X produces and distributes a special type of chemical compound called Compound WX. The information below about X's operations has been assembled to assist budget preparation. The company is preparing its master budget for the first quarter of 2019. The budget will detail each months activity and the activity for the quarter in total. The master budget will be based on the following information:

1. Selling price is $60 per unit in 2019 and will not change for the first two quarters of 2019. Actual and estimated sales are as follows:

Actual 2018	Estimated 2019
November: 10,000 units	January: 11,000 units
December: 12,000 units	February: 10,000 units
	March: 13,000 units
	April: 11,000 units
	May: 11,000 units

2. The company produces enough units each month to meet that months sales plus a desired inventory level equal to 20% of next months estimated sales. Finished Goods inventory at the end of December 2018 consisted of 2,200 units at a variable cost of $33 each.

3. The company purchases enough raw materials each month for the current months production requirement and 25% of next month's production requirements. Each unit of product requires 5 kilograms of raw material at $0.60 per kilogram. There were 13,500 kilograms of raw materials in inventory at the end of December 2018. Garden pays 40% of raw material purchases in the month of purchase and the remaining 60% in the following month.

4. Each unit of finished product requires 1.25 labour-hours. The average wage rate is $16 per hour. All salaries and wages are paid at the current month in cash.

5. Variable manufacturing overhead is calculated and applied at 50% of the direct labour cost.

6. Fixed overhead costs (per month) are as follows:

Factory supervisor's salary	$75,000
Factory insurance	1,400
Factory rent	8,000
Depreciation of factory equipment	1,200

7. Credit sales on account for the month are 60% of the total sales. The company collects 50% of the credit sales during the first month following/after the month of sale and the next 50% of the credit sales during the second month.

8. Variable selling and administrative expenses consist of $4 for shipping and 10% of sales for commissions.

9. Total fixed selling and administrative expenses are as follows:

Advertising	$300
Depreciation	9,000
Insurance	250
Salaries	4,000
Other	14,550

10. The company will purchase assets for use in the sales office at a cost of $300,000, which will be paid cash on January 02, 2019. The monthly depreciation expense on the additional capital assets will be $6,000, starting from January, 2019.

11. The balance sheet as of December 31, 2018, is as follows:

Assets
Cash	$80,000
Accounts receivable	612,000
Inventory: Raw materials	$8,100
Finished goods	72,600	80,700
Plant and equipment	1,000,000
Less: accumulated depreciation	-100,000	900,000
Total assets	$1,672,700
Liabilities and Equity
Accounts payable	$24,000
6% long-term notes payable	900,000
Common shares	735,000
Retained earnings	13,700
Total liabilities and shareholders' equity	$1,672,700

Additional information available follows:

All cash payments except purchases of raw materials are made monthly as incurred.

All borrowings occur at the beginning of each month, and all repayments occur at the end of the month. Borrowings and repayments may occur in any amount.

All interest on borrowed funds is paid at the end of each month at a rate of 0.5% per month.

A minimum cash balance of $30,000 is required at the end of each month.

Question:

1. Provide a presentation of the current situation of the company based on your reports. (500 words)