Retained earnings: $ 23,100 1. a. Actual sales in December were $70,000. Selling price per unit is projected to remain stable at $10 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 April May $ 80,000 $ 92,000 $ 99,000 $ 97,000 $ 85,000 The data from the list are as follows: 1. P9-63A. Comprehensive budgeting problem (Learning Objectives 2 & 3) 2. Martin Manufacturing is preparing its master budget for the first quarter of the upcoming year. The following data pertain to Martin Manufacturing's operations: January: $ 80,000 February: $ 92,000 March: $ 99,000 . April: $ 97,000 Current Assets as of December 31 (prior year): Cash Accounts receivable, net Inventory Property, plant, and equipment, net Accounts payable Capital stock Retained earnings $ 4,500 $ 47,000 $ 15,700 $120,000 $ 42,400 $124,000 $ 23,100 May: $ 85,000. 1. b. Sales are 30% cash and 70% credit. All credit sales are collected in the month following the sale. The data from the list are as follows: . Current Assets as of December 31 (prior year): o Cash: $ 4,500 o Accounts receivable, net: $ 47,000 2. c. Martin Manufacturing has a policy stating that each month's ending inventory of finished goods should be 25% of the following month's sales (in units). 3. d. Of each month's direct materials purchases, 20% are paid for in the month of purchase, while the remainder is paid for in the month following purchase. Two pounds of direct material is needed per unit at $2 per pound. Ending inventory of direct materials should be 10% of next month's production needs. 4. e. Most of the labor at the manufacturing facility is indirect, but there is some direct labor in- curred. The direct labor hours per unit is 0.01. The direct labor rate per hour is $12 per hour. All direct labor is paid month in which the work is performed. The direct labor total cost for each of the upcoming three months is as follows: o Inventory: $ 15,700 Property, plant, and equipment, net: $120,000 Accounts payable: $ 42,400 Capital stock: $124,000 D E January February March $ 996 $1,125 $1,182 Cash Collections Budget For the Quarter Ended March 31 Month January February March Quarter 659 covaWN 1 2 3 4 5 Cash sales 6 Credit sales 7 Total cash collections 8 The information is as follows: No entries have been given for cash sales for the month of January, February, March and the first quarter. No entries have been given for credit sales for the month of January, February, March and the first quarter. No entries have been given for total cash collections for the month of January, February, March and the first quarter. 660 1. 2. Prepare a production budget, using the following format: D Production Budget For the Quarter Ended March 31 Month January February March Quarter 1. f. Monthly manufacturing overhead costs are $5,000 for factory rent, $3,000 for other fixed manufacturing expenses, and $1.20 per unit for variable manufacturing overhead. No deprecia- tion is included in these figures. All expenses are paid in the month in which they are incurred. 2. g. Computer equipment for the administrative offices will be purchased in the upcoming quar- ter. In January, Martin Manufacturing will purchase equipment for $5,000 (cash), while Febru- ary's cash expenditures will be $12,000 and March's cash expenditures will be $16,000. 3. h. Operating expenses are budgeted to be $1.00 per unit sold plus fixed operating expenses of $1,000 per month. All operating expenses are paid in the month in which they are incurred. No depreciation is included in these figures. 4. i. Depreciation on the building and equipment for the general and administrative offices is budgeted to be $4,600 for the entire quarter, which includes depreciation on new acquisitions. 5. j. Martin Manufacturing has a policy that the ending cash balance in each month must be at least $4,000. It has a line of credit with a local bank. The company can borrow in increments of $1,000 at the beginning of each month, up to a total outstanding loan balance of $150,000. The interest rate on these loans is 1% per month simple interest (not compounded). The company would pay down on the line of credit balance in increments of $1,000 if it has excess funds at the end of the quarter. The company would also pay the accumulated interest at the end of the quarter on the funds borrowed during the quarter. 6. k. The company's income tax rate is projected to be 30% of operating income less interest ex- pense. The company pays $10,000 cash at the end of February in estimated taxes. 7. Requirements 1. 1. Prepare a schedule of cash collections for January, February, and March, and for the quarter in total. Use the following format: 1 2 3 4 5 Unit sales* 6 Plus: Desired ending inventory 7 Total needed 8 Less: Beginning inventory 9 Number of units to produce 10 * Hint: Unit sales = Sales in dollars/Selling price per unit The information is as follows: For unit sales no entries are shown for January, February, March and quarter. For plus, desired ending inventory no entries are shown for January, February, March and quarter. For total needed no entries are shown for January, February, March and quarter. For less, beginning inventory no entries are shown for January, February, March and quarter. For number of units to produce no entries are shown for January, February, March and quarter. 1. 3. Prepare a direct materials budget, using the following format: D The information is as follows: For 20% of current month DM purchases no entries are given for Janu- ary, February, March and Quarter. For 80% of prior month DM purchases no entries are given for Jan- uary, February, March and Quarter. For Total cash payments no entries are given for January, Febru- ary, March and Quarter. 1. 