Sparking Corp. produces hand blown glass wine goblets. Each goblet requires .2 kg of glass at $10 per kg, and sells for $35.

As the end of January 2021 approaches, the company is preparing a budget for January 2022.

Information gathered for the budgeting process is outlined below.

1. Sales projections:

December 2021

January 2022

February 2022

March 2022

April 2022

Monthly sales in units

8,000

2,500

4,500

3,000

4,000

45% of sales are cash at point of sale. The credit sales are collected 80% in the month of sale and the remainder the following month.

2. Inventory targets (end of month):

Finished goods

40%

Materials glass

30%

70% of purchases are paid in the month of purchase and the remainder in the following month.

3. Each finished goblet requires .75 labour hours at an average rate of $20 per hour.

Variable overhead is applied at $2 per direct labour hour.

Fixed overhead is projected as $6,000 per month, including depreciation of $1,000. All fixed overhead is treated as a period cost. No amount is allocated to inventory.

4. Variable selling and administrative expenses are $4 per unit for packaging and 5% sales commission.

Fixed selling and administrative costs are projected as $2,000 per month plus $500 per month depreciation.

5. During January 2022, BB Inc. expects to purchase machinery for $100,000, with a 50% down payment in January 2022 and the remainder paid equally in February and March 2022.

6. Dividends of $5,000 will be declared in January 2022 and paid in March 2022.

7. Interest on the note payable is paid at the end of each month.

8. The company requires a minimum cash balance of $20,000. Borrowings are assumed to occur at the beginning of the month, and repayments at the end of the month. Interest is .50% per month.

9. The projected balance sheet at December 31, 2021 is as follows:

Assets

Cash

$ 40,000

Accounts receivable

30,800

Inventory: Raw materials

$ 1,980

Finished goods

18,500

Plant and equipment

250,000

Less: accumulated depreciation

(100,000)

Total assets

$241,280

Liabilities and Equity

Accounts payable

$ 3,030

Note payable 4%

30,000

Common shares

100,000

Retained earnings

108,250

Total liabilities and shareholders equity

$241,280

Required:

Prepare a budgeted balance sheet for January 31, 2022, a budgeted income statement for the month ended January 31, 2022, and a cash budget for the month ended January 31, 2022.