Question

Problem 22-4A Manufacturing: Preparation of a complete master budget LO P1, P2, P3

The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2017:

ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2017
Assets
Cash	$	53,000
Accounts receivable		392,400
Raw materials inventory		96,600
Finished goods inventory		313,920
Total current assets		855,920
Equipment, gross		626,000
Accumulated depreciation		(163,000	)
Equipment, net		463,000
Total assets	$	1,318,920
Liabilities and Equity
Accounts payable	$	204,800
Short-term notes payable		25,000
Total current liabilities		229,800
Long-term note payable		520,000
Total liabilities		749,800
Common stock		348,000
Retained earnings		221,120
Total stockholders’ equity		569,120
Total liabilities and equity	$	1,318,920

To prepare a master budget for April, May, and June of 2017, management gathers the following information:

Sales for March total 21,800 units. Forecasted sales in units are as follows: April, 21,800; May, 18,700; June, 21,000; and July, 21,800. Sales of 253,000 units are forecasted for the entire year. The product’s selling price is $22.50 per unit and its total product cost is $18.00 per unit.

Company policy calls for a given month’s ending raw materials inventory to equal 50% of the next month’s materials requirements. The March 31 raw materials inventory is 4,830 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,300 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.

Company policy calls for a given month’s ending finished goods inventory to equal 80% of the next month’s expected unit sales. The March 31 finished goods inventory is 17,440 units, which complies with the policy.

Each finished unit requires 0.50 hours of direct labor at a rate of $9 per hour.

Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $4.00 per direct labor hour. Depreciation of $30,750 per month is treated as fixed factory overhead.

Sales representatives’ commissions are 8% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $4,300.

Monthly general and administrative expenses include $25,000 administrative salaries and 0.7% monthly interest on the long-term note payable.

The company expects 20% of sales to be for cash and the remaining 80% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale).

All raw materials purchases are on credit, and no payables arise from any other transactions. One month’s raw materials purchases are fully paid in the next month.

The minimum ending cash balance for all months is $53,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.

Dividends of $23,000 are to be declared and paid in May.

No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 40% in the quarter and paid in the third calendar quarter.

Equipment purchases of $143,000 are budgeted for the last day of June.

Required:
Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. (Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar.):

1. Sales budget.
2. Production budget.
3. Raw materials budget.
4. Direct labor budget.
5. Factory overhead budget.
6. Selling expense budget.
7. General and administrative expense budget.
8. Cash budget.
9. Budgeted income statement for the entire second quarter (not for each month separately).
10. Budgeted balance sheet.

