Question

Please assist me in answering the last three charts on Cash Budget, Budgeted Income Statement and Budgeted Balance Sheet.

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

ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2017
Assets
Cash	$	80,000
Accounts receivable		364,000
Raw materials inventory		96,000
Finished goods inventory		364,800
Total current assets		904,800
Equipment, gross		610,000
Accumulated depreciation		(155,000	)
Equipment, net		455,000
Total assets	$	1,359,800
Liabilities and Equity
Accounts payable	$	195,500
Short-term notes payable		17,000
Total current liabilities		212,500
Long-term note payable		510,000
Total liabilities		722,500
Common stock		340,000
Retained earnings		297,300
Total stockholders’ equity		637,300
Total liabilities and equity	$	1,359,800

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

Sales for March total 20,000 units. Forecasted sales in units are as follows: April, 20,000; May, 19,000; June, 19,500; and July, 20,000. Sales of 245,000 units are forecasted for the entire year. The product’s selling price is $26.00 per unit and its total product cost is $22.80 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 4,800 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,500 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 16,000 units, which complies with the policy.

Each finished unit requires 0.50 hours of direct labor at a rate of $20 per hour.

Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.20 per direct labor hour. Depreciation of $23,400 per month is treated as fixed factory overhead.

Sales representatives’ commissions are 6% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $3,500.

Monthly general and administrative expenses include $17,000 administrative salaries and 0.9% monthly interest on the long-term note payable.

The company expects 30% of sales to be for cash and the remaining 70% 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 $45,000. 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 $15,000 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 35% in the quarter and paid in the third calendar quarter.

Equipment purchases of $135,000 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.

Answer 1

8.

ZIGBY MANUFACTURING COMPANY
Cash budget
	April	May	june	Total
Beginning Cash balance	80000	108320	132750	80000
Collections from sales	520000	512200	497900	1530100
Total cash available	600000	620520	630650	1610100
Disbursements:
For Raw material	195500	193000	196500	585000
For Direct labor	192000	194000	199000	585000
For factory overheads	30720	31040	31840	93600
For selling expenses	34700	33140	33920	101760
For administrative expenses	21590	21590	21590	64770
For dividend		15000		15000
For Equipmet Purchase			135000	135000
For short term loan repayment	17000			17000
For interest	170		330	500
	491680	487770	618180	1597630
Cash Surplus / (deficit)	108320	132750	12470	12470
Minimum cash balance	45000	45000	45000
Excess / Shortage	63320	87750	-32530
Financing
Borrowing	0	0	33000	33000
Ending Cash balance	108320	132750	45470	45470
9.
ZIGBY MANUFACTURING COMPANY
Budgeted Income statement
Sales Revenue	1521000
Cost of goods sold	1333800
Gross profit	187200
Expenses:
Selling expenses	101760
Administrative expenses	64770
Total expenses	166530
Net operating income	20670
Interest expense	500
Net income	20170
10. ZIGBY MANUFACTURING COMPANY
Budgeted Balance Sheet
Assets:
Cash		45470
Accounts Receivable		354900
Raw material inventory		100000
Finished goods inventory		364800
Equipment, gross	745000
Acumulated Depreciation	225200
Equipment , net		519800
Total Assets		1384970
Liabilities and stockholders' equity
Accounts Payable		199500
Short-term note payable		33000
Total current liabilities		232500
Long-term note payable		510000
Total liabilities		742500
Stockholders' Equity
Common Stock		340000
Retained earnings:
Balance as at April 1, 2017	297300
Add: Net Income	20170
Less: Dividend paid	15000
Balance as at June 30, 2017		302470
Total Liabillities and stockholders' equity		1384970