Problem 20-4A Manufacturing: Preparation of a complete master budget LO P1, P2, P3 The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2017: ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2017 Assets Cash Accounts receivable Raw materials inventory Finished goods inventory Total current assets Equipment, gross Accumulated depreciation Equipment, net Total assets Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities Long-term note payable Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and equity $ 40,000 342, 248 98,500 325, 540 806,288 600,000 (150,000) 450,000 $1,256,288 $ 200, 500 12,000 212,500 500,000 712,500 335,000 208,788 543, 788 $1,256,288 To prepare a master budget for April, May, and June of 2017, management gathers the following information: a. Sales for March total 20,500 units Forecasted sales in units are as follows: April, 20,500: May, 19.500, June, 20,000, and July 20,500. Sales of 240,000 units are forecasted for the entire year. The product's selling price is $23.85 per unit and its total product cost is $19.85 per unit. b. 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 4,925 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,000 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials. c. 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 16,400 units, which complies with the policy. d. Each finished unit requires 0.50 hours of direct labor at a rate of $15 per hour. e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $20,000 per month is treated as fixed factory overhead. Sales representatives' commissions are 8% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,000. g. Monthly general and administrative expenses include $12.000 administrative salaries and 0.9% monthly interest on the long-term note payable. h. 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). i. 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. j. The minimum ending cash balance for all months is $40,000. 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. k. Dividends of $10,000 are to be declared and paid in May. I. 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. m. Equipment purchases of $130,000 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Required 8 Required 9 F Sales budget. ZIGBY MANUFACTURING Sales Budget April, May, and June 2017 Budgeted Budgeted Unit Sales Unit Price April 2017 May 2017 June 2017 Totals for the second quarter Budgeted Sales Dollars Required 1 Required 2 > Production budget Production Budget April, May, and June 2017 April May 19,500 20,000 80% 80% Next month's budgeted sales (units) Ratio of inventory to future sales June 20,500 80% Required units of available production Units to be produced Required 1 Required 3 > ZIGBY MANUFACTURING Raw Materials Budget April, May, and June 2017 April May June Production budget (units) Materials needed for production Total materials requirements (units) Materials to be purchased Material price per unit Budgeted raw material purchases ZIGBY MANUFACTURING Direct Labor Budget April, May, and June 2017 April May June Total duction (units) Budgeted production (units) Total labor hours needed Budgeted direct labor cost Required 3 Required 5 > ZIGBY MANUFACTURING Factory Overhead Budget April, May, and June 2017 April May June Total Labor hours needed Budgeted variable overhead Budgeted fixed overhead Budgeted total overhead ZIGBY MANUFACTURING Selling Expense Budget April, May, and June 2017 April May June Budgeted sales Sales commissions ZIGBY MANUFACTURING General and Administrative Expense Budgets April, May, and June 2017 April May | L Total budgeted G&A expenses Required 6 Required 8 > May June Calculation of Cash receipts from customers: April Total budgeted sales Cash sales 30% Sales on credit 70% Total cash receipts from customers Current month's cash sales Collections of receivables Total cash receipts ZIGBY MANUFACTURING Cash Budget April, May, and June 2017 April May June Beginning cash balance Total cash available Cash payments for: Total cash payments Preliminary cash balance Ending cash balance Loan balance April May June Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30, 2017 IT 1 1 Operating expenses 0 IT IT IT . TL . 11 TL . . IT D 1 Total operating expenses on 1. V ZIGBY MANUFACTURING Budgeted Balance Sheet June 30, 2017 Assets Total current assets hee l Equipment, net Total assets Liabilities and Equity Liabilities Total current liabilities Stockholders' Equity Total Stockholders' Equity Total Liabilities and Equity