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Master Budget Case

Jenny is majoring in accounting and has a part$-$time job at Wyoming $\text{'}$s Best Wild Hockleberry Jam lnc$,$ a small business selling sugar$-$frec huckleberry jam actoss the country. Jenny is a management traivive in the CFO's office, and one of her job responsibilities is to help the CFO, Mr$.$ Pollock, prepare a master budget for the upcoming fiscal quarter ending on July $31,2024($i$.$e$.,$ the fiscal quarter includes financial results for May, June, and July$).$

The company sells a $12$ jar of huckleberry jam for $$15$ each. Budgeted unit sales for the next four months are as follows:

$\backslash$table$[[,$May,June,July,August$],[$Budgeted sales in units,$110,000,115,000,132,000,142,000]]$

All sales are on account. From past experience, the company has learned that $40$ percent of a month's sales are collected in the month of sale, and the remaining $60$ percent are collected in the following month. The beginning balance of accounts receivable on May $1,2024,$ is $$600,000,$ all of which will be collected in May. Bad debts are negligible and can be ighored.

The company desires an ending finished goods inventory at the end of each month equal to $20$ percent of the budgeted unit sales for the next month.

Making one jar of huckleberry jam requires $1\mathrm{.}2$ pounds of huckleberries. The company desires an ending rew materials inventory at the end of each month equal to $10$ percent of the following month's production needs.

The purthase price of wild hackleberries is $$5$ a pound. Raw material purchases are paid for in the following pattern: $30$ percent of a month's purchases paid in the month of purchase; the remaining $70$ pervent paid in the following month. The beginning balance of accounts payable on May $1,2024,$ is iston,$00$t$,$ atl of which will be paid in May.

Summing up costs of direct materials, direct labor, and manufacturing overhead, the cost of goods sold is $$10$ per unit. $($Asuming the corversion cost, that is$,$ the sum of direct labor and manufacturing overhead, is variable, and it is $$4$ per unit. In other words, for simplicity, this company's cost of goods sole is assumed to be $s$ variable cost, increasing in proportion to budgeted unit sales.$)$ Based on the month's reguired prodiuction, the volal direct labor and manufacturing overhead cost is paid in cash at the end of each month.

Monthly selting und adminiatrative expenses for the company are given below:

$\backslash$table$[[$Varable selliny and admimistrative cxpenses,SISper unit$],[$Fixed selling and administrative cyponsed,$\backslash$table$[[303,000$ in total,$],[$iscluding $$16,000$ depreciation expense$]]]]$

Monthly selling and administrative cxpenses, exceps depreciation expenses, are paid in cash during the month they incur.

Monthly interest expense for its leng$-$term nates payable is $$2,500,$ paid in cash at the end of each month.

Required:

Part $1(80$ points in total eraded based on accuracy.

Please help Jenny prepare the following budgets and schedules for the fiscal quarter ending July $31,2024($the quarter covers the three$-$month period from May to July$).$ You can use the templates from the attached Excel spreadsheet.

$2.$ A sales budget, by month and in total for the quarter. $(10$ points$)$

b$.$ A schedule of expected cash collections, by month and in total for the quarter. Please also show the ending balanees of accounts reccivable. $(10$ points$)$

c$.$ A production budget in units. Show the budget by month and in total for the quarter. $(10$ points$)$

d$.$ A direct materials budget in pounds and in dollars. Show the budget by month and in total for the quarter. Assuming that the required production for August is $147,600$ units. $(10$ points$)$

c$.$ A schedule of expected cash aisbursements for raw materials purchases, by month and in total for the quarter. Please also show the ending balances of accounts payable. $(10$ points$)$

f$.$ A cash budget, assuming the beginning balance of cash on May $1,2024,$ is $$300,000,$ by month and in total and for the quarter. $(15$ points$)$

g$.$ A budgeted income statement for the threc$-$month period ending July $31,2024($by month and in total for the quarter$).$ Use the traditional approach. Please note that interest expense is a line item below net operating income, i$.$e$,$ net operating income $-$ interest expense $=$ net income. $(15$ points$)$

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