The management of Nabar Manufacturing prepared the following estimated balance sheet for June 2017: NABAR MANUFACTURING Estimated Balance Sheet June 30, 2017 Liabilities and Equity Assets 10,000 24,000 85,400 300,000 385,400 600,000 60,580 660,580 Total liabilities and equity ...........1,045,980 249,900 35,000 41080 Accounts receivable Short-term notes payable Total current liabilities Long-term note payable.... Total labilities 720,000 Equipment Retained earnings $1.045.980 To prepare a master budget for July, August, and September of 2017, management gathers the following information: a. Sales were 20,000 units in June. Forecasted sales in units are as follows: July, 21,000; August, 19,000; September, 20,000; and October, 24,000. The product's selling price is $17 per unit and its total product cost is $14.35 per unit. b. Company policy calls for a given month's ending finished goods inventory to equal 70% of the next month's expected unit sales. The June 30 finished goods inventory is 16,800 units, which does not comply with the policy. C. Company policy calls for a given month's ending raw materials inventory to equal 20% of the next month's materials requirements. The June 30 raw materials inventory is 4,375 units (which also fails to meet the policy). The budgeted September 30 raw materials inventory is 1,980 units Raw materials cost $8 per unit. Each finished unit requires 0.50 units of raw materials. d. Each finished unit requires 0.50 hours of direct labor at a rate of $16 per hour. e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $2o,ooo per month is treated as fixed factory overhead f. Monthly general and administrative expenses include $9,000 administrative salaries and 0.9% monthly interest on the long-term note payable. the month of the sales. The sales manager's monthly salary is $3,50o 70% on credit. Receivables are collected in full in the month g. Sales representatives, commissions are 10% of sales and are paid in h. The company expects 30% of sales to be for cash and the remaining following the sale (none are collected in the month of the sale) i. All raw materials purchases are on credit, and no payables arise from any other transactions. One month's raw materials purchases are fully paid in the next month. j. Dividends of $20,oo0 are to be declared and paid in August. k. Income taxes payable at June 30 will be paid in July. Income tax expense will be assessed at 35% in the quarter and paid in October. l. Equipment purchases of $100,000 are budgeted for the last day of September. m. The minimum ending cash balance for all months is $40,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance. Required Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the third calendar quarter, except as otherwise noted below. Round calculations to the nearest whole dollar. 1. Sales budget. 2. Production budget. Check (2) Units to produce: July, 17,500; August, 19,700 3. Raw materials budget. (3) Cost of raw materials purchases: July, $50,760 4. Direct labor budget. 5. Factory overhead budget. (5) Total overhead cost: August, $46,595 6. Selling expense budget. 1. Sales budget. 2. Production budget. Check (2) Units to produce: July, 17,500; August, 19,700 3. Raw materials budget. (3) Cost of raw materials purchases: July, $50,760 4. Direct labor budget. 5. Factory overhead budget. (5) Total overhead cost: August, $46,595 6. Selling expense budget. 7. General and administrative expense budget. 8. Cash budget. 8) Ending cash balance: July, $96,835; August, $141,180 9. Budgeted income statement for the entire quarter (not for each month separately). 10. Budgeted balance sheet as of September 30, 2017. (10) Budgeted total assets: Sep. 30, $1,054,920 Problem 20-4B Sales Budget HOMEWORK September October Julv Budgeted Units Budgeted Unit Sales Price Budgeted Sales in Dollars Total Production Budget September October Julv Next Period's budgeted sales Ratio of inventory to future sales Budgeted ending invento Add Budgeted Sales Required units to be produced Less Beginning Invento Units to be produced Raw Matarials Budget Julv September August uarter Production budget (units) Materials requirement per unit Materials needed for production dd budgeted Ending Inventor Total materials requirement (units) Less Beginning Invento Materials to be purchased Material price per unit Total cost of direct materials purchased Direct Labor Budget September Julv uarter Budgeted production (units) Labor requirements per unit (hours) Total hours needed Labor rate (per hour) Labor dollars 43 Factory Overhead Budget Julv September August uarter 45Labor hours needed 46 Variable factorv overhead rate 47 Budgeted variable overhead 48 Fixed Overhead 49 Budgeted total overhead 50 51 52 Selling Expenses Budgets 53 54 Budgeted Sales 55 Sales commission percent 56 Sales commission expense 57 Sales Salaries 58 Total Selling Expenses 59 60 61 General and Administrative Expenses 62 63 Salaries 64 Interest on long-term note September Total Julv Julv September Total August 65 Total Expenses 67 68 Cash Receipts from Customers 69 70 Total Sales 71 Cash Sales ( %) 72 Credit sales ( % 73 Cash Collections 74 Month after sale ( %) 75 Cash Sales 76 Total Cash Received Julv August September Total 78 79 Budgeted Cash Payments for Purchases 80 81 82 83 84 85 Cash Budget 86 87 Beginning Cash Balance 88 Cash Receipts from Customers 89 Total Cash Available 90 Cash Disbursements 91 92 93 94 95 96 97 98 September Julv uarter September Julv Pavments for raw materials Payments for direct labor Pavments for variable overhead Sales Commissions Sales Salaries General & Administrative Salaries Dividends Loan Interest Long-Term note interest Equipment Purchases Income Taxes 100 101 102 Total Cash Disbursements 103 Preliminary cash balance 104 Additional loain 105 Re 106 Ending Cash Balance 07 Loan Balance, end of month 108 nt of loan to bank 109 110 Budgeted Income Statement NABAR Manufacturing Budgeted Income Statement For the Quarter ended September 30, 2017 112 113 115 116 118 119 120 121 122 123 125 126 127 128 129 130 Budgeted Balance Sheet 131 132 133 134 ASSETS 135 Cash 136 Accounts Receivable 137 Raw Materials Invent 138 Finished Goods Invento 139Total current assets 140 Equipment 141 Less: accumulated depreciation 142 Total Assets NABAR Manufacturing Budgeted Balance Sheet 30-Sep-17 Note 1 Note 2 Note 3 Note 4 Note 5 143 LIABILITIES AND EQUITY 144 Accounts Payable Note 6 145 Bank Loan Payable 146 Taxes Pavable 147 Total current liabilities 148 Long-term note pavable 49 Common stock 150 Reta ined Earnings 151 Total stockholders' equit 152 Total Liabilities and Equit 153 154 155 Budgeted Statement of Retained Earnings 156 157 158 159 Retained earnings Beginning Balance 160 Add: Net Income 161 162 Less: Dividends 163 Retained earnings - Ending Balance 164 165 166 167 168 NABAR Manufacturing Budgeted Statement of Retained Earnings For the Quarter Ended September 30, 2017