1. Prepare an absorption costing income statement for the quarter ended June 30.

2. Prepare a balance ssheet as of June 30.

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:

The gross margin is 25% of sales.

Actual and budgeted sales data:

Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.

Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.

One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory.

Monthly expenses are as follows: commissions, 12% of sales; rent, $2,600 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $981 per month (includes depreciation on new assets).

Equipment costing $1,800 will be purchased for cash in April.

Management would like to maintain a minimum cash balance of at least $4,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Required:

Using the preceding data:

4. Prepare an absorption costing income statement for the quarter ended June 30.

5. Prepare a balance sheet as of June 30.

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:

1. The gross margin is 25% of sales.

2. Actual and budgeted sales data:

3. Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.

4. Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.

5. One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory.

6. Monthly expenses are as follows: commissions, 12% of sales; rent, $3,700 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $837 per month (includes depreciation on new assets).

7. Equipment costing $2,900 will be purchased for cash in April.

8. Management would like to maintain a minimum cash balance of at least $4,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

3. Complete the cash budget.

4. Prepare an absorption costing income statement for the quarter ended June 30.

5. Prepare a balance sheet as of June 30.

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:

1. The gross margin is 25% of sales.

2. Actual and budgeted sales data:

3. Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.

4. Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.

5. One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory.

6. Monthly expenses are as follows: commissions, 12% of sales; rent, $2,100 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $936 per month (includes depreciation on new assets).

7. Equipment costing $1,300 will be purchased for cash in April.

8. Management would like to maintain a minimum cash balance of at least $4,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Required:

Using the preceding data:

4. Prepare an absorption costing income statement for the quarter ended June 30.

5. Prepare a balance sheet as of June 30.

Rickard Enterprises—March Budget

FACTS

Total Sales per Quarter (sales are even per month)

Quarter Units Price/Unit

Q1 4,200 $18

Q2 6,600. $21

Q3 5,900 $20

Q4 9,700 $22

March Inventory Beginning Desired Ending

Raw materials inventory (in lbs.)       1,120 1,760

Raw materials inventory (in $)   $8,960 $14,080

Finished goods (FG) inventory (in units) 280 440

Finished goods inventory (in $) $41,500   $34,500

20% (safety stock desired)

Other Information:

Pounds of materials needed to produce each unit of FG 4

Cost per lb. of raw material $8

Labor hours needed per unit. 0.75

Hourly wage rate: $16

VOH rate (based on direct labor hours) $4

Fixed overhead (annual):

Rent =$19,200

Utilities (fixed monthly rate) =$9000

Property taxes =$7500

As part of the annual budget process, Rich Render has to present his forecasted manufacturing costs for the Transmode Product Line for the upcoming fiscal year. Render's task is to develop a budget for materials, labor, and overhead costs based on projected sales and production for the year. He has asked you to prepare the budget for the month of March through the development of a template that can be used to easily adjust variables if needed.

Using the information included within the exhibit, complete the table below:

• For the table below, calculate the answers to the questions in column A for the month of March and enter your associated response in dollars or units as appropriate in column B (round to whole numbers).

AB

answer the following true or false for each:

18. Part of the ongoing compliance requirements for NFPs is for them to file some version of the Form 990 with the IRS each year.

19. Generally speaking, a NFP board of directors need not keep minutes of its meetings.

20. Board of Director Treasurers are responsible for the bank account and being sure that the Form 990 is filed.

21. The tool the IRS is most likely to use when an officer in a tax-exempt organization receives excessive economic benefits (i.e., the first action most likely to be taken) is an intermediate sanction.

