You have been hired by the McClosky Corporation and they manufacture industrial dye. The company is preparing its 20X9 master budget and has presented you with the following information:

1. The projected December 31, 20X8, balance sheet for the company is as follows:

Assets

Cash $ 6,080

Accounts Receivable 29,500

Raw Materials Inventory 1,000

Finished Goods Inventory 3,200

Prepaid Insurance 1,800

Building $ 350,000

Accum Depreciation (25,000) 325,000

Total Assets $ 366,580

Liabilities and Equity

Notes Payable $ 25,000

Accounts Payable 2,650

Dividends Payable 12,000

Total Liabilities $ 39,650

Common Stock $ 200,000

Paid-In Capital 40,000

Retained Earnings 86,930 326,930

Total Liabilities and

Stockholders Equity $ 366,580

Other Information that is being provided to you:

2. The Accounts Receivable balance at 12/31/20X8 represents the balances of November and December credit sales. Sales were $90,000 and $85,000 respectively.
3. Estimated sales in gallons of dye for January through May 20X9 are as follows:

January 9,000

February 11,000

March 16,000

April 14,000

May 13,000

June 12,000

Each gallon of dye sells for $ 15

4. The collection pattern for accounts receivable is as follows: 70 percent in the month of sale, 20 percent in the first month after the sale, and 10 percent in the second month after the sale. McClosky does not provide cash discounts and they are not expecting any bad debts.
5. Each gallon of dye has the following standard quantities and costs for direct material and direct labor:

1.4 gallons of direct material (some evaporation takes place during processing) X $.90 per gallon $ 1.26

0.5 direct labor X $ 8 per hour 4.00

6. Variable overhead is applied to the product on a machine-hour basis. Processing one gallon of dye takes five hours of machine time. The variable overhead is $0.08 per machine hour. Variable overhead consists of utility costs. Total annual fixed overhead is $150,000; it is applied at $ 1 per gallon based on expected annual capacity of 150,000 gallons. Fixed overhead per year is made up of the following costs:

Salaries $ 110,000

Utilities 15,000

Insurance 1,800

Depreciation-factory 23,200

Fixed overhead is incurred evenly throughout the year.

7. There is no beginning Work-in-Process Inventory. All work is completed in the period in which it is started. Raw Material Inventory at the beginning of the year consists of 1,100 gallons of direct material at a standard cost of $.90 per gallon. There are 500 gallons of dye in Finished Goods Inventory at the beginning of the year carried at a standard cost of $6.28 per gallon; direct material, $.98, direct labor, $4.00; variable overhead $ .30; fixed overhead , $1,00
8. Accounts Payable relates to raw material and is paid 60 percent in the month of purchase and 40 percent in the month after purchase. No discounts are received for prompt payment.
9. The dividend will be paid in January 20X9.
10. A new piece of equipment will be purchased in March 20X9 and the cost is $12,000. Payment of 80 percent will be made in March and 20 percent in April. The equipment has a useful life of three years and will be placed in service on March 1.
11. The note payable has a 12 percent interest rate; interest is paid at the end of each month. The principle of the note is repaid as cash is available to do so.
12. The McClosky management team wishes to maintain a minimum cash balance of $5,500. Investments and borrowing are made in $100 amounts. (Even $100 amounts). Interest on any borrowings are expected to be 12 percent per year, and investments will earn 4 percent per year.
13. The ending finished goods inventory should include 5 percent of next months sales. This will not be true at the beginning of 20X9 due to a miscalculation in sales for the month of December. The ending inventory of raw materials should be 5 percent of next months needs.
14. Selling and administration costs per month are as follows: salaries $25,000; rent, $7,000 and utilities, $800. These costs are paid in cash as they are incurred.
15. The companys tax rate is 20 percent

Milestone 3:

1. Budgeted Balance Sheet
2. Cash Budget
3. Budget Presentation and please address the following questions:

1. The sales manager would like to increase the sales price by 10 next quarter, what will be the projected revenues be for the 2^nd quarter.
2. The production manager would like to purchase new equipment for next quarter due to the fact that their competitor has purchased equipment which cost $50,000. Will the company be able to make the purchase or will you need more information?
3. The CEO feels that the cash budget is not necessary, please explain to the CEO why cash budgeting is important to the organization.
4. Please explain the to the management team how a competitors actions can affect business planning.

