The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2019. ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2019 Assets Cash Accounts receivable Raw materials inventory Finished goods inventory Total current assets Equipment Accumulated depreciation Equipment, net Total assets Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities Long-term note payable Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and equity $ 80,000 364,000 96,000 364,800 904,800 610,000 (155,000) 455,000 $1,359,800 $ 195,500 17,000 212,500 510,000 722,500 340,000 297,300 637, 300 $1,359,800 To prepare a master budget for April, May, and June of 2019, management gathers the following information. a. Sales for March total 20,000 units. Forecasted sales in units are as follows: April, 20,000; May, 19,000; June, 19,500; and July, 20,000. Sales of 245,000 units are forecasted for the entire year. The product's selling price is $26.00 per unit and its total product cost is $22.80 per unit. b. Company policy calls for a given month's ending raw materials inventory to equal 50% of the next month's materials requirements The March 31 raw materials inventory is 4,800 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,500 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials. c. Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's expected unit sales. The March 31 finished goods inventory is 16,000 units, which complies with the policy. d. Each finished unit requires 0.50 hours of direct labor at a rate of $20 per hour. e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.20 per direct labor hour. Depreciation of $23,400 per month is treated as fixed factory overhead. f. Sales representatives' commissions are 6% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,500. g. Monthly general and administrative expenses include $17,000 administrative salaries and 0.9% monthly interest on the long-term note payable. h. The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month 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. The minimum ending cash balance for all months is $45,000. 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. k. Dividends of $15,000 are to be declared and paid in May. I. No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 35% in the quarter and paid in the third calendar quarter. m. Equipment purchases of $135,000 are budgeted for the last day of June. ZIGBY MANUFACTURING Selling Expense Budget April, May, and June 2019 April May June Budgeted sales Sales commissions ZIGBY MANUFACTURING General and Administrative Expense Budget April, May, and June 2019 April May June Total budgeted G&A expenses Calculation of Cash receipts from customers: April May June Total budgeted sales Cash sales Sales on credit 30% 70% Total cash receipts from customers April May June Current month's cash sales Collections of receivables Total cash receipts ZIGBY MANUFACTURING Cash Budget April, May, and June 2019 April May June Beginning cash balance Total cash available Cash payments for: 0 Total cash payments Preliminary cash balance Ending cash balance Loan balance April May June Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30, 2019 Operating expenses Total operating expenses 0 Budgeted Balance Sheet June 30, 2019 Assets Total current assets $ Equipment, net Total assets Liabilities and Equity Liabilities Total current liabilities Stockholders' Equity Total Stockholders' Equity Total Liabilities and Equity The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2019. ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2019 Assets Cash Accounts receivable Raw materials inventory Finished goods inventory Total current assets Equipment Accumulated depreciation Equipment, net Total assets Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities Long-term note payable Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and equity $ 80,000 364,000 96,000 364,800 904,800 610,000 (155,000) 455,000 $1,359,800 $ 195,500 17,000 212,500 510,000 722,500 340,000 297,300 637, 300 $1,359,800 To prepare a master budget for April, May, and June of 2019, management gathers the following information. a. Sales for March total 20,000 units. Forecasted sales in units are as follows: April, 20,000; May, 19,000; June, 19,500; and July, 20,000. Sales of 245,000 units are forecasted for the entire year. The product's selling price is $26.00 per unit and its total product cost is $22.80 per unit. b. Company policy calls for a given month's ending raw materials inventory to equal 50% of the next month's materials requirements The March 31 raw materials inventory is 4,800 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,500 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials. c. Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's expected unit sales. The March 31 finished goods inventory is 16,000 units, which complies with the policy. d. Each finished unit requires 0.50 hours of direct labor at a rate of $20 per hour. e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.20 per direct labor hour. Depreciation of $23,400 per month is treated as fixed factory overhead. f. Sales representatives' commissions are 6% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,500. g. Monthly general and administrative expenses include $17,000 administrative salaries and 0.9% monthly interest on the long-term note payable. h. The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month 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. The minimum ending cash balance for all months is $45,000. 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. k. Dividends of $15,000 are to be declared and paid in May. I. No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 35% in the quarter and paid in the third calendar quarter. m. Equipment purchases of $135,000 are budgeted for the last day of June. ZIGBY MANUFACTURING Selling Expense Budget April, May, and June 2019 April May June Budgeted sales Sales commissions ZIGBY MANUFACTURING General and Administrative Expense Budget April, May, and June 2019 April May June Total budgeted G&A expenses Calculation of Cash receipts from customers: April May June Total budgeted sales Cash sales Sales on credit 30% 70% Total cash receipts from customers April May June Current month's cash sales Collections of receivables Total cash receipts ZIGBY MANUFACTURING Cash Budget April, May, and June 2019 April May June Beginning cash balance Total cash available Cash payments for: 0 Total cash payments Preliminary cash balance Ending cash balance Loan balance April May June Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30, 2019 Operating expenses Total operating expenses 0 Budgeted Balance Sheet June 30, 2019 Assets Total current assets $ Equipment, net Total assets Liabilities and Equity Liabilities Total current liabilities Stockholders' Equity Total Stockholders' Equity Total Liabilities and Equity