Using the following information you are to prepare a comprehensive budget for River City Micro Systems, Inc. The Company assembles a specialized device used in airports to detect certain types of explosives to prevent terrorist attacks.

Arrangements have been made for the component parts (bundled in packets, one per unit) to be produced in Indonesia, shipped to Boise, then assembled and sold by River City Micro to the end users.

You have developed the prototypes, established a market, and now you are putting together a budget for the first three months of 2017. The Company will actually start manufacturing and distribution on January 2, 2017. The purpose of this comprehensive budget is to formalize your expected income, cash flow and balance sheets.

From the following information you are to prepare the following schedules/statements for the months ending January 31, 2017, February 28, 2017 and March 31, 2017:

1) Projected units of production

2) Projected raw material requirements

3) Projected raw material purchases in dollars

4) Projected cost of goods manufactured statement

5) Pro-forma income statement

6) Pro-forma cash flow statement

7) Pro-forma balance sheet

8) Capital lease amortization schedule

9) Depreciation schedule

You should utilize the following assumptions in making your calculations:

a. Projected sales in units are as follows: January = 500, February = 600, March = 600, April and following months = 800. At the start of each month the management plans to have 30 days, (1 month) of direct materials on hand. Each packet of direct material costs $80.00. The company will have 800 units on hand on January 1, 2015 (all purchased during December 2016).

b. Ten hours of direct labor are required to assemble each device. The direct labor cost (including fringe benefits) is $35.00 per hour.

c. Manufacturing overhead is 50% of direct labor cost.

d. Devices are sold at 100% markup on cost.

e. The company wants to have at least 50% of next months projected sales in ending finished goods inventory each month.

f. Direct materials purchases are paid for on the 10^th day of the month following month of purchases.

g. Manufacturing overhead is paid 25% in cash and with the balance paid in 30 days.

h. Wages earned by employees during the first half of each month are paid on the 22^nd with the remainder paid on the 7^th of the following month. Assume that workforce is stable each month (hence, wages and salaries are the same every day of the month).

i. On January 1, 2017 you acquire equipment and finance it 100% through a capital lease. Life of equipment is 60 months with no salvage value. Capital lease payments are $12,000 per month including an imputed interest component. Your cost of capital is 10%. Use this rate to calculate the present value of the cash payments and the present value of the lease principal as of January 1, 2017. The first payment is due on February 1, 2017.

j. Selling commissions are 10% of sales price. These are paid on the 15^th day of the month following month of sale.

k. Administrative salaries and fringe benefits are $60,000 per month payable on schedule outlined in h.

l. Rent is $8,000 per month payable on the first day of each month.

m.On January 1, 2015 the Company will pay 6 months insurance premiums in advance for a total of $24,000.

n. Other general and administrative expenses are estimated to be 15% of sales. They are paid in the month after they are incurred.

o. The company has a $500,000 line of credit secured by inventory and accounts receivable. Borrowing against this line must be in increments of $50,000. Interest is 12% per annum and is payable on the 1^st day of the month following the borrowing. Assume all borrowing occur on the 15^th day of the month. Repayments must also occur in $50,000 increments on the 15^th day of the month.

p. All sales are on account and are collected 15% in month of sale, 75% in next month and the balance in the following month.

q. Income tax rate is 35%. Taxes accrue on each month?s income and are paid in arrears on January 15, Apr 15, Jul 15 and Oct 15 for the preceding quarter. Note: any expected losses create tax benefits that can be used in reduce taxes paid in future quarters.

r. Beginning cash balance on January 1, 2017 is projected to be $100,000 that was raised through the sale of capital stock in December 2016.