22. The intermediate sanction is first imposed on the organization (i.e., the NFP).

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

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

1. Sales for March total 24,000 units. Forecasted sales in units are as follows: April, 24,000; May, 16,600; June, 22,200; and July, 24,000. Sales of 251,000 units are forecasted for the entire year. The product’s selling price is $31.00 per unit and its total product cost is $26.40 per unit.
2. 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 4,705 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,100 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.
3. Company policy calls for a given month’s ending finished goods inventory to equal 70% of the next month’s expected unit sales. The March 31 finished goods inventory is 16,800 units, which complies with the policy.
4. Each finished unit requires 0.50 hours of direct labor at a rate of $26 per hour.
5. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.80 per direct labor hour. Depreciation of $31,400 per month is treated as fixed factory overhead.
6. Sales representatives’ commissions are 5% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $4,100.
7. Monthly general and administrative expenses include $25,000 administrative salaries and 0.8% monthly interest on the long-term note payable.
8. The company expects 35% of sales to be for cash and the remaining 65% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale).
9. 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.
10. The minimum ending cash balance for all months is $99,000. 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.
11. Dividends of $21,000 are to be declared and paid in May.
12. 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.
13. Equipment purchases of $141,000 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.

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

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

1. Sales for March total 24,000 units. Forecasted sales in units are as follows: April, 24,000; May, 16,600; June, 22,200; and July, 24,000. Sales of 251,000 units are forecasted for the entire year. The product’s selling price is $31.00 per unit and its total product cost is $26.40 per unit.
2. 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 4,705 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,100 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.
3. Company policy calls for a given month’s ending finished goods inventory to equal 70% of the next month’s expected unit sales. The March 31 finished goods inventory is 16,800 units, which complies with the policy.
4. Each finished unit requires 0.50 hours of direct labor at a rate of $26 per hour.
5. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.80 per direct labor hour. Depreciation of $31,400 per month is treated as fixed factory overhead.
6. Sales representatives’ commissions are 5% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $4,100.
7. Monthly general and administrative expenses include $25,000 administrative salaries and 0.8% monthly interest on the long-term note payable.
8. The company expects 35% of sales to be for cash and the remaining 65% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale).
9. 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.
10. The minimum ending cash balance for all months is $99,000. 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.
11. Dividends of $21,000 are to be declared and paid in May.
12. 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.
13. Equipment purchases of $141,000 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.

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

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

Sales for March total 24,000 units. Forecasted sales in units are as follows: April, 24,000; May, 16,600; June, 22,200; and July, 24,000. Sales of 251,000 units are forecasted for the entire year. The product’s selling price is $31.00 per unit and its total product cost is $26.40 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 4,705 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,100 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 70% of the next month’s expected unit sales. The March 31 finished goods inventory is 16,800 units, which complies with the policy.

Each finished unit requires 0.50 hours of direct labor at a rate of $26 per hour.

Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.80 per direct labor hour. Depreciation of $31,400 per month is treated as fixed factory overhead.

Sales representatives’ commissions are 5% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $4,100.

Monthly general and administrative expenses include $25,000 administrative salaries and 0.8% monthly interest on the long-term note payable.

The company expects 35% of sales to be for cash and the remaining 65% 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 $99,000. 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 $21,000 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 $141,000 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.

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

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

1. Sales for March total 22,200 units. Forecasted sales in units are as follows: April, 22,200; May, 16,000; June, 19,800; and July, 22,200. Sales of 243,000 units are forecasted for the entire year. The product’s selling price is $26.00 per unit and its total product cost is $21.80 per unit.
2. 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 4,310 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,300 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.
3. 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 17,760 units, which complies with the policy.
4. Each finished unit requires 0.50 hours of direct labor at a rate of $18 per hour.
5. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.00 per direct labor hour. Depreciation of $25,134 per month is treated as fixed factory overhead.
6. Sales representatives’ commissions are 9% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $3,300.
7. Monthly general and administrative expenses include $15,000 administrative salaries and 0.6% monthly interest on the long-term note payable.
8. The company expects 25% of sales to be for cash and the remaining 75% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale).
9. 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.
10. The minimum ending cash balance for all months is $50,000. 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.
11. Dividends of $13,000 are to be declared and paid in May.
12. 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.
13. Equipment purchases of $133,000 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.