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As part of the continued advancement of technology, a drone camera market has

emerged in recent years. The drone camera market has been growing as more

photography enthusiasts have begun adopted this high$-$tech approach to capturing still

images aSoaring Drones entered the market in early $2023.$ Soaring Drones

manufacturescamera drones, selling primarily to retailers.

Soaring Drones is pleased with its financial performance over its first few years of

operations, optimistic to achieve continued financial success. For planning and control

purposes the company utilizes a monthly master budget, which is usually developed at

least three months in advance. The company has a fiscal year ending December $31.$

It is now December $2023.$ You have been asked to prepare the Master Budget for the

quarter ending March $31,2024.$

Based on your discussions with the various departments throughout the company, you

have collected the following relevant information for preparing the budget:

Sales

$1.$ The marketing department is forecasting the following monthly sales for the quarter

ending March $31,2024$

$$ January $2024$: $100$ units at $$2,000$ each

$$ February $2024$: $110$ units at $$2,000$ each

$$ March $2024$ : $120$ units at $$2,000$ each

Sales will increase by about $10\%$ per month after March

Manufacturing Costs and Inventory

$2.$ Each camera drone spends a total of $2\mathrm{.}5$ hours in production.

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$3.$ Due to the highly technical nature of Soaring Drones$$s manufacturing process,

Soaring Drones$$s direct labour rate averages $$35\mathrm{.}00$ per hour. This rate already

includes the employer$$s portion of employee benefits.

$4.$ Each camera drone requires $1\mathrm{.}50$ kg of direct materials. The average cost of direct

materials is $$57/$kg$.$ The supplier of the direct materials tends to be somewhat

erratic, so Soaring Drones finds it necessary to maintain a direct materials inventory

balance equal to $40\%$ of the following month$$s production needs as a precaution

against stock$-$outs.

$5.$ Due to the similarity of the equipment in each of the production stages and the

company$$s concentration on a single product, manufacturing overhead is allocated

based on volume $($i$.$e$.$ the units produced$).$

The variable manufacturing overhead rate is $$150/$unit$,$ consisting of:

Plant & Equipment Maintenance $$50$

Utilities $40$

Indirect Materials $30$

Other $30$

$ $150$

$6.$ The ANNUAL fixed manufacturing overhead costs are as follows:

Supervisor$$s salary $181,800$

Amortization of Plant & Equipment $ $132,000$

Insurance $84,000$

Training & Development $54,750$

Property and Business Taxes $48,000$

Other $30,000$

$ $530,550$

Amortization is calculated using the straight$-$line method, with no amortization

calculated in the year capital assets are acquired. Note that some of the costs

above are considered non$-$cash if they are being paid only once per year and

amortized throughout

$7.$ From previous experience, management has determined that an ending finished

goods inventory equal to $25\%$ of the next month$$s sales is required to efficiently

meet customer demands.

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Collections Pattern

$8.$ Sales are all on credit basis, with $59\%$ collected during the month of the sale and

$41\%$ the following month. There are no early payment discounts for customers.

$9.$ Accounts receivable as at end of business day on December $31,2023$ is projected

to be $$56,000$

Payments Pattern

$10.$ Soaring Drones pays for $70\%$ of a month$$s purchases of direct materials in the

month of purchase, $30\%$ in the following month. There are no early payment

discounts offered by suppliers.

$11.$ Accounts payable as at end of business day on December $31,2023$ is projected

to be $$3,200$

$12.$ All payroll costs are paid in the period in which they are incurred.

$13.$ The property and business taxes, paid at the beginning of July each year, apply to

the following $12-$month period.

$14.$ Annual insurance premiums, paid at the beginning of April each year, apply to the

following $12-$month period.

$15.$ Fixed manufacturing overhead costs are incurred evenly over the year and $$cashrelated$$

amounts are paid as incurred.

$16.$ Selling and administrative expenses are paid in the month in which they occur.

Other

$17.$ Anticipating a significant increase in customer demand and market share over the

next few years, Soaring Drones is planning a significant expansion involving

acquiring

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additional manufacturing equipment for $$350,000$ cash. This amount will be paid

in March

$18.$ Selling and administrative expenses are known to be a mixed cost; however, there is

a lot of uncertainty about the portion that is fixed. Based on prior year experience:

Lowest level of monthly sales:$60$ units

$...$ Total Operating Expe

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