5. Prepare a cash payments budget for direct labor, using the following format: March 1 Direct Materials Budget 2 For the Quarter Ended March 31 3 Month 4 January February 5 Units to be produced (from Production Budget) 6 Multiply by: Quantity (pounds) of DM needed per unit 7 Quantity (pounds) needed for production 8 Plus: Desired ending inventory of DM 9 Total quantity (pounds) needed 10 Less: Beginning inventory of DM 11 Quantity (pounds) to purchase 12 Multiply by: Cost per pound 13 Total cost of DM purchases 14 Quarter D 1 2 3 4 5 6 Cash Payments for Direct Labor Budget For the Quarter Ended March 31 Month January February March Quarter Total cost of direct labor No details are given for total cost of direct labor for the month of January, February, march and quar- ter. 661 1. 6. Prepare a cash payments budget for manufacturing overhead costs, using the following for- The information is as follows: For units to be produced (from Production Budget) no entries are given in January, February, March and quarter. For multiply by, quantity (pounds) of DM needed per unit no entries are given in January, February, March and quarter. For quantity (pounds) needed for pro- duction no entries are given in January, February, March and quarter. For plus, desired ending inven- tory of DM no entries are given in January, February, March and quarter. For total quantity (pounds) needed no entries are given in January, February, March and quarter. For less, beginning inventory of DM no entries are given in January, February, March and quarter. For quantity (pounds) to purchase no entries are given in January, February, March and quarter. For multiply by, cost per pound no en- tries are given in January, February, March and quarter. For total cost of DM purchases no entries are given in January, February, March and quarter. 1. 4. Prepare a cash payments budget for the direct material purchases from Requirement 3, us- ing the following format. (Use the accounts payable balance at December 31 of prior year for the prior month payment in January.) mat: D 1 2 3 4 Quarter Cash Payments for Manufacturing Overhead Budget For the Quarter Ended March 31 Month January February March 5 Variable manufacturing overhead costs 6 Rent (fixed) 7 Other fixed MOH 8 Cash payments for manufacturing overhead 9 D 1 Cash Payments for Direct Materials Budget 2 For the Quarter Ended March 31 3 Month 4 January February 20% of current month DM purchases 6 80% of prior month DM purchases 7 Total cash payments March Quarter The information is as follows: No entries are given for variable manufacturing overhead costs for the month of January, February, March and quarter. No entries are given for rent (fixed) for the month of January, February, March and quarter. No entries are given for other fixed MOH for the month of January, February, March and quarter. No entries are given for cash payments for manufacturing overhead for the month of January, February, March and quarter. 1. 7. Prepare a cash payments budget for operating expenses, using the following format: D The information is as follows: For 20% of current month DM purchases no entries are given for Janu- ary, February, March and Quarter. For 80% of prior month DM purchases no entries are given for Jan- uary, February, March and Quarter. For Total cash payments no entries are given for January, Febru- ary, March and Quarter. 1. 5. Prepare a cash payments budget for direct labor, using the following format: March 1 Direct Materials Budget 2 For the Quarter Ended March 31 3 Month 4 January February 5 Units to be produced (from Production Budget) 6 Multiply by: Quantity (pounds) of DM needed per unit 7 Quantity (pounds) needed for production 8 Plus: Desired ending inventory of DM 9 Total quantity (pounds) needed 10 Less: Beginning inventory of DM 11 Quantity (pounds) to purchase 12 Multiply by: Cost per pound 13 Total cost of DM purchases 14 Quarter D 1 2 3 4 5 6 Cash Payments for Direct Labor Budget For the Quarter Ended March 31 Month January February March Quarter Total cost of direct labor No details are given for total cost of direct labor for the month of January, February, march and quar- ter. 661 1. 6. Prepare a cash payments budget for manufacturing overhead costs, using the following for- The information is as follows: For units to be produced (from Production Budget) no entries are given in January, February, March and quarter. For multiply by, quantity (pounds) of DM needed per unit no entries are given in January, February, March and quarter. For quantity (pounds) needed for pro- duction no entries are given in January, February, March and quarter. For plus, desired ending inven- tory of DM no entries are given in January, February, March and quarter. For total quantity (pounds) needed no entries are given in January, February, March and quarter. For less, beginning inventory of DM no entries are given in January, February, March and quarter. For quantity (pounds) to purchase no entries are given in January, February, March and quarter. For multiply by, cost per pound no en- tries are given in January, February, March and quarter. For total cost of DM purchases no entries are given in January, February, March and quarter. 1. 4. Prepare a cash payments budget for the direct material purchases from Requirement 3, us- ing the following format. (Use the accounts payable balance at December 31 of prior year for the prior month payment in January.) mat: D 1 2 3 4 Quarter Cash Payments for Manufacturing Overhead Budget For the Quarter Ended March 31 Month January February March 5 Variable manufacturing overhead costs 6 Rent (fixed) 7 Other fixed MOH 8 Cash payments for manufacturing overhead 9 D 1 Cash Payments for Direct Materials Budget 2 For the Quarter Ended March 31 3 Month 4 January February 20% of current month DM purchases 6 80% of prior month DM purchases 7 Total cash payments March Quarter The information is as follows: No entries are given for variable manufacturing overhead costs for the month of January, February, March and quarter. No entries are given for rent (fixed) for the month of January, February, March and quarter. No entries are given for other fixed MOH for the month of January, February, March and quarter. No entries are given for cash payments for manufacturing overhead for the month of January, February, March and quarter. 1. 7. Prepare a cash payments budget for operating expenses, using the following format