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ABC Company manufactures and sells a single product. Thefollowing information is available concerning the operations for1999.

a. The company's single product sells for $60 per unit. Budgetedsales in units for the next four quarters are:

1999   Quarter1       3,000 Budgeted sales inunits

1999   Quarter2       3,500 Budgeted sales inunits

1999   Quarter3       4,000 Budgeted sales inunits

1999   Quarter4       4,500 Budgeted sales inunits

2000   Quarter1       5,000 Budgeted sales inunits

b. Sales are collected in the following pattern: 80% in thequarter in which the sale is made, 19% in the following quarter. OnJanuary 1, 1999, the company's balance sheet showed $60,000 inaccount receivables, all of which will be collected in the firstquarter of the year 1999. Bad debts are projected at 1% ofquarterly sales. There is a -0- balance in the AFDA account.

c. The company requires an ending inventory of finished units onhand at the end of each quarter equal to 20% of the budgeted salesfor the next quarter. This requirement was met on December 31,19x8.  (The company had 600 units on hand to start thenew-year).

d. Two pounds (2lbs) of raw materials are required to completeone unit of product. The company requires an ending inventory ofraw materials on hand at the end of each quarter equal to 10% ofthe production needs of the following quarter. This requirement wasmet on December 31, 19x8.  (The company had 620 lbs ofraw materials on hand to start the new-year). Quarter 1 of the nextyear (year 2000) is estimated at 10,200 lbs needed forproduction.

e. The raw material costs $4.00 per pound. Purchases of rawmaterial are paid for in the following pattern: 50% paid in thequarter in which the purchase was made, and the remaining 50% ispaid in the following quarter. On January 1, 1999, the company'sbalance sheet showed $10,600 in accounts payable for raw materialpurchases.  All of which will be paid for in the firstquarter of the year 1999.

f. Manufacturing overhead and selling & administrativeexpenses are paid in the quarter incurred.  The onlyexception is depreciation.

g. The manufacturing overhead budget distinguishes betweenvariable and fixed overhead costs. Variable costs fluctuate withproduction volume on the basis of the following rates per directlabor hour: indirect materials $1.00, indirect labor $1.40,utilities $0.40, and maintenance $0.20. Fixed costs per quarterare: Supervisory Salaries $20,000, Depreciation $3,800, PropertyTaxes & Insurance $9,000 and Maintenance $5,700. Overhead isapplied to production on the basis of direct labor hours. Theannual rate is $8 per hour. (Hint: Total Manufacturing Overhead for1999 $246,400 / Direct Labor hours 30,800 hours = $8/direct laborhour).

h. Selling & administrative expense budget distinguishesbetween variable and fixed overhead costs.  Variablecosts are Sales Commissions of $3.00 and Freight-Out $1.00.Variable expenses per quarter are based on the unit sales projectedin the sales budget. Fixed costs, per quarter,are:  Advertising $5,000, Sales Salaries $15,000, OfficeSalaries $7,500 Depreciation $1,000 and Property Taxes &Insurance $1,500.

i. January 1, 1999, cash balance is expected to be $38,000.

j. Marketable securities are expected to be sold for $2,000 cashin the first quarter.

k. 2 hours of direct labor are required to produce each unit offinished goods and the anticipated hourly wage rate is $10. DirectLabor is paid 100% in the quarter incurred.

l. Management plans to purchase new factory equipment in thesecond quarter for $50,000.

m. Management plans to purchase new office computers in thethird quarter for $12,000.

n. Assume depreciation on new purchases is accounted forquarterly budgeted depreciation amounts.

o. Management plans to sell old equipment at the end of thefourth quarter for $3,000. Purchase price is $20,000, on January 1,1996. Depreciation is calculated using the straight-line method,useful life estimated at five years, with no residual value.

p. The company makes equal quarterly payments of its estimatedannual income taxes in the amount of $3,000 per quarter.

q. Loans are repaid in the first subsequent quarter in whichthere is sufficient cash (incurring 8% interest if funds areborrowed.)

r. A minimum cash balance of $20,000 is maintained perquarter.

s. Budgeted balance sheet information as of December 31, 1998were: Building & Equipment $ 182,000, Common Stock $ 225,000,Accumulated Depreciation$ 28,800 and Retained Earnings of $46,480.

Requirements:

You must follow the posted lecture on Budgets that Iauthored.

UsingExceland the information above, preparethe following budgets and schedules for the year 1999, showingboth quarterly and the year total figures:
1. Sales budget & schedule of cash collections fromcustomers
2. Production budget
3. Direct materials budget & schedule of expected payments fordirect materials
4. Direct labor budget
5. Manufacturing overhead budget
6. Selling & administrative expense budget
7. Cash budget
In addition, complete the following:

A. Finished goods inventory budget (Schedule)
B. Budgeted income statement (Budgeted financial statement)
C. Budgeted balance sheet (Budgeted financial statement)