Sales Budget The marketing department has estimated sales as follows for the remainder of the year: (Actual sales in June were 4,000 units) \begin{tabular}{r|r|l|r|} \hline July & 10,000 & October & 5,000 \\ \hline August & 7,000 & Noyember & 6,000 \\ \hline September & 15,000 & December & 8,000 \\ \hline \end{tabular} The selling price of a SUPER DUPER widget is $50 and all sales are on account. Based on past experience, sales are collected in the following pattern: 60% in the month of sale 32% in month following the sale 8% are never collected (uncollectible) 2. Production Budget The company maintains a finished goods inventory equal to 20% of the following month's sales. The inventory of finished goods on July 1 is as it should be. 3. Raw Materials Purchasing Budget Each unit of SUPER DUPER widget requires 5 pounds of WHAM compound. To prevent shortages, the company would like the inventory of WHAM compound on hand at the end of each month to equal 30% of the following month's production needs. The inventory on July 1 is 14,100 pounds. WHAM compound costs $0.70 per pound and Vaughan pays for 40% of its purchases in the month of purchase; the remainder is paid in the following month. $38,080 of WHAM compound was purchased in June and 40% was paid for in June. Vaughan Company RM Purchasing Budget 3rd Quarter July Required Production RM per Unit Production Needs Add: Desired Ending Inventory Total Needs Less: Beginning Inventory RM to be Purchased Cost of RM per pound Cost of RM to be Purchased Cash Disbursements for RM June's RM Purchases July's RM Purchases August's RM Purchases September's RM Purchases Total Disbursements Total September 3rd Quarter 4. The next Budget is the 4. The next Budget is the Direct Labor Budget. Let's assume that each unit takes 1.4 DLH to make and each DLH costs \$16. Let's further assume that labor is paid in the month incurred. 5. Next we will prepare our FOH budget. FOH is applied based on DLH. Estimated variable FOH is expected to be $500,000 and estimated DLH are expected to be 400,000 . Fixed FOH is estimated to be $10,850 per month with $4,000 of that amount being depreciation of factory equipment and building. Like DL, assume that FOH is paid in the month incurred. 6. Now we need to prepare the Ending FG Inventory Budget. Now it is time for the Selling and Administrative Budget. It too will be divided into a variable portion and a fixed portion. Assume that variable \( \$ \& A \operatorname{costs} \)amp;Acosts are $2 per unit plus bad debt expense. Further assume that monthly Fixed Costs are as follows: Advertising $28,000, Executive Salaries $70,000, Other $10,000, and Office depreciation is $3,000.\( \$ 3,000 . \$ \& A \)amp;A are paid in the month incurred. 8. From here we go to the cash budget. We need to know cash receipts, cash disbursements, Cash flows/deficit, and the financing section. Vaughan's cash guidelines are as follows: They have a line of credit that can be accessed in $1,000 increments at an annual interest rate of 12%. Money will be borrowed on the last day of a given month and paid back on the last day of the month when it can be. Minimum cash balance required by Vaughan is $50,000. The beginning cash balance on July 1 is $50,000. Interest is paid when money is paid back. From here we move on to the Budgeted Income Statement. 10. And last but not least, we have the budgeted Balance Sheet! We need to know what our balance sheet looked like on July 1 , so here goes: Vaughan Company Balance Sheet 7/1/ Year 2024 Assets: Cash (given) A/R (given) RM Inventory (14,100$0.70) FG Inventory (2,00028.70). Land Building\&Equipment Less A/D Total Assets Vaughan Company Budgeted Balance Sheet 9/30/ Year 2024 Assets: Cash A/R RM Inventory FG Inventory Land Bulding\&Equipment Less A/D Total Assets Liabilities \& SE: A/P (given) $22,848 Common Stock 165,000 Retained Earnings Total Liab \& SE: \begin{tabular}{lr} & 212,422 \\ \hline$ & 400,270 \end{tabular} Liabilities \& SE : A/P Common Stock Retained Earnings Total Liab \& SE