The Bandits Beagle Company produces wood dog houses that sell for $400 each. Budgeted sales for the first four months are as follows:

Month Budgeted Sales (units)

January 1,000

February 1,500

March 2,500

April 2,000

Each dog house requires 20 square feet of oak at a cost of $10 per square foot. The company wants to maintain an inventory of dog houses equal to 10% of the following months sales. Inventory on January 1 consisted of 80 dog houses.

The company wants to maintain an inventory of oak equal to 20% of next months needs. Materials inventory on January 1 consisted of 11,000 square feet of oak. The company estimates an inventory of oak on hand at the end of March to equal 8,000 square feet.

Each dog house requires 5 hours of direct labor at a cost of $8.00 per hour. Variable manufacturing overhead is budgeted at $2 per direct labor hour.

Monthly fixed overhead consists of the following:

Supervisors salaries $ 6,000

Insurance $ 2,000

Depreciation on factory equipment $ 500

Depreciation on production facility $10,000

Total $18,500

The company expects 60% of the sales of each month will be collected in that month, with 35% collected in the following month. Five percent of all sales are uncollectible and written off in the following month.

The accounts receivable balance at the beginning of the year is $200,000, which is 40% of last years December sales of $500,000.

The company normally pays for 70% of its purchases in the month of purchase. The remaining 30% is paid in the following month.

Accounts payable at the beginning of the year is $54,000, which is 30% if December purchases of $180,000.

Assume variable selling costs equal 5% of sales and are paid in the month following the sale. Fixed Selling, general and administrative costs are $50,000 and, except for $10,000 of depreciation, are paid in the month incurred. Estimated tax payments equal 40% of estimated income for the quarter are made at the end of each quarter.

The company attempts to maintain a cash balance of $100,000 at all times. Any excess is invested in marketable securities of $10,000 denominations earning an 8% return.

Any deficiencies are covered by borrowing from a local bank at 10% interest.

The cash balance at the beginning of the year is $105,000.

Required:

Prepare a sales budget in dollars for each month and in total for the first quarter of the year.

Prepare a production budget in units for each month and in total for the first quarter.

Prepare a purchases budget in dollars for direct materials for each month and in total for the first quarter.

Prepare a direct labor budget for each month and in total for the first quarter.

Prepare a manufacturing overhead budget for each month and in total for the first quarter.

Prepare a schedule of cash collections on accounts receivable for each month and in total for the first quarter.

Prepare a schedule of cash payments on accounts payable for each month and in total for the first quarter.

Prepare a pro-forma income statement for each month and in total for the first quarter.