The management of Zigby Manufacturing prepared the following balance sheet for March 31. Cash Accounts receivable Assets ZIGBY MANUFACTURING Balance Sheet March 31 Liabilities Liabilities and Equity Accounts payable $ 176,000 1,515,360 Raw materials inventory 433,400 Loan payable Finished goods inventory 1,432,376 Long-term note payable Equipment Less: Accumulated depreciation $ 2,640,000 660,000 Equity Total assets 1,980,000 Common stock Retained earnings $ 5,537,136 Total liabilities and equity To prepare a master budget for April, May, and June, management gathers the following information. $ 884,400 12,000 2,200,000 1,474,000 966,736 $ 3,096,400 2,440,736 $ 5,537,136 a. Sales for March total 90,200 units. Budgeted sales in units follow: April, 90,200; May, 85,800; June, 88,000; and July, 90,200. The product's selling price is $24.00 per unit and its total product cost is $19.85 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 21,670 pounds. The budgeted June 30 ending raw materials Inventory is 17,600 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 72,160 units. d. Each finished unit requires 0.50 hour of direct labor at a rate of $15 per hour. e. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $88,000 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 $13,200. g. Monthly general and administrative expenses Include $52,800 for administrative salaries and 0.9% 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 $176,000. 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 $44,000 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 $440,000 are budgeted for the last day of June. Sales Cash receipts from Cash sales Collections of prior period sales Total cash receipts ZIBGY MANUFACTURING Schedule of Cash Receipts April $ 2,164,800 May $ 2,059,200 June $ 2,112,000 649,440 617,760 1,515,360 1,515,360 633,600 1,441,440 $ 2,164,800 $ 2,133,120 $ 2,075,040 Materials purchases Schedule of Cash Payments for Direct Materials April May June S 871,200 S 886,600 S 800,800 Cash payments for Current period purchases 15 0 S 0 S 0 Prior period purchases Total cash payments 433,400x 433,400 871,200 886,600 871,200 S 886,600 Cash Budget April May June Beginning cash balance Add: Cash receipts from sales Total cash available Less: Cash payments for: Additional loan (loan repayment) Cash receipts from customers Direct labor Direct material Total cash payments Preliminary cash balance Ending cash balance Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month Loan balance 0 0 0 April $ 12,000 S 12,000 x 0 May June