I ONLY NEED REQUIREMENTS 5-10, I HAVE ALREADY COMPLETED 1-4

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.						zigby	AprilMayJuneBudget
1. Sales Budget
		Apr	May	Jun	Total	Jul
Budgeted No of Units		21800	18700	21000	61500	21800
Selling Price		$                 22.5	$                        22.5	$             22.5	$              22.5	$                                22.5
Budgeted Total Sale		$          490,500	$                  420,750	$      472,500	$     1,383,750	$                         490,500
2. Production Budget
		Apr	May	Jun	Total	Jul
Budgeted No of Units		21,800	18,700	21,000	61,500	21,800
Add: Desired Ending Inventory	80%	14,960	16,800	17,440	17,440	-
Total Need		36,760	35,500	38,440	78,940	21,800
Less: Beginning Inventory		-17,440	-14,960	-16,800	-17,440	-17,440
Budgeted Production		19,320	20,540	21,640	61,500	4,360
3. Direct Material Purchase Budget
		Apr	May	Jun	Total
Budgeted Production		19,320	20,540	21,640	61,500
per unit usage		0.50	0.50	0.50	0.50
Total Mat Required		9,660	10,270	10,820	30,750
Add: Desired Ending Inventory	50%	5,135	5,410	5,300	5,300
Total Need		14,795	15,680	16,120	36,050
Less: Beginning Inventory		-4,830	-5,135	-5,410	-4,830
Budgeted Purchase of Raw Maat Units		9,965	10,545	10,710	31,220
Per Unit Price		$                    20	$                            20	$                20	$                 20
Budgeted Purchase of Raw Mat$		$          199,300	$                  210,900	$      214,200	$        624,400
4. Direct Labor Budget
		Apr	May	Jun	Total
Budgeted Production		19,320	20,540	21,640	61,500
per unit Hour		0.5	0.5	0.5	0.5
Total HOurs Required		9660	10270	10820	30750
Per Hour Price		$                      9	$                              9	$                  9	$                    9
Budgeted Direct Labor Cost		$            86,940	$                    92,430	$        97,380	$        276,750
5. Factory Overhead Budget:
		Apr	May	Jun	Total
Total Direct Labor Hours Needed		9,660	10,270	10,820	30,750
Predetermined Overhead Rate		$                   4.0	$                           4.0	$               4.0	$                4.0
Total Overheads-Cash Expense		$            38,640	$                    41,080	$        43,280	$        123,000
Fixed Overhead-Depreciation		$            30,750	$                    30,750	$        30,750	$          92,250
Total Overheads		$            69,390	$                    71,830	$        74,030	$        215,250
6.Selling Expense Budget:
		Apr	May	Jun	Total
Sales Representative's Commission	8% of Sale	$            39,240	$                    33,660	$        37,800	$        110,700
Sales Manager Monthly Salary		$               4,300	$                      4,300	$           4,300	$          12,900
Total Budgeted Selling Expense		$            43,540	$                    37,960	$        42,100	$        123,600
7. General and Administrative Expense Budget
		Apr	May	Jun	Total
Administrative Salaries		$            25,000	$                    25,000	$        25,000	$          75,000
Interest on Long Term Note Payable	0.70%	$               3,640	$                      3,640	$           3,640	$          10,920
Total Budgeted Gen and Adm Expense		$            28,640	$                    28,640	$        28,640	$          85,920
9. Budgeted Income Statement:
Sales Revenue		$       1,383,750
Less: Cost of Goods Sold	61500*18	$       1,107,000
Gross Profit		$          276,750
Less: Selling Expense		$          123,600
Less: General and Administrative Expense		$            85,920
Less: Interest on Short Term Note		$                  425
Income before tax		$            66,805
Less: Income Tax	40%	$            26,722
Net Income		$            40,083
8. Cash Budget:
		Apr	May	Jun	Total
Beginning Balance		$            53,000	$                  115,690	$      169,830	$          53,000
Add: Cash Collected against sales		$          490,500	$                  476,550	$      431,100	$     1,398,150
Total Available Cash		$          543,500	$                  592,240	$      600,930	$     1,451,150
Less: Cash disbursment for:
Raw Material Purchase		$          204,800	$                  199,300	$      210,900	$        615,000
Direct Labor		$            86,940	$                    92,430	$        97,380	$        276,750
Manufacturing Overheads		$            38,640	$                    41,080	$        43,280	$        123,000
Selling Expense		$            43,540	$                    37,960	$        42,100	$        123,600
General and Admin Expense		$            28,640	$                    28,640	$        28,640	$          85,920
Dividend			$                    23,000		$          23,000
Equipment Purchase				$      143,000	$        143,000
Total Cash Payment		$          402,560	$                  422,410	$      565,300	$     1,390,270
Surplus/(Deficit)		$          140,940	$                  169,830	$        35,630	$          60,880
Borrowing				$        17,545	$          17,545
Interest Payment 1%		$                -250		$            -175	$              -425
Repayment		$           -25,000			$         -25,000
Ending Balance		$          115,690	$                  169,830	$        53,000	$          53,000
Schedule of Collection from customers:
	Credit Sale	Apr	May	June	Total	30th June Receivable
March Receivable		$          392,400			$        392,400
April Sale	$                                392,400		$                  392,400		$        392,400	$                                    -
May Sale	$                                336,600			$      336,600	$        336,600	$                                    -
June Sale	$                                378,000				$                  -	$                         378,000
Total Credit Sale Collection		$          392,400	$                  392,400	$      336,600	$     1,121,400	$                         378,000
Cash Collection	20%	$            98,100	$                    84,150	$        94,500	$        276,750	0
Total Collection		$          490,500	$                  476,550	$      431,100	$     1,398,150	$                         378,000
Schedule of payment for pur:
	Credit Pur	Apr	May	June	Total	30th June Payable
March Payable		$          204,800			$        204,800
April Pur	$                                199,300		$                  199,300		$        199,300	$                                    -
May Pur	$                                210,900			$      210,900	$        210,900	$                                    -
June Pur	$                                214,200				$                  -	$                         214,200
Total Payment for Pur		$          204,800	$                  199,300	$      210,900	$        615,000	$                         214,200
10. Budgeted Balance Sheet:
Assets
Cash		$          53,000
Accounts receivable		$         378,000
Raw materials inventory	5300*20	$         106,000
Finished goods inventory	17440*18	$         313,920
Total current assets		$         850,920
Equipment, gross	626000+143000	$         769,000
Accumulated depreciation	163000+92250	$       -255,250
Equipment, net		$         513,750
Total assets		$      1,364,670
Liabilities and Equity
Accounts payable		$         214,200
Short-term notes payable		$          17,545
Income Tax Payable		$          26,722
Total current liabilities		$         258,467
Long-term note payable		$         520,000
Total liabilities		$         778,467
Common stock		$         348,000
Retained earnings	221120+Net Income-Dividend	$         238,203
Total stockholders’ equity		$         586,203
Total liabilities and equity		$      1,364,670	$                             -