SALES FORECAST in Units Jan Feb Mar Apr - - - - - PRODUCTION BUDGET Sales EI -BI Production RAW MATERIAL PURCHASES (packets--1 per unit) Production EI BI Purchases - - - Purchases in $ (@$80) - - - - - #DIV/0! #DIV/0! #DIV/0! #DIV/0! COST OF GOODS MANUFACTURED BUDGET Production Direct Material (@$80) Direct Labor (10 hrs @$35/hr) Overhead (50% DL$) Total CGM Average Cost/Unit Projected Sellling Price #DIV/0! #DIV/0! May June January February March Sales in Units Sales (@$1210) Cost of Sales (@605) Gross Margin Operating Expenses: Administrative salaries (given) Sales commissions (10% of sales) Rent (given) Insurance ($24,000 6) Other general and administrative (15% of sales) Depreciation ($564,180 60) Totals Operating Income (Loss) Inrterest Expense Capital Lease Operating Line Income (Loss) Before Taxes Estimated Income Taxes $ Net Income (Loss) $ - - $ - $ - - - - - - - - - - $ - $ - Cash Forecast January February March Cash Receipts: Sales (from I/S) collection in month (15%) collection in 2nd month (75%) collection in 3rd month (10%) Total Cash Receipts Cash Disbursements: Direct Labor Costs Incurred (production) paid in mo (50%) paid in 2nd mo (50%) Total direct labor cash payments Administrative Salaries (Expense) paid in mo (50%) paid in 2nd mo (50%) Total adminstrative salary payments Sales commissions (Expense) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - paid in full in following mo - Material purchases (Procurement) paid in full in following month MOH paid in month (25%) paid in 2nd mo (75%) Total MOH Other administrative costs (Expense) $ - paid in full in following month Insurance Rent Capital Lease Principal Interest expense on capital lease (per schedule) $ $ 24,000 8,000 on bank loan* Total interest $ 90,750 $ 108,900 ### 7,295 8,000 7,356 - 4,705 4,644 - 1,500 6,205 3,500 8,144 - $ $ Total disbursements Cash Receipts Less Cash Disbursements Beginning Balance Cash Available Borrowings $ 32,000 $ 112,250 $ 132,400 (32,000) (112,250) (132,400) 100,000 189,750 195,400 68,000 77,500 63,000 300,000 100,000 50,000 Ending Cash Balance $ 368,000 * $ 177,500 $ 113,000 Assets Current Assets: Cash Accounts Receivable Raw Marterial Inventory Finished Goods Inventory Prepaid Insurance Total Current Assets Property and Equipment: Equipment on Capital Lease Accumulated Depreciation January 1 January 31 February 28 March 31 - - - - - - - - - - - - - - - - - - - - - - - - - Net Property and Equipment Liabilities and Stockholders' Equity Current Liabilities: Accounts Payable Wages Payable Bank Note Payable Interest Payable Income Taxes Payable Capital Lease Payable-Current Portion Total Current Liabilities Capital Lease - Amount Due After One Year Stockholders' Equity: Common Stock Retained Earnings (Deficit) Total Stockholders' Equity $ - $ - $ - $ - SALES FORECAST in Units Jan 500 Feb 600 Mar 600 Apr 800 Sales EI 500 300 600 300 600 400 800 400 -BI Production 800 300 600 300 700 400 800 RAW MATERIAL PURCHASES (packets--1 per unit) Production 800 600 EI 600 700 BI 800 600 700 800 700 800 800 800 Purchases 800 PRODUCTION BUDGET 600 700 800 48,000 56,000 64,000 COST OF GOODS MANUFACTURED BUDGET Production Direct Material (@$80) 64,000 Direct Labor (10 hrs @$35/hr) 280,000 Overhead (50% DL$) 140,000 48,000 210,000 105,000 56,000 245,000 122,500 Total CGM Average Cost/Unit Projected Sellling Price 363,000 605 1,210 423,500 605 1,210 Purchases in $ (@$80) 484,000 605 1,210 May 800 June January 500 February 600 March 600 Sales (@$1210) Cost