Required

Prepare company's balance sheet & income statement for quarter with detail explanation

Budgeted sales for the next five months are: April 20,000 units May 50,000 units June 30,000 units July 25,000 units August 15,000 units The selling price is $10 per unit. All sales are on account. Royal's collection pattern is: 70% collected in the month of sale, 25% collected in the month following sale, 5% uncollectible. The March 31 accounts receivable balance of $30,000 will be collected in full. The management at Royal Company wants ending inventory to be equal to 20% of the following month's budgeted sales in units. On March 31, 4,000 units were on hand. At Royal Company, five pounds of material are required per unit of product. Management wants materials on hand at the end of each month equal to 10% of the following month's production. On March 31, 13,000 pounds of material are on hand. Material cost is $0.40 per pound Royal pays $0.40 per pound for its materials. One-half of a month's purchases is paid for in the month of purchase, the other half is paid in the following month. The March 31 accounts payable balance is $12,000. At Royal, each unit of product requires 0.05 hours (3 minutes) of direct labor. The Company has a "no layoff" policy so all employees will be paid for 40 hours of work each week. In exchange for the "no layoff" policy, workers agree to a wage rate of $10 per hour regardless of the hours worked (no overtime pay). For the next three months, the direct labor workforce will be paid for a minimum of 1,500 hours per month At Royal, manufacturing overhead is applied to units of product on the basis of direct labor hours