Victory Company is preparing budgets for the quarter ending June 30. The following information is related to Victory Company:

1) Budgeted sales for the next five months are:

April 20,000 units

May 50,000 units

June 30,000 units

July 25,000 units

August 15,000 units

2) The selling price is $10 per unit.

3) All sales are on account. And collection pattern is 70% collected in the month of sale; 25% collected in the month following sale, and 5% is uncollectible. The March 31 accounts receivable balance of $30,000 will be collected in full.

4) Victory wants ending inventory to be equal to 20% of the following month's budgeted sales in units. On March 31, 4,000 units were on hand.

5) At Victory, 5 pounds of material are required per unit of product. Management wants materials on hand at the end of each month equal to 10% of the following month's production. On March 31, 13,000 pounds of material are on hand. Material cost $0.40 per pound.

6) One-half of a month's materials purchases are paid for in the month of purchase; the other half is paid in the following month. The March 31 accounts payable balance is $12,000.

7) At Victory, each unit of product requires 0.05 hours of direct labor. The Company has a "no layoff" policy so all employees will be paid for 40 hours of work each week. In exchange for the "no layoff" policy, workers agreed to a wage rate of $10 per hour regardless of the hours worked (No overtime pay). For the next three months, the direct labor workforce will be paid for a minimum of 1,500 hours per month.

8) The Company uses a variable manufacturing overhead rate of $1 per unit produced. Fixed manufacturing overhead is $50,000 per month and includes $20,000 of noncash costs (primarily depreciation of plant assets).

9) Manufacturing overhead is applied to units of product on the basis of direct labor hours.

10) At Victory, variable selling and administrative expenses are $0.50 per unit sold. Fixed selling and administrative expenses are $70,000 per month. The fixed selling and administrative expenses include $10,000 in costs - primarily depreciation - that are not cash outflows of the current month.

11) Victory maintains a 16% open line of credit for $75,000. Maintains a minimum cash balance of $30,000. Borrows on the first day of the month and repays loans on the last day of the month. Pays a cash dividend of $49,000 in April. Purchases $143,700 of equipment in May and $48,300 in June paid in cash. Has an April 1 cash balance of $40,000.

12) Victory reported the following account balances on June 30 prior to preparing its budgeted financial statements: Land - $50,000, Building (net) - $175,000, Common stock - $200,000, and Retained earnings - $146,150.

Instruction

Based on the above information prepare the following:

1) Sales budget (with a schedule of expected cash collections).

2) Production budget.

3) Direct materials budget (with a schedule of expected cash disbursements for materials).

4) Direct labor budget.

5) Manufacturing overhead budget.

6) Ending finished goods inventory budget.

7) Selling and administrative expense budget.

8) Cash budget.

9) Budgeted income statement for the three months ended June 30.

10) Budgeted balance sheet on June 30.