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: 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, 2017 (all purchased during December 2016). Ten hours of direct labor are required to assemble each device. The direct labor cost (including fringe benefits) is $35.00 per hour. Manufacturing overhead is 50% of direct labor cost. Devices are sold at 100% markup on cost. 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 10th 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 22nd with the remainder paid on the 7th 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 15th 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, 2017 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 1st day of the month following the borrowing. Assume all borrowing occur on the 15th day of the month. Repayments must also occur in $50,000 increments on the 15th 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 months 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.

Some helpful check figures and information that were provided :

These relate to the production, purchases and cost of goods manufactured budgets

Required production in units for Jan. 800

Required purchases of raw materials in Jan 600 or $48,000

Total cost of goods manufactured in Jan $484,000 or $605 per unit

You need to borrow enough to have sufficient cash on hand for the next 10 days of the following month. You do not need to repay the loan until you have extra cash to do so. Most students make a mistake in not borrowing enough money. I think that is because from the cradle we are taught that interest is bad. It is better to borrow more and not run out. You can only borrow once a month so you need to plan ahead.

Interest expense for the bank loan and capital lease need to be accrued on the previous month. For example you do not pay any interest until Feb but you need to accrue it on the IS and BS in Jan

You need to complete the workbook I have provided plus you need to develop an amortization schedule for the capital lease.

January figures:

Sales $605,000

Gross Margin $302,500

Operating Expenses $232,663

Operating Income $69,837

Interest expense and income taxes will vary by group depending on how much you borrow.

Cash Flow Statement:

Cash Receipts $90,750 (excludes any borrowings)

Cash Disbursements $301,000

Selected Balance Sheet Figures for January 31

Accounts Receivable $514,250

Raw Materials Inventory $48,000

Finished Goods Inventory $181,500

Prepaid Insurance $20,000

Accounts Payable $243,750

Wages Payable $230,500

Common Stock $100,000

Budgeted cash flow work book

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)	-	-	-
		on bank loan*	-	-	-
		Total interest	$-	$-	$-
	Total disbursements		$-	$-	$-
Cash Receipts Less Cash Disbursements			-	-	-
Beginning Balance			-	-	-
Cash Available			-	-	-
Borrowings			-	-	-
Ending Cash Balance			$-	$-	$-

Budgeted balance sheet workbook

	Assets	January 1	January 31	February 28	March 31
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	-
	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	-	-	-	-
		$-	$-	$-	$-

1-4 have been answered

Projected units of production
	January	February	March	Total
Projected sales units	500	600	600	1700
Add: Desired ending inventory units	300	300	400	400
(50% of next month's sale)
Finished goods units required	800	900	1000	2100
Less: Beginning inventory units	0	300	300	0
Projected units of production	800	600	700	2100

2.

Projected raw material requirement (units)
	January	February	March	Total
Budgeted production	800	600	700	2100
Direct material required per unit	1	1	1	1
Raw material required for production	800	600	700	2100
Add: Desired ending inventory	600	700	800	800
(ome month's requirement)
Projected raw material requirement	1400	1300	1500	2900
Less: Beginning inventory	800	600	700	800
Projected raw material purchases	600	700	800	2100

3.

Projected raw materials purchases in dollars
	January	February	March	Total
Projected raw material requirement	1400	1300	1500	2900
Less: Beginning inventory	800	600	700	800
Projected raw material purchases	600	700	800	2100
Raw material cost per unit	80	80	80	80
Projected raw material purchases ($)	48000	56000	64000	168000

4.

Projected cost of goods manufactured statement
	January	February	March	Total
Beginning inventory of raw material *	64000	48000	56000	64000
Add: Units purchased **	48000	56000	64000	168000
Raw material available for manufacture	112000	104000	120000	232000
Less: Ending inventory of raw material ***	48000	56000	64000	64000
Raw material used for production	64000	48000	56000	168000
Direct labor cost ****	280000	210000	245000	735000
Manufacturing overhead (50% of direct labor cost)	140000	105000	122500	367500
Cost of goods manufactured	484000	363000	423500	1270500
Workings:
	January	February	March
Begining inventory of raw material units	800	600	700
Cost per unit	80	80	80
Value of beginning inventory of raw material *	64000	48000	56000
Raw material units purchased	600	700	800
Cost per unit	80	80	80
Cost of raw material purchases **	48000	56000	64000
Ending inventory of raw material units	600	700	800
Cost per unit	80	80	80
Cost of ending inventory raw material ***	48000	56000	64000
Estimated production	800	600	700
Direct labor hours per units of production	10	10	10
Total direct labor hours required for production	8000	6000	7000
Direct labor cost per hour	35	35	35
Direct labor cost for production ****	280000	210000	245000