Standard / Longboard

January	2000 /1000
February	2200 /1600
March	1500 /1000
April	1300 /900

Management has also told us the following facts:

• Sales are 80% cash and 20% on account
• Collections of the 20% of sales made on account each month are as follows:
  • 50% in the month of sale
  • 35% in month following sale
  • 15% in 2^nd month after sale
• The balance of $20,000 in A/R as of the end of 2019 consists of:
  • $3,200 from sales made in November all of which is budgeted to be collected in January of 2020.
  • $16,800 from sales made in December of which $14,800 is budgeted to be collected in January and $2,000 in February of 2020.
• Finished Goods inventory on December 31, 2019, consists of 540 standard boards at a cost of $30 each, and 330 Longboards at a cost of $60 each.
• FIFO inventory costing is used.
• Desired ending Finished Goods inventory is 30% of the following month’s budgeted sales quantity.
• Direct materials required are 4 pounds of wood per standard deck and 7 pounds of wood per long-board deck. The average cost of wood is $2.50 per pound.
• Raw Materials Inventory on December 31, 2019 consists of 3,000 pounds of wood at a cost of $2.50 per pound.
• Desired ending Raw materials inventory each month is 3,000 pounds of wood.
• Each board requires .5 hours of direct labor. The average cost of direct labor is $16 per hour.
• Variable manufacturing overhead of $0.85 per board consists of utilities which get paid at the end of each month in cash.
• Monthly payroll for employee salaries is $4,000 plus commissions of 10% of sales. (S&A)
• Rent expense each month is $2,000 (S&A)
• Depreciation – Building $500/month – factory (COGS)
• Depreciation – Equipment $250/month – Factory (COGS)
• Property Tax is $2,050/month – Factory (COGS). This is not paid in cash until April. Hint: Thus this is payable at the end of March.
• Insurance expense is $1,110/month – Factory (COGS)
• Supplies Expense = 3% of sales (S&A)
• All purchases of materials are made with cash.
• Payments are made towards A/P in the amount of $3,000 each month.
• Payments are made towards the principal amount of N/P in the amount of $2,000 each month.

1. Prepare the Operating Budget by month for the first quarter of 2020, including the following schedules:
   1. Sales budget
   2. Production budget
   3. Direct Materials Budget, Direct Labor Budget, and Manufacturing Overhead Budget. The budgeted predetermined overhead is allocated based on direct labor hours.
   4. Cost of Goods Sold Budget
   5. Selling and Administrative Expense Budget