ZIGBY MANUFACTURING Balance Sheet March 31 Assets Liabilities and Equity Cash Accounts receivable Raw materials inventory Finished goods inventory $ 176,000 Liabilities 1,515,360 Accounts payable 433,400 1,432,376 Loan payable Long-term note payable $ 884,400 12,000 2,200,000 $ 3,096,400 Equipment Less: Accumulated depreciation $ 2,640,000 660,000 Equity 1,980,000 Common stock Retained earnings 1,474,000 966,736 Total assets $ 5,537,136 Total liabilities and equity 2,440,736 $ 5,537,136 To prepare a master budget for April, May, and June, management gathers the following information. a. Sales for March total 90,200 units. Budgeted sales in units follow: April, 90,200; May, 85,800; June, 88,000; and July, 90,200. The product's selling price is $24.00 per unit and its total product cost is $19.85 per unit. b. Raw materials inventory consists solely of direct materials that cost $20 per pound. Company policy calls for a given month's ending materials inventory to equal 50% of the next month's direct materials requirements. The March 31 raw materials inventory Is 21,670 pounds. The budgeted June 30 ending raw materials Inventory is 17,600 pounds. Each finished unit requires 0.50 pound of direct materials. c. Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's budgeted unit sales. The March 31 finished goods Inventory is 72,160 units. d. Each finished unit requires 0.50 hour of direct labor at a rate of $15 per hour. e. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $88,000 per month is the only fixed factory overhead item. f. Sales commissions of 8% of sales are paid in the month of the sales. The sales manager's monthly salary is $13,200. g. Monthly general and administrative expenses include $52,800 for administrative salaries and 0.9% monthly Interest on the long- term note payable. h. The company budgets 30% of sales to be for cash and the remaining 70% on credit. Credit sales are collected in full in the month following the sale (no credit sales are collected in the month of sale). 1. All raw materials purchases are on credit, and accounts payable are solely tied to raw materials purchases. Raw materials purchases are fully paid in the next month (none are paid in the month of purchase). J. The minimum ending cash balance for all months is $176,000. If necessary, the company borrows enough cash using a loan to reach the minimum. Loans require an interest payment of 1% at each month-end (before any repayment). If the month-end preliminary cash balance exceeds the minimum, the excess will be used to repay any loans. k. Dividends of $44,000 are budgeted to be declared and paid in May. I. No cash payments for income taxes are budgeted in the second calendar quarter. Income tax will be assessed at 35% In the quarter and budgeted to be paid in the third calendar quarter. m. Equipment purchases of $440,000 are budgeted for the last day of June. Units to produce Materials required per unit (pounds) Materials needed for production (pounds) Add: Desired ending inventory Total materials required (pounds) Less: Beginning materials inventory Materials to purchase (pounds) Materials cost per pound Cost of direct materials purchases ZIGBY MANUFACTURING Direct Materials Budget April May June Total 86,680 87,560 89,760 0.50 0.50 0.50 43,340 43,780 44,880 21,890 22,440 4,510 65,230 66,220 49,390 21,670 21,890 22,440 43,560 44,330 26,950 x 114,840 $ 20 20 $ 20 $ 20 69 $ 871,200 S 886,600 $ 539,000 $ 2,296,800