of Sales (@605) Gross Margin Operating Expenses: Administrative salaries (given) Sales commissions (10% of sales) Rent (given) Insurance ($24,000 6) Other general and administrative (15% of sales) Depreciation ($564,180 60) Totals Operating Income (Loss) Inrterest Expense Capital Lease Operating Line Income (Loss) Before Taxes Estimated Income Taxes $ 605,000 302,500 302,500 $ 726,000 363,000 363,000 $ 726,000 363,000 363,000 60,000 60,500 8,000 4,000 90,750 9,403 232,653 69,847 60,000 72,600 8,000 4,000 108,900 9,403 262,903 100,097 ### 72,600 ### ### 108,900 9,403 262,903 100,097 4,707 1,500 63,640 22,274 4,646 3,500 91,951 32,183 4,584 4,250 91,263 31,942 Net Income (Loss) $ 41,366 Sales in Units $ 59,768 $ 59,321 Cash Forecast January Cash Receipts: Sales (from I/S) collection in month (15%) collection in 2nd month (75%) collection in 3rd month (10%) Total Cash Receipts Cash Disbursements: Direct Labor Costs Incurred (production) paid in mo (50%) paid in 2nd mo (50%) Total direct labor cash payments Administrative Salaries (Expense) paid in mo (50%) February March $ 605,000 $ 90,750 726,000 108,900 453,750 $ $ 90,750 $ 562,650 $ 280,000.00 140,000.00 726,000 108,900 544,500 60,500 713,900 140,000.00 60,000.00 30,000.00 210,000 105,000 140,000 245,000.00 60,000 30,000 245,000 122,500 105,000 227,500.00 60,000 30,000 paid in 2nd mo (50%) Total adminstrative salary payments Sales commissions (Expense) paid in full in following mo 30,000.00 60,500.00 - 30,000 60,000.00 72,600.00 60,500 30,000 60,000.00 72,600.00 72,600 Material purchases (Procurement) paid in full in following month 48,000.00 64,000.00 $ 56,000.00 48,000 $ 64,000.00 56,000 MOH paid in month (25%) paid in 2nd mo (75%) 140,000.00 35,000.00 105,000 26,250 105,000 Total MOH Other administrative costs (Expense) $ 35,000 $ 90,750 131,250 108,900 $ 109,375 108,900 paid in full in following month Insurance Rent Capital Lease Principal Interest expense on capital lease (per schedule) on bank loan* $ $ 24,000 8,000 90,750 $ 108,900 Total interest Total disbursements Cash Receipts Less Cash Disbursements Beginning Balance Cash Available $ $ Borrowings Ending Cash Balance $ $ 301,000 $ (210,250) 100,000 (110,250) 8,000 7,293 ### 7,354 4,707 1,500 4,646 3,500 6,207 $ 657,000 $ (94,350) 189,750 95,400 300,000 100,000 189,750 $ 195,400 * - 122,500 30,625 78,750 8,146 657,875 56,025 195,400 251,425 50,000 $ 301,425 - Assets Current Assets: Cash Accounts Receivable Raw Marterial Inventory Finished Goods Inventory January 1 $ 100,000 $ 64,000 Prepaid Insurance Total Current Assets Property and Equipment: Equipment on Capital Lease Accumulated Depreciation Net Property and Equipment Liabilities and Stockholders' Equity Current Liabilities: Accounts Payable Wages Payable Bank Note Payable Interest Payable Income Taxes Payable Capital Lease Payable-Current Portion Total Current Liabilities Capital Lease - Amount Due After One Year Stockholders' Equity: Common Stock Retained Earnings (Deficit) Total Stockholders' Equity January 31 189,750 514,250 48,000 181,500 February 28 $ March 31 195,400 $ 677,600 56,000 181,500 301,425 689,700 64,000 242,000 164,000 20,000 953,500 16,000 1,126,500 12,000 1,309,125 - 564,180 9,403 564,180 18,806 ### 28,209 - 554,777 545,374 535,971 164,000 1,508,277.00 1,671,874 1,845,096 - 64,000 - 304,250.00 170,000.00 300,000.00 6,206.54 22,274 316,250 135,000 400,000 8,146 54,457 337,375 152,500 450,000 8,834 86,399 64,000 - 7,293 810,024 556,887 7,354 921,207 549,532 7,416 