Here are the statements to complete milestone 3

Sales Budget Estimated Units Selling Price Estimated Sales Quarter 1 Jan. Feb. Mar. Total 9,000 11,000 16,000 15 15 15 135,000 165,000 240,000 540,000 Production Budget Quarter 1 Estimated Units Add: Desired Ending Inventory (5%) Avaliable Units Less: Beginning Inventory Production Units Jan. Feb. Mar. Total 9,000 11,000 16,000 550 800 700 9,550 11,800 16,700 500 550 800 9,050 11,250 15,900 36,200 Purchase Budget Quarter 1 Production Units Materials Needed Per Unit Total Materials Needed Add: Desired Ending Inventory (5%) Units Available Less: Beginning Inventory Budgeted Purchase Unit Unit Price of Material Total Purchase Jan. Feb. Mar. Total 9,050 11,250 15,900 36,200 1.4 1.4 1.4 1.4 12,670 15,750 22,260 50,680 787.50 1,113 977 976.50 13,457.50 16,863 23,237 51,656.50 1,100 787.50 1,113 1,100 12,357.50 16,075.50 22,123.50 50,556.50 0.9 0.9 0.9 0.9 11,121.75 14,467.95 19,911.15 45,500.85 Labor Budget Quarter 1 Budgeted Production Units Hours Needed Per Unit Total Hours Needed Rate Per Hour Direct Labor Cost Jan. Feb. Mar. Total 9,050 11,250 15,900 36,200 0.5 0.5 0.5 0.5 4,525 5,625 7,950 18,100 8 8 8 8 36,200 45,000 63,600 144,800 Variable Overhead Budget Quarter 1 Budgeted Production Units Machine Hours Needed Per Unit Total Hours Needed Machine Hour Rate Variable Overhead Cost Jan. Feb. Mar. Total 9,050 11,250 15,900 36,200 5 5 5 5 45,250 56,250 79,500 181,000 0.08 0.08 0.08 0.08 3,620 4,500 6,360 14,480 Fixed Overhead Budget Salaries 110,000/12 Utilities 15,000/12 Insurance 1,800/12 Deprecation 23,200/12 Overhead Budget per Month Quarter 1 Jan. Feb. Mar. Total 9,167 9,167 9,167 27,500 1,250 1,250 1,250 3,750 150 150 150 450 1,933 1,933 1,933 5,800 12,500 12,500 12,500 37,500 Cost Per Unit 0.9 Total Cost Per Finished Goods 1.26 8 4 Budgeted Cost of Goods Manufactured Quarter 1 Requirment Per Unit Direct Materials 1.4 Direct Labor 0.5 Variable Manufacturing OH Fixed Manufacturing OH Manufacturing Cost Per Unit Number of Units Produced Budgeted Cost of Goods Manufactured 5 0.08 0.4 1 6.66 36,200 241,092 Budgeted Income Statement Quarter 1 540,000 Sales Revenue Less: Cost of Goods Sold Beginning Finished Goods Inventory 3,200 Add: Cost of Goods Manufactured 241,092 Cost of Goods Avaliable For Sale 244,292 Less: Ending Finished Goods Inventory 6.6 X 700 4,620 Cost of Goods Sold Gross Margin Less: Selling and Administration Expense (25,000 + 7,000+800) X 3 Earnings Before Taxes Taxes at 20% Net Income 239,672 300,328 98,400 201,928 40,386 161,542 Sales Budget Estimated Units Selling Price Estimated Sales Quarter 1 Jan. Feb. Mar. Total 9,000 11,000 16,000 15 15 15 135,000 165,000 240,000 540,000 Production Budget Quarter 1 Estimated Units Add: Desired Ending Inventory (5%) Avaliable Units Less: Beginning Inventory Production Units Jan. Feb. Mar. Total 9,000 11,000 16,000 550 800 700 9,550 11,800 16,700 500 550 800 9,050 11,250 15,900 36,200 Purchase Budget Quarter 1 Production Units Materials Needed Per Unit Total Materials Needed Add: Desired Ending Inventory (5%) Units Available Less: Beginning Inventory Budgeted Purchase Unit Unit Price of Material Total Purchase Jan. Feb. Mar. Total 9,050 11,250 15,900 36,200 1.4 1.4 1.4 1.4 12,670 15,750 22,260 50,680 787.50 1,113 977 976.50 13,457.50 16,863 23,237 51,656.50 1,100 787.50 1,113 1,100 12,357.50 16,075.50 22,123.50 50,556.50 0.9 0.9 0.9 0.9 11,121.75 14,467.95 19,911.15 45,500.85 Labor Budget Quarter 1 Budgeted Production Units Hours Needed Per Unit Total Hours Needed Rate Per Hour Direct Labor Cost Jan. Feb. Mar. Total 9,050 11,250 15,900 36,200 0.5 0.5 0.5 0.5 4,525 5,625 7,950 18,100 8 8 8 8 36,200 45,000 63,600 144,800 Variable Overhead Budget Quarter 1 Budgeted Production Units Machine Hours Needed Per Unit Total Hours Needed Machine Hour Rate Variable Overhead Cost Jan. Feb. Mar. Total 9,050 11,250 15,900 36,200 5 5 5 5 45,250 56,250 79,500 181,000 0.08 0.08 0.08 0.08 3,620 4,500 6,360 14,480 Fixed Overhead Budget Salaries 110,000/12 Utilities 15,000/12 Insurance 1,800/12 Deprecation 23,200/12 Overhead Budget per Month Quarter 1 Jan. Feb. Mar. Total 9,167 9,167 9,167 27,500 1,250 1,250 1,250 3,750 150 150 150 450 1,933 1,933 1,933 5,800 12,500 12,500 12,500 37,500 Cost Per Unit 0.9 Total Cost Per Finished Goods 1.26 8 4 Budgeted Cost of Goods Manufactured Quarter 1 Requirment Per Unit Direct Materials 1.4 Direct Labor 0.5 Variable Manufacturing OH Fixed Manufacturing OH Manufacturing Cost Per Unit Number of Units Produced Budgeted Cost of Goods Manufactured 5 0.08 0.4 1 6.66 36,200 241,092 Budgeted Income Statement Quarter 1 540,000 Sales Revenue Less: Cost of Goods Sold Beginning Finished Goods Inventory 3,200 Add: Cost of Goods Manufactured 241,092 Cost of Goods Avaliable For Sale 244,292 Less: Ending Finished Goods Inventory 6.6 X 700 4,620 Cost of Goods Sold Gross Margin Less: Selling and Administration Expense (25,000 + 7,000+800) X 3 Earnings Before Taxes Taxes at 20% Net Income 239,672 300,328 98,400 201,928 40,386 161,542