The management of Zigby Manufacturing prepared the following balance sheet for March 31. Assets Cash Accounts receivable Raw materials inventory Finished goods inventory Equipment Less: Accumulated depreciation ZIGBY MANUFACTURING Balance Sheet March 31 Liabilities and Equity $ 53,000 Liabilities 350,980 Accounts payable 96,600 Loan payable 313,920 Long-term note payable Equity 463,000 Common stock Retained earnings $ 1,277,500 Total liabilities and equity $ 204,800 25,000 500,000 $ 729,800 $ 626,000 163,000 348,000 199,700 547,700 $ 1,277,500 Total assets To prepare a master budget for April, May, and June, management gathers the following information. a. Sales for March total 21,800 units. Budgeted sales in units follow: April, 21,800; May, 18,700; June, 21,000; and July, 21,800. The product's selling price is $23.00 per unit and its total product cost is $18.00 per unit. b. Raw materials inventory consists solely of direct materials that cost $20 per pound. Company policy calls for a given month's ending materials inventory to equal 50% of the next month's direct materials requirements. The March 31 raw materials inventory is 4,830 pounds. The budgeted June 30 ending raw materials inventory is 5,300 pounds. Each finished unit requires 0.50 pound of direct materials. c. Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's budgeted unit sales. The March 31 finished goods inventory is 17,440 units. d. Each finished unit requires 0.50 hour of direct labor at a rate of $9 per hour. e. The predetermined variable overhead rate is $4.00 per direct labor hour. Depreciation of $30,750 per month is the only fixed factory overhead item. f. Sales commissions of 8% of sales are paid in the month of the sales. The sales manager's monthly salary is $4,300. g. Monthly general and administrative expenses include $25,000 for administrative salaries and 0.7% monthly interest on the long- term note payable. h. The company budgets 30% of sales to be for cash and the remaining 70% on credit. Credit sales are collected in full in the month following the sale (no credit sales are collected in the month of sale). i. All raw materials purchases are on credit and accounts payable are solely tied to raw materials purchases. Raw materials purchases are fully paid in the next month (none are paid in the month of purchase). j. The minimum ending cash balance for all months is $53,000. If necessary, the company borrows enough cash using a loan to reach the minimum. Loans require an interest payment of 1% at each month-end (before any repayment). If the month-end preliminary cash balance exceeds the minimum, the excess will be used to repay any loans. k. Dividends of $23,000 are budgeted to be declared and paid in May. I. No cash payments for income taxes are budgeted in the second calendar quarter. Income tax will be assessed at 35% in the quarter and budgeted to be paid in the third calendar quarter. m. Equipment purchases of $100,000 are budgeted for the last day of June. May $ 430,100 June $ 483,000 ZIBGY MANUFACTURING Schedule of Cash Receipts April Sales $ 501,400 Cash receipts from Cash sales 150,420 Collections of prior period sales 350,980 Total cash receipts $ 501,400 129,030 350.980 $ 480,010 144,900 301,070 $ 445,970 June $ 214,200 Schedule of Cash Payments for Direct Materials April May Materials purchases $ 199,300 $ 210,900 Cash payments for Current period purchases $ 0 $ 0 Prior period purchases 204,800 199,300 Total cash payments $ 204,800 $ 199,300 $ 0 210,900 $ 210,900 June Cash Budget April $ 53,000 501,400 554,400 $ May $ 129,658 480,010 609,668 186,650 445,970 632,620 Beginning cash balance Add: Cash receipts from sales Total cash available Less: Cash payments for: Direct material Direct labor Variable overhead General and administrative salaries Sales commissions Sales salaries Loan interest Dividends Purchases of equipment Long-term note interest 201,000 86,940 38,640 25,000 40,112 4,300 250 199,300 92,430 41,080 25,000 34,408 4,300 0 23,000 210,900 97,380 43,280 25,000 38,640 4,300 0 0 100,000 3,500 0 0 0 3,500 3,500 Total cash payments Preliminary cash balance Additional loan (loan repayment) Ending cash balance 399,742 423,018 523,000 154,658 186,650 X 109,620 (25,000) 0 0 $ 129,658 $ 186,650 $ 109,620 Loan balance April $ 25,000 May June $ $ 0 $ $ 0 Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month 0 0 (25,000) 0 $ $ 0 $ 0 $1,414,500 1,107,000 307,500 ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30 Sales Cost of goods sold Gross profit Selling, general and administrative expenses Sales commissions expense $ 113,160 Salaries payable 12,900 General administrative salaries expense 75,000 Loan interest expense Long-term note interest expense 10,500 250 Total operating expenses Income before taxes Income taxes payable Net income >> 211,810 95,690 33,492 $ 62,198 ZIGBY MANUFACTURING Budgeted Balance Sheet June 30 Assets Cash $ 109,620 X Accounts receivable 338,100 Raw materials inventory 106,000 Finished goods inventory 313,920 Total current assets $ 867,640 Equipment $ 726,000 Accumulated depreciation 255,250 Equipment, net 470,750 Total assets $1,338,390 Liabilities and Equity Liabilities Accounts payable $ 218,000 X Bank loan payable 0 Income taxes payable 33,492 Total current liabilities 251,492 Long-term note payable 500,000 Equity Common stock $ 348,000 Retained earnings 238,898 X Total Equity Total Liabilities and Equity 586,898 $1,338,390