Exam 3 Chap 20 Part 1

The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 2015:

   

ZIGBY MANUFACTURING
Estimated Balance Sheet
March 31, 2015

Assets

 

    

  Cash

$

56,000      

  Accounts receivable

 

341,250      

  Raw materials inventory

 

84,200      

  Finished goods inventory

 

337,680      

    

     Total current assets

 

819,130      

  Equipment, gross

 

632,000      

  Accumulated depreciation

 

(166,000)     

    

     Equipment, net

 

466,000      

    

  Total assets

$

1,285,130      

    

Liabilities and Equity

 

    

  Accounts payable

 

189,800      

 Short-term notes payable

 

28,000      

    

     Total current liabilities

$

217,800      

  Long-term note payable

 

516,000      

  

    

     Total liabilities

 

733,800      

  Common stock

 

351,000      

  Retained earnings

 

200,330      

    

     Total stockholders’ equity

 

551,330      

    

  Total liabilities and equity

$

1,285,130      

       

  
 

To prepare a master budget for April, May, and June of 2015, management gathers the following information.

  

a.

Sales for March total 21,000 units. Forecasted sales in units are as follows: April, 21,000; May, 15,800; June, 21,600; July, 21,000. Sales of 256,000 units are forecasted for the entire year. The product’s selling price is $25.00 per unit and its total product cost is $20.10 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 4,210 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,600 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 16,800 units, which complies with the policy.

d.

Each finished unit requires 0.50 hours of direct labor at a rate of $12 per hour.

e.

Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $4.30 per direct labor hour. Depreciation of $37,960 per month is treated as fixed factory overhead.

f.

Sales representatives’ commissions are 7% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $4,600.

g.

Monthly general and administrative expenses include $28,000 administrative salaries and 0.5%  monthly interest on the long-term note payable.

h.

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 is 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 $56,000. 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 $26,000 are to be declared and paid in May.

 

l.

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.

m.

Equipment purchases of $146,000 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.

 

 

Required information

 

1.

Sales budget.

 

 

     

 

 2.

 

 

Required information

 

2.

Production budget.

 

 

     

 

 3.

 

 

Required information

 

3.

Raw materials budget.

 

 

     

 

 4.

 

 

Required information

 

4.

Direct labor budget.

 

 

     

 

 5.

 

 

Required information

 

5.

Factory overhead budget.

 

 

     

 

 6.

 

 

Required information

 

6.

Selling expense budget.

 

 

     

 

 7.

 

 

Required information

 

7.

General and administrative expense budget.

 

 

     

 

 8.

 

 

Required information

 

8.

Cash budget. (Negative balance and Loan repayment amount should be indicated with minus sign. Round your answers to 2 decimal places.)

 

 

      
     

 

 9.

 

 

Required information