The company began operations December 1, 2018.

The information provided to each candidate is as follows.

Cost Items and Account Balances

Administrative salaries $17,500

Advertising 12,000

Cash, December 1 0

Depreciation on factory building 3,500

Depreciation on office equipment 900

Insurance on factory building 2,500

Miscellaneous expensesfactory 2,000

Office supplies expense 500

Professional fees 700

Property taxes on factory building 600

Raw materials used 90,000

Rent on production equipment 8,000

Research and development 12,000

Sales commissions 60,000

Utility costsfactory 1000

Wagesfactory 90,000

Work in process, December 1 0

Work in process, December 31 0

Raw materials inventory, December 1 0

Raw materials inventory, December 31 0

Raw material purchases 90,000

Finished goods inventory, December 1 0

Production and Sales Data

Number of products produced 12,000

Expected sales in units for December

($40 unit sales price) 10,000

Expected sales in units for January 12,000

Desired ending inventory 20% of next months sales

Direct materials per finished unit 1 kilogram

Direct materials cost $7 per kilogram

Direct labor hours per unit .35

Direct labor hourly rate $20

Cash Flow Data

Cash collections from customers: 75% in month of sale and 25% the following month.

Cash payments to suppliers: 75% in month of purchase and 25% the following month.

Income tax rate: 45%.

Cost of proposed production equipment: $720,000.

Manufacturing overhead and selling and administrative costs are paid as incurred.

Desired ending cash balance: $30,000.

Questions:

Prepare budget for the month of December 2018.

*Sales budget, Production budget, Direct materials budget, direct labor budget, selling &administrative expense, cash budget, and Budget income statement.

*Make flexible budget for manufacturing costs for activity levels between 8,000 & 10,000 units, in 1,000-unit increments.