Sales Budget Expected sales volume: 3,000 units in the first quarter with 500-unit increases in each succeeding quarter Sales price: $60 per unit. Production Budget Company can meet future sales needs with an ending inventory of 20% of next quarter's budgeted sales volume. Direct Materials Budget Company maintains an ending inventory of raw materials equal to 10% of the next quarter's production requirements. The manufacture of each unit requires 2 pounds of raw materials, and the expected cost per pound is $4. Assume that the desired ending direct materials amount is 1,020 pounds for the fourth quarter of 2017. Direct Labor Budget Two hours of direct labor are required to produce each unit of finished goods. The anticipated hourly wage rate is $1O. Manufacturing OH Budget Company expects variable costs to fluctuate with production volume on the basis of the following rates per direct labor hour: indirect materials $1.00, indirect labor $1.40, utilities $0.40, and maintenance $0.20. Supervisory salaries are $20,000 per quarter Depreciation is $3,800 per quarter Property taxes for the year are $36,000, paid evenly over each quarter Flat maintenance fee of $5,700 is paid each quarter. Selling and Admin Expense Budget Variable expense rates per unit of sales are sales commissions $3 and freight-out $1. Variable expenses per quarter are based on the unit sales from the sales budget. Advertising expense for the year is $20,000 paid evenly each quarter Sales salaries are $15,000 each quarter The office manager is paid a salary of $7,500 each quarter Depreciation for office equipment is $1,000 each quarter. Property taxes are $6,000 for the year, paid evenly each quarter Budgeted Income Statement Additional items: Interest expense is expected to be $100 Income taxes are estimated to be $12,000 Cash Budget Assumptions The January 1, 2017, cash balance is expected to be $38,000. The Company wishes to maintain a balance of at least $15,000. 1. 2. Sales: 60% are collected in the quarter sold and 40% are collected in the following quarter. Accounts receivable of $60,000 at December 31, 2016, are expected to be collected in full in the first quarter of 2017. 3. Short-term investments are expected to be sold for $2,000 cash in the first quarter. 4, Direct materials: 50% are paid in the quarter purchased and 50% are paid in the following quarter. Accounts payable of $10,600 at December 31, 2016, are expected to be paid in full in the first quarter of 2017. 5, Direct labor: 100% is paid in the quarter incurred Manufacturing overhead and selling and administrative expenses: All items except depreciation are paid in the quarter incurred. 6. 7. Management plans to purchase a truck in the second quarter for $10,000 cash. 8. The Company makes equal quarterly payments of its estimated annual income taxes. 9. Loans are repaid in the earliest quarter in which there is sufficient cash (that is, when the cash on hand exceeds the $15,000 minimum required balance). Budgeted Balance Sheet Pertinent data from the budgeted balance sheet at December 31, 2016, are as follows. $182,000 28,800 225,000 46,480 Buildings and equipment Accumulated depreciation Common stock Retained earnings My Company Manufacturing Overhead Budget For the Year Ending December 31, 2017 Quarter year Variable Costs Total variable costs xed costs Total fixed costs Total manufacturing OH Direct labor hours Manufacturing OH rate per DL hour Vy Company chedule of expected collections Sales 60000 30,000 log,o0o 77 000 Year 12/31/16 0coo Second quarter uarter My Company for DM Schedule of expected Quarter Year Purchaes VP. 12/31/16 First quarter Second quarter Third quarter ourth quarter