgeted Balance Sheet Information

• Assume 20 percent of fourth quarter budgeted sales will be collected in full in the following year (this represents accounts receivable at the end of the fourth quarter).

• Expected account balances at the end of the fourth quarter are:

Property, plant, and equipment (net)	$32,000,000
Common stock	$13,500,000

• Actual retained earnings at the end of last year totaled $6,840,150, and no cash dividends will be paid during the current budget period ending December 31^st.

Required:

Complete the following budgets and schedules included in your Master Budget package:

1. Sales Budget
2. Schedule of Expected Cash Receipts
3. Production Budget
4. Direct Materials Budget
5. Schedule of Expected Cash Disbursements for purchase of materials
6. Direct Labor Budget
7. Manufacturing Overhead Budget
8. Selling and Administration Budget
9. Cash Budget
10. Budgeted Income Statement
11. Budgeted Balance Sheet (for year)