In a time rush Budgeted sales of the company’s only product for the next five months are:
January 9,300 units
February 6,400 units
March 7,700 units
April 5,700 units
May 6,600 units
• The selling price is $54 per unit.
Prepare the following elements of the master budget for this problem:
6. Ending finished goods inventory budget.
7. Selling and administrative expense budget.
8. Cash budget.
9. Budgeted income statement.
10. Budgeted balance sheet.
SCHEDULE OF EXPECTED CASH COLLECTIONS
• All Sales are on account.
• The company collects 63% of credit sales in the month of the sale and 37% of credit sales in the following month.
• The accounts receivable balance on January 1 was $0.
PRODUCTION BUDGET
• The company desires to have inventory on hand at the end of each month equal to 19% of the following month’s budgeted unit sales.
• On December 31, 0 units were on hand.
DIRECT MATERIALS BUDGET
• 5.85 pounds of material are required per unit of product.
• Management desires to have materials on hand at the end of each month equal to 12% of the following month’s production needs.
• The beginning materials inventory was 0 pounds.
• The material costs $.53 per pound.
SCHEDULE OF EXPECTED CASH DISBURSEMENTS FOR MATERIAL
• 53% of a month’s purchases are paid for in the month of purchase; 47% is paid for in the following month.
• No discounts are given for early payment.
• The accounts payable balance on December 31 was $0.
DIRECT LABOR BUDGET
• Each unit produced requires .64 hours of direct labor.
• Each hour of direct labor costs the company $10.75.
• Management fully adjusts the workforce to the workload each month.
MANUFACTURING OVERHEAD BUDGET
• Variable manufacturing overhead is $3.30 per direct labor-hour.
• Fixed manufacturing overhead is $91,000 per month. This includes $17,000 in depreciation, which is not a cash outflow.
ENDING FINISHED GOODS INVENTORY BUDGET
• Blair, a new startup business, uses absorption costing in its budgeted income statement and balance sheet.
• Manufacturing overhead is applied to units of product on the basis of direct labor-hours.
• The company has no work in process inventories.
SELLING AND ADMINISTRATIVE EXPENSE BUDGET
• Variable selling and administrative expenses are $1.58 per unit sold.
• Fixed selling and administrative expenses are $71,000 per month and include $11,000 in depreciation.
CASH BUDGET
1. A line of credit is available at a local bank.
a. All borrowing occurs at the beginning of the month, and all repayments occur at the end of the month. Borrowing occurs in increments of $1,000.
b. Any interest incurred during the first quarter will be paid at the end of the quarter. The interest rate is 16% per year.
2. Blair, a new startup business, desires a cash balance of at least $30,000 at the end of each month. The cash balance at the beginning of January was $18,000.
3. Cash dividends of $18,000 are to be paid to stockholders in February.
4. Equipment purchases of $164,000 are scheduled for January and $148,000 for February. This equipment will be installed and tested during the first quarter and will not become operational until April, when depreciation charges will commence.
Additional Information:
The following balances exist on January 1:
Land $300,000
Equipment $162,000
Common Stock $480,000
complete budget 1-5 provided below
Requrement for this assignment:
Prepare the following elements of the master budget for this problem:
8. Cash budget.
9. Budgeted income statement.
10. Budgeted balance sheet.