Using the following information, you are to prepare a income statement for The Company, Friends, Again, assembles a specialized device used to help friends enjoy back yard BBQs$.$ Arrangements have been made for the component parts $($bundled in packets; one packet is used to assemble one unit$)$ to be produced in Morocco, shipped to Boise, then assembled and sold by Friends, Again

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 $1,20$xx$.$ No expenses occur nor does cash leave the company before January $1,20$xx$.$

Use the following assumptions in making your budget calculations:

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

b$.$ Projected sales in units are $1558$ in January and increase by $265$ units each month through the remainder of the year.

c$.$ 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 $34\%$ in the month of sale, $34\%$ 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.

d$.$ Production Tab only: The company wants to have at least $30\%$ of the next month$$s projected sales in ending finished goods inventory on hand. $($Since the company is just starting, beginning January finished good will be zero.$)$

e$.$ Direct Materials Tab only: At the start of each month, management plans to have enough packets of raw materials on hand to cover the next $30$ days$$ production requirements. Each packet of raw material costs $$139\mathrm{.}00.$ The company will have $2275$ packets on hand on January $1,20$xx$.$ ALL RAW MATERIALS PACKETS PURCHASED DURING LATE DECEMBER HAVE NOT BEEN PAID. Raw materials are payable on the $10$th day of the month after the purchase.

f$.$ Five hours of direct labor are required to assemble each device. The direct labor cost $($including fringe benefits$)$ is $$24\mathrm{.}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. Assume that the workforce is stable each month $($hence$,$ wages and salaries are the same every day of the month$).$

g$.$ Manufacturing overhead incurred averages $85\%$ 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.

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

i$.$ 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.

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

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

l$.$ Other administrative expenses are estimated to be $7\mathrm{.}5\%$ of sales. Other administrative expenses are paid in the month after the expense occurs.

m$.$ The federal and state income tax rate is estimated at $25\%.$ Taxes accrue on each month$$s income and will be paid quarterly on April $15,$ July $15,$ etc. Note: Your company is successful, and YOU WILL NEED TO PAY TAXES.

n$.$ The company has a $$750,000$ line of credit secured to its inventory and accounts receivable through a private investor. Borrowing against this line must be in increments of $$25,000$ and happen on the $16$th day of the month. Repayments must also occur in $$25,000$ increments on the $16$th day of the month. Your borrowings and repayments should be adjusted to provide a minimum ending cash balance of $$25,000$ each month.

o$.$ Interest for the line of credit is calculated at an of rate of $6\%$ assuming a $360$ year. Interest expense is payable on the $1$st day of the month after the borrowing occurred.

p$.$ Beginning cash balance on January $1,20$xx is projected to be $$25,000.$ This money was raised through issuing common stock and should be recorded accordingly.

Check Figures:

Production$--$March, Required Production, Units: $2168.$ If you get the wrong number, read D$.$

Raw Materials$--$March, Packets to Purchase, Units $2433.$ If you get the wrong number, read E between the first comma and the first period.

Income Statement$--$January, Sales: $$1,406,095$

Income Statement$--$January, Operating Income: $$295,615$

Income Statement$--$January, Net Income: $$221,383$

Cash Budget$--$January, Total Budget Disbursements: $$652,399$

Cash Budget$-$January Total Assets $$25,673$

Balance Sheet$-$January Total Assets $$1,323,843$

Balance Sheet$-$Febuary Total Assets $$1,794,767$

Balance Sheet$-$March Total Assets $$2,136,574$