Required:

Prepare a monthly master budget for Minerva for the year ended March 31, 2021, including the following schedules:

1. Cash Budget

Minerva Ltd. is a company that manufactures and sells a single product called Zeus-Bolt. For planning and control purposes they use a monthly master budget, which is developed in advance of the budget year. Their fiscal year end is March 31. The sales forecast consisted of these few lines: For the year ended March 31, 2020: 450,000 units at $12.00 each* For the year ended March 31, 2021: 480,000 units at $12.50 each For the year ended March 31, 2022: 510,000 units at $13.00 each . *Sales for the year ended March 31, 2020 are based on actual sales to date and budgeted sales for the duration of the year. Your investigations of the company's records have revealed the following information: 1. Peak months for sales correspond with gift-giving holidays. History shows that January, March, May and June are the slowest months with only 6% of sales for each month. Sales pick up over the summer with July, August and September each contributing 7% to the total. Valentine's Day in February boosts sales to 8%, and Easter in April accounts for 10%. As Christmas shopping picks up momentum, winter sales start at 10% in October, move to 12% in November and then peak at 15% in December. This pattern of sales is not expected to change in the next two years. 2. Sales are on a cash and credit basis, with 50% collected during the month of the sale, 35% the following month, and 14% the month thereafter. 1% of sales are considered uncollectible (bad debt expense). Sales in February and March 2020 are expected to be $432,000 and $324,000 respectively. Based on the above collection pattern this will result in Accounts Receivable of $219,240 at March 31, 2020, which will be collected in April and May 2020. 3. From previous experience, management has determined that an ending inventory equal to 25% of the next month's sales is required to fit the buyer's demands. The finished goods inventory at March 31, 2020 is expected to be 12,000 units having a cost of $97,800. The company uses a weighted average cost to value inventory. The direct labour cost (see point 7) and the fixed manufacturing overhead cost (see point 9) is averaged over the total number of units produced. 1 4. There is only one type of raw material used in the production of Zeus-Bolt. Olympus acrylic (OA) is a very compact material that is purchased in powder form. Each Zeus-Bolt requires 3 kilograms of OA, at a cost of $1.20 per kilogram. The supplier of OA tends to be somewhat erratic so Minerva finds it necessary to maintain an inventory balance equal to 40% of the following month's production needs as a precaution against stock-outs. The ending raw materials inventory for March 2020 is expected to be 51,840 kilograms having a cost of $62,208. 5. Minerva pays for 40% of a month's purchases in the month of purchase, 35% in the following month and the remaining 25% two months after the month of purchase. There is no early payment discount. Beginning accounts payable will consist of $108,956 arising from the following estimated direct material purchases for February and March of 2020: OA purchases in February, 2020: $119,340 OA purchases in March, 2020 $131,868 6. Space Age's manufacturing process is highly automated, so their direct labour cost is low. On average, each unit spends a total of 6 minutes in production. Employees are hired on a full- time basis and are guaranteed to receive wages for a minimum of 4,000 hours at $16 per hour. In months when more labour time is needed, part-time workers are hired for hours in-excess of 4,000 hours at $18 an hour. All labour costs are paid in the period in which they are incurred. 7. Variable manufacturing overhead is allocated based on units produced. The unit variable overhead manufacturing rate is $1.50 8. The fixed manufacturing overhead costs for the entire year are as follows: Training and development $ 144,000 Property and business taxes 84,000 Supervisors' salaries 216,000 Depreciation of manufacturing equipment 84,000 Insurance 48,000 Other 123,600 $ 699,600 Fixed manufacturing overhead costs are incurred evenly over the year and paid as incurred. Minerva uses the straight-line method of depreciation. 9. Selling and administrative expenses are known to be a mixed cost; however, there is a lot of uncertainty about the portion that is fixed. Previous years' experience has provided the following information: Lowest level of sales: 390,000 units Total S&A Expenses: $456,000 Highest level of sales: 540,000 units Total S&A Expenses: $576,000 It is estimated that the total selling and administrative expenses for the budget year will be about 5% greater than the previous average. These costs are paid in the month in which they occur, with the exception of the only non-cash item: a monthly depreciation of office equipment in the amount of $4,000. Bad debt expense (see point 2) and warehouse rental costs (see point 10) are not included in the above expenses. 10. Because sales are seasonal, Minerva must rent an additional warehouse from September to December to house the additional inventory on hand at $16,000 per month, payable at the beginning of the month. 11. During the fiscal year ended March 31, 2021 Minerva will be required to make monthly income tax installment payments of $15,000. Outstanding income taxes payable from the year ended March 31, 2020 must be paid in June 2020. 12. Prior to the busy season, Minerva is planning to upgrade its manufacturing equipment for which they will need to pay cash. The bid that was accepted totaled $600,000 which will be paid in 10 equal instalments beginning in April 2020. Manufacturing overhead costs shown above already include the depreciation on this equipment. 13.An arrangement has been made with the local bank that if Minerva maintains a minimum balance of $50,000 in their bank account, they will be given a line of credit at a preferred rate of 9% per annum (i.e. 0.75% per month). All borrowing is considered to happen on the first day of the month, repayments are on the last day of the month. All borrowings and partial repayments from the bank should be in multiples of $1,000 and interest must be paid at the end of each month. Interest is calculated on the balance at the beginning of the month, which includes any amounts borrowed that month (i.e. any borrowing for a month must occur at the beginning of that month). There is an outstanding line of credit borrowing of $78,000 on March 31, 2020 resulting from borrowings in the previous year. 14. Minerva has a policy of paying dividends at the end of each month. The board of directors plans to continue their policy of declaring dividends of $10,000 per month. 16.A listing of the estimated balances in the company's ledger accounts as of March 31, 2020 is given below: Cash Accounts receivable Inventory-raw materials Inventory-finished goods Capital assets (net) $ 50,752 219,240 62,208 97,800 920,000 $ 1,350,000 Accounts payable Income tax payable Bank Loan Common shares Retained earnings $ 108,956 63,000 78,000 500,000 600,044 $ 1.350.000