1,042,524 542,117 64,000 1,366,911 1,470,739 1,584,641 100,000 100,000 41,366 141,366 100,000 101,135 201,135 100,000 160,455 260,455 - 100,000 $ 164,000 $ 1,508,277 $ 1,671,874 $ 1,845,096 Payment 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 0 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 Interests 0 4707 4646 4584 4523 4460 4398 4334 4270 4206 4141 4075 4009 3943 3876 3808 3740 3671 3601 3531 3461 3390 3318 3246 3173 3099 3025 2950 2875 2799 2722 2645 2567 2488 2409 2329 2248 2167 2085 2003 1919 1835 1750 1665 1579 1492 1405 1316 1227 1137 1047 956 864 771 677 583 488 392 295 198 99 Principal Pa Beginning Balance 7293 7354 7416 7477 7540 7602 7666 7730 7794 7859 7925 7991 8057 8124 8192 8260 8329 8399 8469 8539 8610 8682 8754 8827 8901 8975 9050 9125 9201 9278 9355 9433 9512 9591 9671 9752 9833 9915 9997 10081 10165 10250 10335 10421 10508 10595 10684 10773 10863 10953 11044 11136 11229 11323 11417 11512 11608 11705 11802 11901 564784 557491 550137 542721 535244 527704 520102 512436 504706 496912 489053 481129 473138 465081 456956 448764 440504 432175 423776 415308 406769 398159 389477 380722 371895 362994 354019 344969 335844 326642 317365 308009 298576 289064 279473 269802 260050 250217 240302 230305 220224 210059 199810 189475 179054 168546 157951 147267 136494 125632 114678 103634 92498 81269 69946 58529 47016 35408 23703 11901 0 PV factor 10% 60 Month 47.0654 SALES FORECAST in Units Jan 500 Feb 600 Mar 600 Apr 800 Sales EI 500 300 600 300 600 400 800 400 -BI Production 800 300 600 300 700 400 800 RAW MATERIAL PURCHASES (packets--1 per unit) Production 800 600 EI 600 700 BI 800 600 700 800 700 800 800 800 Purchases 800 PRODUCTION BUDGET 600 700 800 48,000 56,000 64,000 COST OF GOODS MANUFACTURED BUDGET Production Direct Material (@$80) 64,000 Direct Labor (10 hrs @$35/hr) 280,000 Overhead (50% DL$) 140,000 48,000 210,000 105,000 56,000 245,000 122,500 Total CGM Average Cost/Unit Projected Sellling Price 363,000 605 1,210 423,500 605 1,210 Purchases in $ (@$80) 484,000 605 1,210 May 800 June January 500 February 600 March 600 Sales (@$1210) Cost of Sales (@605) Gross Margin Operating Expenses: Administrative salaries (given) Sales commissions (10% of sales) Rent (given) Insurance ($24,000 6) Other general and administrative (15% of sales) Depreciation ($564,180 60) Totals Operating Income (Loss) Inrterest Expense Capital Lease Operating Line Income (Loss) Before Taxes Estimated Income Taxes $ 605,000 302,500 302,500 $ 726,000 363,000 363,000 $ 726,000 363,000 363,000 60,000 60,500 8,000 4,000 90,750 9,403 232,653 69,847 60,000 72,600 8,000 4,000 108,900 9,403 262,903 100,097 ### 72,600 ### ### 108,900 9,403 262,903 100,097 4,707 1,500 63,640 22,274 4,646 3,500 91,951 32,183 4,584 4,250 91,263 31,942 Net Income (Loss) $ 41,366 Sales in Units $ 59,768 $ 59,321 Cash Forecast January Cash Receipts: Sales (from I/S) collection in month (15%) collection in 2nd month (75%) collection in 3rd month (10%) Total Cash Receipts Cash Disbursements: Direct Labor Costs Incurred (production) paid in mo (50%) paid in 2nd mo (50%) Total direct labor cash payments Administrative Salaries (Expense) paid in mo (50%) February March $ 605,000 $ 90,750 726,000 108,900 453,750 $ $ 90,750 $ 562,650 $ 280,000.00 140,000.00 726,000 108,900 544,500 60,500 713,900 140,000.00 60,000.00 30,000.00 210,000 105,000 140,000 245,000.00 60,000 30,000 245,000 122,500 105,000 227,500.00 60,000 30,000 paid in 2nd mo (50%) Total adminstrative salary payments Sales