Royal Company is preparing budgets for the quarter ending June 30. Budgeted sales for the next five months are: April June August 20,000 units May 30,000 units July 15,000 units 50,000 units 25,000 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. The variable manufacturing overhead rate is $20 per direct labor hour. Fixed manufacturing overhead is $50,000 per month and includes $20,000 of noncash costs (primarily depreciation of plant assets). At Royal, the selling and administrative expenses budget is divided into variable and fixed components. The variable selling and administrative expenses are $0.50 per unit sold. Fixed selling and administrative expenses are $70,000 per month. The fixed selling and administrative expenses include $10,000 in costs primarily depreciation - that are not cash outflows of the current month. Royal: month Maintains a 16% open line of credit for $75,000 Maintains a minimum cash balance of $30,000 Borrows on the first day of the month and repays loans on the last day of the Pays a cash dividend of $49,000 in April Purchases $143,700 of equipment in May and $48,300 in June (both purchases paid in cash). Has an April 1 cash balance of $40,000 Royal reported the following account balances prior to preparing its budgeted financial statements: Land $50,000 Common stock $200,000 Retained earnings $146,150 Equipment - $175,000 Required: 1. Prepare a sales budget, including a schedule of expected cash collections. 2. Prepare a production budget. 3. Prepare a direct materials budget, including a schedule of expected cash disbursements for purchases of materials. 4. Prepare a direct labor budget. 5. Prepare a manufacturing overhead budget. 6. Prepare a selling and administrative expense budget. 7. Prepare a cash budget.