Using the following information, you are to prepare a comprehensive budget for Mockingbird Minis. The Company assembles a specialized device used to create custom bottles. Arrangements have been made for the component parts (bundled in packets; one packet is used to assemble one unit) to be produced in Uganda, shipped to Boise, then assembled and sold by Mockingbird Minis.

You have developed the prototypes, established a market, and now you are putting together a budget for the first three months of operations. The Company will start manufacturing and distribution on January 1, 20xx. No expenses occur nor does cash leave the company before January 1, 20xx.

Assume all 12 months have 30 days to make the calculations easier. This is commonly done in the business world.

Use the following assumptions in making your budget calculations:

A. Projected sales in units are 1642 in January and increase by 265 units each month through the remainder of the year. Sales price includes COST PLUS AN ADDITIONAL 150% OF COST (cost includes raw material, direct labor and overhead). All sales are on account and are collected 30% in the month of sale, 30% in the next month, and 20% in the second following month. The remaining accounts receivable are uncollectible and recorded as bad debt expense IN THE MONTH OF SALE.

B. Five hours of direct labor are required to assemble each device. The direct labor cost (including fringe benefits) is $24.00 per hour. Wages earned by employees during the first half of each month are paid on the third Friday of the current month. Wages earned in the second half of the month are paid on the first Friday of the next month.

C. Manufacturing overhead incurred averages 90% of direct labor cost. Manufacturing overhead percentage includes warehouse rent, insurance, utilities, etc. Manufacturing overhead is paid 40% in the current month with the remaining balance paid the following month

D. The company wants to have at least 30% of the next months projected sales in ending finished goods inventory on hand. (Since the company is just starting, beginning January finished good will be zero.)

E. At the start of each month, management plans to have enough packets of raw materials on hand to cover the next 30 days production requirements. Each packet of raw material costs $131.00. The company will have 2255 packets on hand on January 1, 20xx. ALL RAW MATERIALS PACKETS PURCHASED DURING LATE DECEMBER HAVE NOT BEEN PAID. Raw materials are payable on the 10th day of the month after the purchase.

F. Create a Cost of Goods Schedule (LO 2.3). All numbers should be in $ and linked from tab B, C, D, E.

G1. Sales commissions are 14% of sales price. 100% of sales commissions are payable on the 15th day of the month after the sale.

G2. Other administrative expenses are estimated to be 7.5% of sales. Other administrative expenses are paid in the month after the expense occurs.

H1. Rent on administrative office space is $10,000 per month. Rent for each month is due on the first day of each month.

H2. On January 1, 20xx the Company will pay an $84,000 annual insurance liability premium covering January through December, 20xx. This insurance policy is a different policy than MOH insurance.

H3. Administrative salaries and fringe benefits are $60,000 per month. Administrative salaries are paid one-half on the third Friday of the current month and one-half is on the first Friday of the next month.

I. Using the provided template, create a Proforma Income Statement based on calculations from tab A through H.

J1. Create a Proforma Cash Budget based on calculations from tab A through H. Beginning cash balance on January 1, 20xx is projected to be $34,000. This money was raised through issuing common stock.

J2. The company has a $750,000 line of credit secured to its inventory and accounts receivable through a private investor. Borrowing and repayments against this line must be in increments of $25,000 and will happen on the 1st day of each month. You NEED TO pay back as much as you can to avoid interest. To simplify this project, NO interest will be calculated.

J3. The minimum cash balance the company would like to keep on hand is $10,000.

Check Figures:

Production--March, Required Production, Units: 2252.

If you get the wrong number, read B.

Raw Materials--March, Packets to Purchase, Units 2517.

If you get the wrong number, read C between the first comma and the first period.

COGS--January, Raw Materials Used: $290,047

COGS--February, Cost of Goods Manufactured: $713,154

COGS--March, Cost of Goods Sold: $779,748

Income Statement--January, Sales: $1,473,695

Income Statement--January, Net Income: $195,634

Cash Budget--January, Total Budget Disbursements: $647,900

Cash Budget--January, Ending Cash: $18,208

\begin{tabular}{|c|c|c|c|c|c|} \hline & Jan & Feb & Mar & Apr & Qtr Total \\ \hline \multicolumn{6}{|l|}{ Total Labor Cost, in \$ (from Direct Labor) } \\ \hline \multicolumn{6}{|l|}{% of Direct Labor to MOH} \\ \hline \multicolumn{6}{|l|}{ Manufacturing Overhead, in \$ } \\ \hline \multicolumn{6}{|c|}{ Section 2: Expected Cash Disbursements (to Cash Budget) } \\ \hline & Jan & Feb & Mar & Apr & Qtr Total \\ \hline \multicolumn{6}{|l|}{ Jan MOH,in$} \\ \hline \multicolumn{6}{|l|}{ Feb MOH,in$} \\ \hline \multicolumn{6}{|l|}{ Mar MOH, in $} \\ \hline Total Cash Disbursement, in \$ & & & & & \\ \hline \end{tabular}