You have just been hired into a management position which requires the application of your budgeting skills. You find out that budgeting has not been a priority of the company. You have contacted various areas on the organization and have accumulated the information below to assist you in preparing a comprehensive budget.

Manufacturing Inc. produces a part used in the production of engines.

Actual Sales and Projected Sales in Units:

March (Actual) ......... 38,000

April ..........44,000

May ........... 45,000

June ........... 50,000

July ........... 52,000

Sales are the following type: 55% Cash Sales collected in month of sales -- 45% Credit Sales collected in the following month of sale

The following data pertains to the manufacturing process.

1. Finished goods inventory --- March 31st --- 35,200 Units --- $148.71 budgeted cost to make a unit --- Desired ending finished goods for each month 80% of next month's sales volume.

2. Direct materials used:

Direct Material : Metal

Per-Unit Usage : 10 pounds

Cost Per Pound: $8.00

The beginning balance of each month needs to be able to produce 50% of that month's estimated sales volume

Beginning material in pounds as of April 1st 220,000

Direct Materials paid in month purchased.

3. The direct labor used per unit --- 4 hours--- $13.00 per hour --- direct labor paid in month incurred

4. Overhead each month is estimated based on direct labor hours per variable cost. All costs that use cash are paid in month incurred.

--------------------------------------------------------Fixed Cost ---------------------Variable cost

Supplies -------------------------------------------N/A -------------------------------- $1.00

Power -----------------------------------------------N/A ---------------------------------$0.50

Maintenance -------------------------------------$28,000 ----------------------------$0.40

Supervision ------------------------------------- $16,000 --------------------------------N/A

Depreciation -------------------------------------$20,000 --------------------------------N/A

Taxes ---------------------------------------------- $12,000 --------------------------------N/A

Other ---------------------------------------------- $80,000 -------------------------------$1.10 Total ------------------------------------------------ $156,000 ----------------------------- $3.00

5. Monthly selling and administrative expenses are based on units sold per variable cost. All costs that use cash are paid in month incurred.

------------------------------------------------------- Fixed Cost ----------------------------- Variable Cost

Salaries ------------------------------------------- $30,000 -----------------------------------N/A

Commissions ------------------------------------ N/A ------------------------------------------- $1.00

Depreciation ------------------------------------- $10,000 ----------------------------------- N/A

Shipping ------------------------------------------ N/A ------------------------------------------ $0.60

Other --------------------------------------------- $20,000 -------------------------------------- $0.40

Total ---------------------------------------------- $60,000 -------------------------------------- $2.00

6. Unit selling price = $165 per unit

7. Cash balance as of April 1st = $120,000

Prepare the following second quarter budgets- 6. Cash Budget Per Month and Quarter. 7. Based on the quarterly cash budget you prepared, provide recommendations on cash management. The comments should be direct towards management.

8. Budgeted income statement (ignore income tax) for the quarter.

9. What if the company decides to lay off one of the administrative staff. The monthly salaries will be reduced by $5,000 What budgets are affected, and why? What is the New Net Income (loss) for the quarter?