WISCONSON ICE CREAM COMPANY, INC. December 14, 2020

MASTER BUDGET PROBLEM

1. A sales budget, including a schedule of expected cash collections.
2. A production budget (or merchandise purchases budget).
3. A direct materials budget, including a schedule of expected cash disbursements.
4. A direct labor budget.
5. A manufacturing overhead budget.
6. An ending finished goods inventory.
7. A selling and administrative expense budget.
8. A cash budget.
9. A budgeted income statement.
10. A budgeted balance sheet.

1. The company plans to sell 100,000 gallons of ice cream, with sales peaking in the third quarter. The estimated sales budget is below:

Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total
10,000 gals.	30,000 gals.	40,000 gals.	20,000 gals.	100,000 gals.

The average selling price for a gallon of ice cream (any flavor) is $20.

2. All sales are made on credit with 70% of sales collected in the quarter in which the sale is made, and the remaining 30% are collected in the following quarter.

3. The desired level of ending inventory influences production requirements for the quarter. Inventories should be carefully planned. Excessive inventories tie up funds and create storage problems. Insufficient inventories can lead to lost sales or crash production efforts in the following period. Management believes that an ending inventory equal to 20% of the next quarters sales strikes the appropriate balance. Based on prior years outcomes, it is estimated that ending inventory at 12/31/17 will be 3,000 gallons.

4. The only raw material included in the direct materials budget is high fructose sugar in flavored milk, which is the only major ingredient in ice cream other than water. The remaining raw materials are relatively insignificant and are included in variable manufacturing overhead. Management desires to maintain ending inventories of this ingredient equal to 10% of the following quarters production needs. Ending raw materials for the 4^th quarter of the year is estimated to be 22,500 pounds.

5. WIC, Inc. will adjust the labor force as work requirements change from quarter to quarter and as workers are needed. The total direct labor cost is computed simply by multiplying the direct labor-hour requirements by the direct labor rate per hour. Production requirements for each gallon are 0.4 hours of labor at a pay rate of $15.00 per hour.

6. The unit cost per case is determined using absorption costing, and includes the following amounts:

Direct Materials 15.0 lbs. @ $0.20 per pound.

Direct Labor 0.4 hrs. @ $15.00 per hour.

Manufacturing OH 0.4 hrs. @ $10.00 per hour.

7. The selling and administrative expense budget lists the budgeted expenses for areas other than manufacturing. The following list contains amounts budgeted for various S & A expenses:

Advertising $20,000 per quarter.

Executive salaries $55,000 per quarter.

Insurance $10,000 per quarter.

Property taxes $4,000 per quarter.

Depreciation expense $10,000 per quarter.

8. Cash budget consists of four sections:

1. receipts section
2. disbursements section
3. cash excess or deficiency section
4. financing section

The company requires an ending cash balance of $30,000. An open line of credit can be arranged with a local bank that can be used to bolster the companys cash position. Any interest on loans taken out with this line of credit would carry an interest rate of 3% per quarter. All borrowings and repayments are in round $10,000 amounts and that all borrowings occur at the beginning of the quarter, and that all repayments are made at the end of the quarter.

9. Additional disbursements not listed above include Equipment purchases of $50,000 during first quarter, and $40,000, $20,000, $20,000 in the subsequent quarters, totaling $130,000 for the year. Also, dividends of $8,000 were declared and paid during each of the four quarters, totaling $32,000 for the year.

10. The balance sheet for the year-ended December 31, 2016 is reported here:

Wisconsin Ice Cream Co., Inc.
Balance Sheet
December 31, 2016
Current assets:
Cash	$ 42,500
Accounts receivable	90,000
Raw materials inventory (21,000 lbs.)	4,200
Finished goods inventory (2,000 gals.)	26,000
Total current assets		$ 162,700
Plant and equipment
Land	$ 80,000
Buildings and equipment	700,000
Accumulated depreciation	(292,000)
Plan and equipment, net		$ 488,000
Total assets		$ 650,700
Liabilities and Stockholder's Equity
Current liabilities		$ 25,800
Stockholders' equity
Common stock	$ 175,000
Retained earnings	$ 449,900
Total stockholder's equity		$ 624,900
Total liabilities and stockholders' equity		$ 650,700

REQUIRED:

Prepare the Master Budget for Wisconsin Ice Cream, Co, Inc. for the year-ending December 31, 2017. Complete all schedules listed above.