commissions (Expense) paid in full in following mo 30,000.00 60,500.00 - 30,000 60,000.00 72,600.00 60,500 30,000 60,000.00 72,600.00 72,600 Material purchases (Procurement) paid in full in following month 48,000.00 64,000.00 $ 56,000.00 48,000 $ 64,000.00 56,000 MOH paid in month (25%) paid in 2nd mo (75%) 140,000.00 35,000.00 105,000 26,250 105,000 Total MOH Other administrative costs (Expense) $ 35,000 $ 90,750 131,250 108,900 $ 109,375 108,900 paid in full in following month Insurance Rent Capital Lease Principal Interest expense on capital lease (per schedule) on bank loan* $ $ 24,000 8,000 90,750 $ 108,900 Total interest Total disbursements Cash Receipts Less Cash Disbursements Beginning Balance Cash Available $ $ Borrowings Ending Cash Balance $ $ 301,000 $ (210,250) 100,000 (110,250) 8,000 7,293 ### 7,354 4,707 1,500 4,646 3,500 6,207 $ 657,000 $ (94,350) 189,750 95,400 300,000 100,000 189,750 $ 195,400 * - 122,500 30,625 78,750 8,146 657,875 56,025 195,400 251,425 50,000 $ 301,425 - Assets Current Assets: Cash Accounts Receivable Raw Marterial Inventory Finished Goods Inventory January 1 $ 100,000 $ 64,000 Prepaid Insurance Total Current Assets Property and Equipment: Equipment on Capital Lease Accumulated Depreciation Net Property and Equipment Liabilities and Stockholders' Equity Current Liabilities: Accounts Payable Wages Payable Bank Note Payable Interest Payable Income Taxes Payable Capital Lease Payable-Current Portion Total Current Liabilities Capital Lease - Amount Due After One Year Stockholders' Equity: Common Stock Retained Earnings (Deficit) Total Stockholders' Equity January 31 189,750 514,250 48,000 181,500 February 28 $ March 31 195,400 $ 677,600 56,000 181,500 301,425 689,700 64,000 242,000 164,000 20,000 953,500 16,000 1,126,500 12,000 1,309,125 - 564,180 9,403 564,180 18,806 ### 28,209 - 554,777 545,374 535,971 164,000 1,508,277.00 1,671,874 1,845,096 - 64,000 - 304,250.00 170,000.00 300,000.00 6,206.54 22,274 316,250 135,000 400,000 8,146 54,457 337,375 152,500 450,000 8,834 86,399 64,000 - 7,293 810,024 556,887 7,354 921,207 549,532 7,416 1,042,524 542,117 64,000 1,366,911 1,470,739 1,584,641 100,000 100,000 41,366 141,366 100,000 101,135 201,135 100,000 160,455 260,455 - 100,000 $ 164,000 $ 1,508,277 $ 1,671,874 $ 1,845,096 Payment 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 0 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 Interests 0 4707 4646 4584 4523 4460 4398 4334 4270 4206 4141 4075 4009 3943 3876 3808 3740 3671 3601 3531 3461 3390 3318 3246 3173 3099 3025 2950 2875 2799 2722 2645 2567 2488 2409 2329 2248 2167 2085 2003 1919 1835 1750 1665 1579 1492 1405 1316 1227 1137 1047 956 864 771 677 583 488 392 295 198 99 Principal Pa Beginning Balance 7293 7354 7416 7477 7540 7602 7666 7730 7794 7859 7925 7991 8057 8124 8192 8260 8329 8399 8469 8539 8610 8682 8754 8827 8901 8975 9050 9125 9201 9278 9355 9433 9512 9591 9671 9752 9833 9915 9997 10081 10165 10250 10335 10421 10508 10595 10684 10773 10863 10953 11044 11136 11229 11323 11417 11512 11608 11705 11802 11901 564784 557491 550137 542721 535244 527704 520102 512436 504706 496912 489053 481129 473138 465081 456956 448764 440504 432175 423776 415308 406769 398159 389477 380722 371895 362994 354019 344969 335844 326642 317365 308009 298576 289064 279473 269802 260050 250217 240302 230305 220224 210059 199810 189475 179054 168546 157951 147267 136494 125632 114678 103634 92498 81269 69946 58529 47016 35408 23703 11901 0 PV factor 10% 60 Month 47.0654