Question

I ONLY need requirements 9&10 on the first set of requirements and then 1 &2 on the second set of requirements please. Thank you!

Endless Mountain Company manufactures a single product that is popular with outdoor recreation enthusiasts. The company sells its product to retailers throughout the northeastern quadrant of the United States. It is in the process of creating a master budget for 2019 and reports a balance sheet at December 31, 2018 as follows:

Endless Mountain Company
Balance Sheet
December 31, 2018
Assets
Current assets:
Cash	$	46,200
Accounts receivable (net)		260,000
Raw materials inventory (4,500 yards)		11,250
Finished goods inventory (1,500 units)		32,250
Total current assets				$	349,700
Plant and equipment:
Buildings and equipment		900,000
Accumulated depreciation		(292,000	)
Plant and equipment, net					608,000
Total assets				$	957,700
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable				$	158,000
Stockholders’ equity:
Common stock	$	419,800
Retained earnings		379,900
Total stockholders’ equity					799,700
Total liabilities and stockholders’ equity				$	957,700

The company’s chief financial officer (CFO), in consultation with various managers across the organization has developed the following set of assumptions to help create the 2019 budget:

1. The budgeted unit sales are 12,000 units, 37,000 units, 15,000 units, and 25,000 units for quarters 1-4, respectively. Notice that the company experiences peak sales in the second and fourth quarters. The budgeted selling price for the year is $32 per unit. The budgeted unit sales for the first quarter of 2020 is 13,000 units.
2. All sales are on credit. Uncollectible accounts are negligible and can be ignored. Seventy-five percent of all credit sales are collected in the quarter of the sale and 25% are collected in the subsequent quarter.
3. Each quarter’s ending finished goods inventory should equal 15% of the next quarter’s unit sales.
4. Each unit of finished goods requires 3.5 yards of raw material that costs $3.00 per yard. Each quarter’s ending raw materials inventory should equal 10% of the next quarter’s production needs. The estimated ending raw materials inventory on December 31, 2019 is 5,000 yards.
5. Seventy percent of each quarter’s purchases are paid for in the quarter of purchase. The remaining 30% of each quarter’s purchases are paid in the following quarter.
6. Direct laborers are paid $18 an hour and each unit of finished goods requires 0.25 direct labor-hours to complete. All direct labor costs are paid in the quarter incurred.
7. The budgeted variable manufacturing overhead per direct labor-hour is $3.00. The quarterly fixed manufacturing overhead is $150,000 including $20,000 of depreciation on equipment. The number of direct labor-hours is used as the allocation base for the budgeted plantwide overhead rate. All overhead costs (excluding depreciation) are paid in the quarter incurred.
8. The budgeted variable selling and administrative expense is $1.25 per unit sold. The fixed selling and administrative expenses per quarter include advertising ($25,000), executive salaries ($64,000), insurance ($12,000), property tax ($8,000), and depreciation expense ($8,000). All selling and administrative expenses (excluding depreciation) are paid in the quarter incurred.
9. The company plans to maintain a minimum cash balance at the end of each quarter of $30,000. Assume that any borrowings take place on the first day of the quarter. To the extent possible, the company will repay principal and interest on any borrowings on the last day of the fourth quarter. The company’s lender imposes a simple interest rate of 3% per quarter on any borrowings.
10. Dividends of $15,000 will be declared and paid in each quarter.
11. The company uses a last-in, first-out (LIFO) inventory flow assumption. This means that the most recently purchased raw materials are the “first-out” to production and the most recently completed finished goods are the “first-out” to customers.

Required:

The company’s CFO has asked you to prepare the 2019 master budget. To fulfill this request, prepare the following budget schedules and financial statements.

1. Quarterly sales budget including a schedule of expected cash collections.

2. Quarterly production budget.

3. Quarterly direct materials budget including a schedule of expected cash disbursements for purchases of materials.

4. Quarterly direct labor budget.

5. Quarterly manufacturing overhead budget.

6. Ending finished goods inventory budget at December 31, 2019.

7. Quarterly selling and administrative expense budget.

8. Quarterly cash budget.

9. Income statement for the year ended December 31, 2019.

10. Balance sheet at December 31, 2019.

Required:

1. Calculate the following budgeted figures for 2019:

a. The total fixed cost.

b. The variable cost per unit sold.

c. The contribution margin per unit sold.

d. The break-even point in unit sales and dollar sales.

e. The margin of safety.

f. The degree of operating leverage

2. Prepare a budgeted variable costing income statement for 2019. Stop your computations at net operating income.

Answer 1

Req-9	Income Statement
	Sales	2,848,000
	Cost of Goods sold	1,998,724
	Gross profit	849,276
	Selling and admin Expense	579,250
	Interest Expense	9,642
	Net Profit	260,384
	Less: Dividend Paid	60,000
	Net Income	200,384
Req 10	Balance Sheet
	Assets
	Cash	319,243
	Accounts Receivable	200,000
	Raw Material Inventory	12,750
	Finished Goods Inventory	42,363
	Total Current Assets	574,356
	Equipment	900,000
	Accumulated Depreciation	(404,000)
	Equipment, Net	496,000
	Total Assets	1,070,356
	Liabilities and Equity
	Accounts Payable	70,272
	Total Current Liabilities	70,272
	Total Liabilities	70,272
	Common Stock	419,800
	Retained Earnings	580,284
	Total Stockholder's Equity	1,000,084
	Total Liability and Equity	1,070,356

Req 1-a	Total Fixed Cost	1,068,000
	Working Note : 1
		Per Qtr	Per Year
	Budgdted Fixed Overhead	150,000	600,000
	Advertisement	25,000	100,000
	Executive Salaries	64,000	256,000
	Insurance	12,000	48,000
	Property TAXES	8,000	32,000
	Depreciation Expense	8,000	32,000
	Total		1,068,000
Req 1-b	Variable Cost per Unit	17.00
	Working Note : 2
		Req per Unit	Rate	Cost per Unit
	Direct Material	3.5	3	10.50
	Direct Labor	0.25	18	4.50
	Varible Overhead	0.25	3	0.75
	Variable selling and Admin			1.25
	Total			17.00