Royal company is preparing budgets for the second quarter ending june 30 .

budgetd sales of the company's only product 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

Selling price is $10 per unit

The following elements of the master budget will be prepared in this example:

1. Sales budget ( with a scedule of expected cash collection).

2. production budget.

3. Direct material budget (with a schedule of expected cash disbursements for materials)

4. Direct labor budget.

5. Manufecturing overhead budget.

6. Ending finished goods inventory budget.

7. Selling and administrative expense budget.

8. Cash budget

9. budgeted income statement

Additional Data:

All sales are in account

The company collects 70% of these credit sales in the month of the sale; 25% are collected in the month following sale; and the remaining 5% are uncollectible.

The account recievable balance on March 31 was $30000 all of this balance was collectible

The company desires to have inventory on hand at the end of each month equal to 20% of the following months budgeted unit sales.

On April 1st 4000 units were on hand

5 pounds of material are required per unit of product

Management desires to have materials on hand at the end of each month equal to 10% of the following month's production needs

The begining materials inventory was 13,000 pounds

The material costs $0.40 per pound

Half of month's purchases are paid for in the month of purchase; the other half is paid for in the following month

No discount are given for early payments

The accounts payable balance on March 31st was $12000

Each unit produced requires 0.05 hours of direct labor

Each hour of direct labor costs the company $10

Management fully adjust the workforce to the workload each month

Variable manufecturing overhead is $20 per direct labor-hour

Fixed manufacturing overhead is $50,500 per month this includes $20,500 in depreciation, which is not a cash outflow

Royal company uses absorption costing in its budgeted income statement and balance sheet

Manufecturing overhead is applied to units of product on the basis of direct labor-hours

The company has no work in process inventories

Variable selling and administrative expenses are $0.50 per unit sold

Fixed selling and administrative expenses are $70,000 per month and include $10,000 in depreciation

Royal company deaires a cash balance of at least $30,000 at the end of each month. The cash balance at the beginning of April was $40,000

Cash dividends of $51,000 are to be paid to stockholders in April

Equipment purchases of $143,700 are scheduled for May and $48,800 for June. This equipment will be installed and tested during the second quarter and will not become operational until July, When depreciation charges will commence.