You were recently hired as an assistant controller at PURELY PYJAMAS LTD. Your employer manufactures and sells a single product, Onesie Pajamas. The first task you have been assigned in your new role is to prepare the master budget for the quarter ended December 31^st, 20X2.

You have assembled the following information.

SALES INFORMATION

The Pajamas sell for $45 each. Recent and budgeted sales (in units) are as follows:

October 1,700

November 1,800

December 1,850

January 1,450

February 1,200

• All sales are on credit, with no discount. The company has found that only 30% of a months sales are collected by month-end.
• An additional 50% is collected in the month following the sale, and the remaining 20% is collected in the second month following the sale.
• This company does not experience any bad debts.

INVENTORY AND PRODUCTION

• Inventories of finished goods on hand at the end of each month are to be equal to 50% of the following months budgeted sales.
• As of September 30^th, 20X2, the company had 1,000 Pajamas in finished goods inventory.
• The company has no work-in-process (WIP) inventory.
• Each pair of pajamas requires 1.5 of a yard of fabric, which the company purchases for $22.00 per yard.
  • Note there is only one raw material used to make the product. It is company policy to keep enough fabric in raw materials to meet 30% of the next months production needs.
• As of September 30^th, Purely Pajamas Ltd. had 787.5 yards of fabric in raw materials inventory.
• Purchases of raw materials are paid for as follows: 50% in the month of purchase and the remaining 50% in the following month.
• Each pair of pajamas requires 0.50 labour hours to assemble by hand.
• Employees who make the Pajamas are paid $21.00 per hour, and never work overtime.
• Manufacturing overhead includes all the costs of production other than direct materials and direct labour.
• The variable manufacturing overhead is $1.00 per pair of pajamas in production, and the fixed component is $6,000 per month.
• The $6,000 of fixed manufacturing overhead includes depreciation of $2,000 per month on the sewing machines and graphic print machines used to manufacture the Pajamas.
• Direct labour hours are used as an allocation base for assigning manufacturing overhead to units produced.

SELLING AND ADMINISTRATION

Purely Pajamas Ltd.s other monthly operating expenses are given below:

Variable:

License

$0.75 per pair of pajamas sold

• All Pajamas are made to look like a unique character which attracts a licensing fee. The license amount is paid directly to the companies with the exclusive rights to the characters intellectual property rights.

Fixed:

Wages and salaries	$5,000
Utilities	$1,200
Insurance	$600
Depreciation (S&A)	$800
Miscellaneous	$1,200

• All operating expenses are paid during the month in cash, with the exception of the depreciation, as it is not a cash expense.

CAPITAL EQUIPMENT & DIVIDENDS

• Due to the planned introduction of a new pajamas line for teens in 20X3, the company will be purchasing a new set of industrial sewing machines in October for $18,000 and a new packaging machine in November for $14,000.
• The equipment will not be used until 2021. The machines were purchased ahead of schedule, as Purely Pajamas Ltd. did not want to experience any delays in case a future shutdown.
• The company has a policy to declare a dividend of $35,000 on the last day of each quarter, which is to be paid in the first month of the next quarter.

PURELY PAJAMAS Ltd. Balance Sheet as at September 30^th, 20X2:

Assets
Cash		$ 35,000
Accounts receivable		106,500
Inventory - Raw Materials		17,325
Inventory - Finished Goods		48,047
PP&E	$45,000
Accumulated depreciation	(12,000)
		33,000
TOTAL ASSETS		$ 239,872
Liabilities and Equity
Bank loan		-
Accounts payable, purchases		$ 27,720
Dividends payable		35,000
Capital stock, no par		22,000
Retained earnings		155,152
TOTAL LIABILITIES AND EQUITY		$ 239,872

Additional information on cash requirements and financing

• Management of Purely Pajamas Ltd. requires a minimum ending cash balance each month of $15,000.
• The company can borrow money from its bank at 6% annual interest. All borrowing must be done at the beginning of a month, and repayments must be made at the end of a month. Borrowings and repayments of principal must be in round $1,000 amounts.
• Interest is computed and paid when any repayments occur. Round all interest payments to the nearest whole dollar. Compute interest using whole months, not days.
• The company wishes to use any excess cash to pay loans off as rapidly as possible.
  1. Sales Budget and Schedule of Expected Cash Collections

ASSIGNMENT REQUIREMENTS:

Prepare the following for the company for the quarter ending December 31^st, 20X2:

1. Production Budget
2. Direct Materials Budget and Schedule of Expected Cash Disbursements
3. Direct Labour Budget (inclusive of expected labour disbursements)
4. Manufacturing Overhead Budget (inclusive of expected overhead disbursements)
5. Ending Finished Goods Inventory Budget
6. Selling and Administrative Budget
7. Cash Budget
8. Schedule of Cost of Goods Manufactured
9. Budgeted Income Statement (with the cost of goods sold computation included in the income statement) You may ignore income taxes for the purposes of this budget
10. Budgeted Retained Earnings Statement
11. Budgeted Balance Sheet as at December 31^st, 20X2

GENERAL GUIDANCE:

Preparing the schedules

• For items (a) through (h) show each of the 3 months and a total column for the whole quarter (ended December 31).
• It may be helpful to prepare (a) through (g) on one individual worksheet in Excel, to make building and referencing easier.
• For items (i) through (k), show only for the quarter ended December 31st, 20X2.
• All schedule and statements should be formatted professionally.
• Use Excel to do the work.
  • Use cell references and formulas in your schedules You will be able to update certain numbers and have the changes instantly flow through the rest of the schedules.
  • Dont just type it in.

Submission

Upload your excel file to the dropbox in the Master Budget Project tile on Moodle, prior to 11:55 PM on November 25^th, 2022.

Check figures	Amount	Schedule
Total Sales for the Quarter	$240,750	Sales Budget
Total cash collections for the quarter	$272,775	Expected cash collections
Total required production for the quarter (units)	$5,075	Production
Raw materials to purchase for the quarter (total yards)	$7,421	Direct materials
Total Cash Disbursements for materials	$165,371	Expected Cash disbursements for materials
Ending Finished Good inventory	$34,834	Ending Finished Goods inventory Budget
Total Cash disbursements for selling and admin	$28,013	Selling and Admin budget
Ending cash balance	$14,869	Cash budget
Total cost of goods manufactured for the quarter	$243,838	Schedule of COGM
Total assets December 31, 20x2	$193,895	Balance sheet