The management of Zigby Manufacturing prepared the following balance sheet for March $31.$

ZIGBY MANUFACTURING

Balance Sheet

$3/31/20$XX

Assets Liabilities and Equity

Cash $$200,000$ Liabilities

Accounts receivable $1,722,000$ Accounts payable $$1,005,000$

Raw materials inventory $492,500$ Loan payable $12,000$

Finished goods inventory $1,627,700$ Long$-$term note payable $2,500,0003,517,000$

Equipment $3,000,000$ Equity

Less: Accumulated depreciation $750,0002,250,000$ Common stock $1,675,000$

Retained earnings $1,100,2002,775,200$

Total assets $$6,292,200$ Total liabilities and equity $$6,292,200$

To prepare a master budget for April, May, and June, management gathers the following information.

a$.$ Sales for March total $102,500$ units. Budgeted sales in units follow: April, $102,500$; May, $97,500$; June, $100,000$; and July, $102,500.$ The product$$s selling price is $$24\mathrm{.}00$ per unit and its total product cost is $$19\mathrm{.}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 $24,625$ pounds. The budgeted June $30$ ending raw materials inventory is $20,000$ pounds. Each finished unit requires $0\mathrm{.}50$ 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 $82,000$ units.

d$.$ Each finished unit requires $0\mathrm{.}50$ hour of direct labor at a rate of $$15$ per hour.

e$.$ The predetermined variable overhead rate is $$2\mathrm{.}70$ per direct labor hour. Depreciation of $$100,000$ 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$$s monthly salary is $$15,000.$

g$.$ Monthly general and administrative expenses include $$60,000$ for administrative salaries and $0\mathrm{.}9\%$ 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 $$200,000.$ 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 $$50,000$ are budgeted to be declared and paid in May.

l$.$ 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 $$500,000$ are budgeted for the last day of June.

Required: GRADING RUBRIC

Points with ALL Formulas Points without ALL Formulas

$1.$ Sales budget $-$ Page $776$ in book $31$

$2.$ Production budget $-$ Page $777$ in book $31$

$3.$ Direct materials budget $-$ Page $778$ in book $52$

$4.$ Direct labor budget $-$ Page $778$ in book $31$

$5.$ Factory overhead budget Page $779$ in book $31$

$6.$ Selling expense budget $-$ Page $780$ in book $31$

$7.$ General and administrative expense budget $-$ Page $780$ in book $31$

$8.$ Schedule of cash receipts $-$ Page $782$ in book $31$

$9.$ Schedule of cash payments for direct materials $-$ Page $783$ in book $31$

$10.$ Cash budget $-$ Page $783$ in book $75$

$11.$ Budgeted income statement for entire second quarter $($not monthly$)-$ Page $785$ in book $75$

$12.$ Budgeted balance sheet at June $30-$ Page $786$ in book $75$

$5025$