Storm Tools has formed a new business unit to produce battery-powered drills. The business unit was formed by the transfer of selected assets and obligations from the parent company. The unit's initial balance sheet on January 1 contained cash ($500,000), plant and equipment ($2,500,000), notes payable to the parent ($1,000,000), and Common Stock ($2,000,000).

The business unit is expected to repay the note at $50,000 per month, plus all accrued interest at 1/2% per month. Payments are made on the last day of each month.

The unit is scheduled to produce 25,000 drills during January, with an increase of 2,500 units per month for the next three months. Each drill requires $40 of raw materials. Raw materials are purchased on account, and paid in the month following the month of purchase. The plant manager has established a goal to end each month with raw materials on hand, sufficient to meet 25% of the following month's planned production.

The unit expects to sell 20,000 drills in January; 25,000 in February, 25,000 in March, and 30,000 per month thereafter. The selling price is $100 per drill. Half of the drills will be sold for cash through a website. The others will be sold to retailers on account, who pay 40% in the month of purchase, and 60% in the following month. Uncollectible accounts are not material.

Each drill requires 20 minutes of direct labor to assemble. Labor rates are $24 per hour. Variable factory overhead is applied at $9 per direct labor hour. The fixed factory overhead is $25,000 per month; 60% of this amount is related to depreciation of plant and equipment. With the exception of depreciation, all overhead is funded as incurred.

Selling, general, and administrative costs are funded in cash as incurred, and consist of fixed components (salaries, $100,000; office, $40,000; and advertising, $75,000) and variable components (15% of sales).

Prepare the master budget for the quarter ended March 31, 2018.

	JANUARY	FEBRUARY	MARCH	QUARTER
Unit sales
Unit sales price
Budgeted sales revenue

PRODUCTION BUDGET
QUARTER ENDED MARCH 31, 2018
	JANUARY	FEBRUARY	MARCH	QUARTER
Unit sales	-	-	-	-
Desired ending inventory	-
Total needed
Beginning inventory	-
Units to be produced

SERGEY CORPORATION
DIRECT MATERIAL PURCHASES BUDGET
QUARTER ENDED MARCH 31, 2018
	JANUARY	FEBRUARY	MARCH	QUARTER
Units to be produced
Desired ending inventory
Total needed
Less: Beginning inventory	-
Direct Materials to purchase
Cost of materials per unit
Cost of purchases

SERGEY CORPORATION
DIRECT LABOR BUDGET
QUARTER ENDED MARCH 31, 2018
	JANUARY	FEBRUARY	MARCH	QUARTER
Direct labor hours
Labor rate per hour
Direct labor cost per unit
Units to be produced
Direct labor cost

SERGEY CORPORATION
MANUFACTURING OVERHEAD BUDGET
QUARTER ENDED MARCH 31, 2018
	JANUARY	FEBRUARY	MARCH	QUARTER
Direct Labor Hours
X Variable Factory Overhead Rate	$ 9.00	$ 9.00	$ 9.00	$ 9.00
Total variable overhead
Fixed Costs
Total overhead
Less: Depreciation
Cash payments for overhead
Estimated overhead rate:				$ 3.91

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES BUDGET
QUARTER ENDED MARCH 31, 2018
	JANUARY	FEBRUARY	MARCH	QUARTER
Estimated Sales ($)
X Variable SG&A rate	15%	15%	15%	15%
Total variable selling, general and administrative expenses
Fixed costs:
Salaries
Office
Advertising
Total fixed selling & administrative expenses
Total S & A expenses

SERGEY CORPORATION
BUDGETED INCOME STATEMENT
QUARTER ENDED MARCH 31, 2018
	JANUARY	FEBRUARY	MARCH	QUARTER
Sales
Less: Cost of Goods Sold
Gross Margin
Less: S&A Expenses
Interest Expense	5,000	4,750	4,500	14,250
Net Income
Cost Per Unit
Direct Materials
Direct Labor
Factory Overhead
Total Cost per unit

SERGEY CORPORATION
CAPITAL EXPENSES BUDGET
QUARTER ENDED MARCH 31, 2018
	JANUARY	FEBRUARY	MARCH	QUARTER
Capital Expenses	$ -	$ -	$ -	$ -

STORM TOOLS
CASH RECEIPTS AND DISBURSEMENTS BUDGET
QUARTER ENDED MARCH 31, 2018
	JANUARY	FEBRUARY	MARCH	QUARTER
Cash receipts:
Collection of credit sales:
January
February
March
Total cash receipts
Cash disbursements:
Purchases of materials:
January
February
March
Total disbursements for purchases
Payment of direct labor
Payment of overhead
Payment of S & A expenses
Capital acquisition
Financing:
Planned repayment
Interest on note (1/2% of unpaid balance)
Total cash disbursements
Excess or (deficiency)
Plus: Beginning cash balance
Ending cash balance
Sales:
Cash Sales	50%
Remaining 50% on credit with collections as follows
Month of Sale	40%
Month after sale	60%
Direct Material Payments
Month of Sale	0%
Month after sale	100%

SERGEY CORPORATION
BUDGETED BALANCE SHEET
MARCH 31, 2018
ASSETS				LIABILITIES
				Accounts Payable
Cash				Notes Payable - Parent Company
Accounts Receivable
Inventories:				Stockholders' Equity
Direct Materials
Finished Goods				Common Stock
Equipment				Retained Earnings
Less: Accum Depr				Rounding Error		(Should be less than $100)
Total Assets				Total Liabilities and Stockholders' Equity