The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2017:

ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2017
Assets
Cash	$	59,000
Accounts receivable		487,500
Raw materials inventory		93,010
Finished goods inventory		433,000
Total current assets		1,072,510
Equipment, gross		638,000
Accumulated depreciation		(169,000	)
Equipment, net		469,000
Total assets	$	1,541,510
Liabilities and Equity
Accounts payable	$	215,410
Short-term notes payable		31,000
Total current liabilities		246,410
Long-term note payable		530,000
Total liabilities		776,410
Common stock		354,000
Retained earnings		411,100
Total stockholders equity		765,100
Total liabilities and equity	$	1,541,510

To prepare a master budget for April, May, and June of 2017, management gathers the following information:

Sales for March total 25,000 units. Forecasted sales in units are as follows: April, 25,000; May, 17,000; June, 22,400; and July, 25,000. Sales of 259,000 units are forecasted for the entire year. The products selling price is $26.00 per unit and its total product cost is $21.65 per unit.

Company policy calls for a given months ending raw materials inventory to equal 50% of the next months materials requirements. The March 31 raw materials inventory is 4,650 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,900 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.

Company policy calls for a given months ending finished goods inventory to equal 80% of the next months expected unit sales. The March 31 finished goods inventory is 20,000 units, which complies with the policy.

Each finished unit requires 0.50 hours of direct labor at a rate of $15 per hour.

Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $4.60 per direct labor hour. Depreciation of $39,710 per month is treated as fixed factory overhead.

Sales representatives commissions are 5% of sales and are paid in the month of the sales. The sales managers monthly salary is $4,900.

Monthly general and administrative expenses include $34,000 administrative salaries and 0.8% monthly interest on the long-term note payable.

The company expects 25% of sales to be for cash and the remaining 75% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale).

All raw materials purchases are on credit, and no payables arise from any other transactions. One months raw materials purchases are fully paid in the next month.

The minimum ending cash balance for all months is $98,000. 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.

Dividends of $29,000 are to be declared and paid in May.

No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 40% in the quarter and paid in the third calendar quarter.

Equipment purchases of $149,000 are budgeted for the last day of June.

Required: Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. (Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar.): 1. Sales budget. 2. Production budget. 3. Raw materials budget. 4. Direct labor budget. 5. Factory overhead budget. 6. Selling expense budget. 7. General and administrative expense budget. 8. Cash budget. 9. Budgeted income statement for the entire second quarter (not for each month separately). 10. Budgeted balance sheet.

1.

ZIGBY MANUFACTURING
Sales Budget
April, May, and June 2017
	Budgeted Unit Sales	Budgeted Unit Price	Budgeted Sales Dollars
April 2017	25,000	$26.00	$650,000
May 2017	17,000	26.00	442,000
June 2017	22,400	26.00	582,400
Totals for the second quarter	64,400	$26.00	$1,674,400

2.

ZIGBY MANUFACTURING
Production Budget
April, May, and June 2017
	April	May	June	Total
Next month's budgeted sales (units)	17,000	22,400	25,000
Ratio of inventory to future sales	80%	80%	80%
Budgeted ending inventory (units)	13,600	17,920	20,000
Budgeted units sales for month	25,000	17,000	22,400
Required units of available production	38,600	34,920	42,400
Beginning inventory (units)	20,000	13,600	17,920
Units to be produced	18,600	21,320	24,480	64,400

3.

ZIGBY MANUFACTURING
Raw Materials Budget
April, May, and June 2017
	April	May	June	Total
Production budget (units)	18,600	21,320	24,480
Materials requirements per unit	0.50	0.50	0.50
Materials needed for production	9,300	10,660	12,240
Budgeted ending inventory	5,330	6,120	5,900
Total materials requirements (units)	14,630	16,780	18,140
Beginning inventory	4,650	5,330	6,120
Materials to be purchased	9,980	11,450	12,020	33,450
Material price per unit	$20	$20	$20	$20
Budgeted raw material purchases	$199,600	$229,000	$240,400	$669,000

4.

ZIGBY MANUFACTURING
Direct Labor Budget
April, May, and June 2017
	April	May	June	Total
Budgeted production (units)	18,600	21,320	24,480
Labor requirements per unit (hours)	0.50	0.50	0.50
Total labor hours needed	9,300	10,660	12,240	32,200
Direct labor rate (per hour)	$15	$15	$15	$15
Budgeted direct labor cost	$139,500	$159,900	$183,600	$483,000

5.

ZIGBY MANUFACTURING
Factory Overhead Budget
April, May, and June 2017
	April	May	June	Total
Labor hours needed	9,300	10,660	12,240
Variable factory overhead rate	$4.60	$4.60	$4.60
Budgeted variable overhead	$42,780	$49,036	$56,304	$148,120
Budgeted fixed overhead	39,710	39,710	39,710	119,130
Budgeted total overhead	$82,490	$88,746	$96,014	$267,250

6.

ZIGBY MANUFACTURING
Selling Expense Budget
April, May, and June 2017
	April	May	June	Total
Budgeted sales	$650,000	$442,000	$582,400
Sales commission percent	5%	5%	5%
Sales commissions	$32,500	$22,100	$29,120	$83,720
Sales salaries	4,900	4,900	4,900	14,700
Total budgeted selling expenses	$37,400	$27,000	$34,020	$98,420

7.

7.

ZIGBY MANUFACTURING
General and Administrative Expense Budgets
April, May, and June 2017
	April	May	June
Interest on long-term note
Salaries
Total budgeted G&A expenses

8.

Calculation of Cash receipts from customers:
		April	May	June
Total budgeted sales		$650,000	$442,000	$582,400
Cash sales	25%	162,500	110,500	145,600
Sales on credit	75%	$487,500	$331,500	$436,800
Total cash receipts from customers
		April	May	June
Current month's cash sales		$162,500	$110,500	$145,600
Collections of receivables		487,500
Total cash receipts		$650,000
ZIGBY MANUFACTURING
Cash Budget
April, May, and June 2017
		April	May	June
Beginning cash balance		$59,000
Cash receipts from customers
Total cash available
Cash payments for:
Sales salaries
Direct labor
Dividends
General & administrative salaries
Loan interest
Long-term note interest
Purchases of equipment
Raw materials
Variable overhead
Sales commissions
Total cash payments		0	0	0
Preliminary cash balance
Additional loan (loan repayment)
Ending cash balance
Loan balance
		April	May	June
Loan balance - Beginning of month
Additional loan (loan repayment)
Loan balance - End of month

9.

ZIGBY MANUFACTURING
Budgeted Income Statement
For Three Months Ended June 30, 2017
Sales
Operating expenses
Bank loan interest expense
Total operating expenses		0
		0
		$0