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Problem 20-4A (Algo) Manufacturing: Preparation of a complete master budget LO P1, P2, P3 The management of Zigby Manufacturing prepared the following balance sheet for March 31 ZIGBY MANUFACTURING Balance Sheet March 31 Assets Liabilities and Equity Cash $ 80,000 Liabilities Accounts receivable 378,000 Accounts payable Raw materials inventory 96,000 Loan payable Finished goods inventory 364,300 Long-tere note payable Equipment $ 610,000 Equity Less: Accumulated depreciation 155 000 455,000 Common stock Retained earning Total assets 51.373.100 Total liabilities and equity $ 195,500 17,000 500.000 $2.712,500 340,000 321,300 561.100 5 1.173, 100 To prepare a master budget for April, May, and June, management gathers the following information a. Sales for March total 20,000 units, Budgeted sales in units follow. April, 20,000; May 19,000: June 19,500; and July, 20,000. The product's selling price is $27.00 per unit and its total product cost is $22.80 per unit. b. Ruw materials inventory consists solely of direct materials that cost $20 per pound Company policy calls for a given month's ending materials inventory to equal 50% of the next month's direct materials requirements. The March 31 raw materials inventory is 4.800 pounds The budgeted June 30 ending raw materials inventory is 4,500 pounds. Each finished unit requires 0.50 pound of direct materials c. Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's budgeted unit sales The March 31 finished goods inventory is 16,000 units. d. Each finished unit requires 0.50 hour of direct labor at a rate of $20 per hour. e. The predetermined variable overhead rate is $3.20 per direct labor hour. Depreciation of $23,000 per month is the only fixed factory overhead item. f. Sales commissions of 6% of sales are paid in the month of the sales The sales manager's monthly salary is $3.500. 9. Monthly general and administrative expenses include $17000 for administrative salaries and 0.9% monthly interest on the long-term note payable h. The company budgets 30% of sales to be for cash and the remaining 70% on credit, Credit sales are collected in full in the month following the sale (no credit sales are collected in the month of sale) 1. All raw materials purchases are on credit, and accounts payable are solely tied to raw materials purchases. Raw materials purchases are fully paid in the next month (none are paid in the month of purchase) J. The minimum ending cash balance for all months is $80,000. If necessary, the company borrows enough cash using a loan to reach the minimum. Loans require an interest payment of 1% at each month end before any repayment). If the month-end preliminary cash balance exceeds the minimum the excess will be used to repay any loans k. Dividends of $15,000 are budgeted to be declared and paid in May. 1. No cash payments for income taxes are budgeted in the second calendar quarter Income tax will be assessed at 35% in the quarter and budgeted to be paid in the third calendar quarter m. Equipment purchases of $100.000 are budgeted for the last day of June Required: Prepare the following budgets for the months of April, May, and June: 1. Sales budget 2. Production budget. 3. Direct materials budget. 4. Direct labor budget. 5. Factory overhead budget. 6. Selling expense budget. 7. General and administrative expense budget. 8. Schedule of cash receipts. 9. Schedule of cash payments for direct materials. 10. Cash budget 11. Budgeted income statement for entire second quarter (not monthly). 12. Budgeted balance sheet at June 30. Req 1 Req 2 Reg 3 Req 4 Reg 5 Rege Sales budget. ZIGBY MANUFACTURING Sales Budgets April May June Budgeted sales units Selling price per unit Total budgeted sales Production budget. ZIGBY MANUFACTURING Production Budget April May June Total Budgeted sales units Calculation of desired ending inventory Next period budgeted sales units Ratio of inventory to future sales 19,000 19.500 20,000 80% 80% 80% Total required units Units to produce Req 1 Req 2 Req 3 Reg 4 Req 5 Reg 6 Req 7 Req 8 to 10 Raw materials budget. (Round per unit values to 2 decimal places.) ZIGBY MANUFACTURING Direct Materials Budget April May June Units to produce Materials needed for production (pounds) Total materials required (pounds) Materials to purchase (pounds) Materials cost per pound Cost of direct materials purchases Reg 1 Req 2 Req3 Req 4 Reg 5 Req 6 Reg 7 Req 8 to 10 Re Direct labor budget. (Round per unit values to 2 decimal places.) ZIGBY MANUFACTURING Direct Labor Budget April May June Total Units to produce Direct labor hours needed Cost of direct labor 3 Req3 Reg 5 > Reg 1 Reg 2 Reg 3 Req 4 LICENCED Req 5 Req 6 Req 7 Req 8 to 10 Reg Factory overhead budget. (Round variable overhead rate values to 2 decimal places.) June Total ZIGBY MANUFACTURING Factory Overhead Budget April May Direct labor hours needed Variable overhead rate per direct labor hour Budgeted variable overhead Budgeted fixed overhead Budgeted total factory overhead Req 1 Req 2 Req3 Reg 4 Reg 5 CUTE Req 6 GOOD Reg 7 Reg 8 to 10 Selling expense budget. ZIGBY MANUFACTURING Selling Expense Budget April May June Budgeted sales Sales commissions Req 1 Req 2 Req3 Reg 4 Reg 5 Reg 6 Reg 7 Req 8 to 10 RE General and administrative expense budget. ZIGBY MANUFACTURING General and Administrative Expense Budget April May June Total general and administrative expenses Budgeted income statement for entire second quarter (not monthly). (Round your final answers to the nearest whole dollar.) ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30 Selling, general and administrative expenses Total operating expenses Req 1 Req 2 Reg 3 Req 4 Req 5 Req 6 Req 7 Reg 8 to 10 Reg 11 Req 12 Budgeted balance sheet at June 30. (Round your final answers to the nearest whole dollar.) ZIGBY MANUFACTURING Budgeted Balance Sheet June 30 Assets Total current assets Equipment, net Total assets Liabilities and Equity Liabilities Liabilities Bank loan payable 0 Total current liabilities Equity Total Equity Total Liabilities and Equity Req 11
