Sales and Marketing

Glow products are sold to retailers for $75 each and the sales have been in demand due to the Covid-19. However, the marketing department has been conservative toward the end of the year due market saturation. The marketing department has just sent you their forecasted quarter sales and marketing budget.

Quarter	2023 Q1	2023 Q2	2023 Q3	2023 Q4	2024 Q1	2024 Q2
Sales in Unit	25,000	26,000	25,000	26,000	29,000	30,000
Advertising	$25,000	$25,000	$27,000	$27,000	$30,000	$30,000

Production and Inventory

Ending finished goods inventories are supposed to be equal to 30% of the next quarter’s sales in units. Glow currently does its own assembly production in house. Each unit consists of 2 LED panels and the cost of each is $10. Each unit needs 1 labour hour from assemble to finish package. The hourly pay rate to the assembling workers is $15 per hour.

The production manager also required desired direct material ending inventory to 30% of the next quarter production.

Product and Period Costs

Below is a display of the Glow division quarterly manufacture overhead and selling and

administrative expenses:

Manufacture Overhead Variable:

Indirect labour $5 per labour hour

Indirect Materials $2 per labour hour

Fixed:

Wages and Salaries $6,000

Utilities $4,000

Maintenance $2,000

Insurance $7,000

Depreciation $7,000

Rent $10,000

Selling and Administrative

Variable:

Sales Commissions $5 per unit

Fixed (quarterly):

Wages and Salaries $100,000

Utilities $18,000

Insurance $6,000

Depreciation $5,000

Miscellaneous $9,000

Cash, Accounts Receivable and Accounts Payable

The company desires a minimum ending cash balance each quarter on $250,00. All sales to the distributors are made on credit terms with no discount (for now), and payable within 45 days. The Glow has determined that only 75% of sales are collected by the end of the quarter in which the sale occurred. The rest 25% is collected in the quarter following the sale.

Purchases are paid for in the following manner: 50% in the quarter of the purchase and the remaining 50% paid in the quarter following the purchase.

Additional Information

Labour, Manufacture Overhead, and Selling and Administrative expenses are all paid

during the month, in cash, with the exception of depreciation (of course). Glow will make

a purchase of a warehouse during the second quarter of 2022 for $950,000 cash. Glow’s

balance sheet at the end of the fourth quarter last year is shown below:

Assets

Cash $250,000

Accounts receivable $250,000 (uncollected from Q4 last year)

Liabilities

Accounts payable $200,000 (unpaid from Q4 last year)

An agreement with Bank of the West allows Glow to borrow up to a total loan amount of

$500,000 (maximum amount). The interest rate on these loans is 12% annually

Required:

Prepare a master budget for 2023. Include the following budget schedules and financial statements as if there is no income tax

1) Master Budget

2) Cash Budget. Show the cash budget by quarter.

3) Budgeted Income statement by quarter and annual