Question

The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2019. ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2019 Assets Cash $ 65,000 Accounts receivable 437,760 Raw materials inventory 90,200 Finished goods inventory 308,028 Total current assets 900,988 Equipment 630,000 Accumulated depreciation (165,000 ) Equipment, net 465,000 Total assets $ 1,365,988 Liabilities and Equity Accounts payable $ 204,500 Short-term notes payable 27,000 Total current liabilities 231,500 Long-term note payable 515,000 Total liabilities 746,500 Common stock 350,000 Retained earnings 269,488 Total stockholders’ equity 619,488 Total liabilities and equity $ 1,365,988 To prepare a master budget for April, May, and June of 2019, management gathers the following information. Sales for March total 22,800 units. Forecasted sales in units are as follows: April, 22,800; May, 16,000; June, 23,000; and July, 22,800. Sales of 255,000 units are forecasted for the entire year. The product’s selling price is $24.00 per unit and its total product cost is $19.30 per unit. 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 4,510 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,500 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials. Company policy calls for a given month’s ending finished goods inventory to equal 70% of the next month’s expected unit sales. The March 31 finished goods inventory is 15,960 units, which complies with the policy. Each finished unit requires 0.50 hours of direct labor at a rate of $11 per hour. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $4.20 per direct labor hour. Depreciation of $35,020 per month is treated as fixed factory overhead. Sales representatives’ commissions are 10% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $4,500. Monthly general and administrative expenses include $27,000 administrative salaries and 0.6% monthly interest on the long-term note payable. The company expects 20% of sales to be for cash and the remaining 80% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale). 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. The minimum ending cash balance for all months is $55,000. 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. Dividends of $25,000 are to be declared and paid in May. 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. Equipment purchases of $145,000 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.):

. 8. Cash budget.

9. Budgeted income statement for the entire second quarter (not for each month separately).

10. Budgeted balance sheet. This is the last question in the assignment. To submit, use Alt + S. To access other questions, proceed to the question map button.

Answer 1

Answer with working is given below

Sales Budget Sales Units Total Budgeted Sales Cash Sales Sales on Credit April 22,800 $547,200 $109,440 $437,760 May 16,000 $384,000 $76,800 $307,200 June Quarter 23,000 61,800 $552,000 $1,483,200 $110,400 $296,640 $441,600 $1,186,560 Total Cash receipts from Customers April May June Quarter Collection Current Month Cash Sales Collection of Receivables Total collection- AR $109,440 $437,760 $547,200 $76,800 $437,760 $514,560 $110,400 $296,640 $307,200 $1,182,720 $417,600 $1,479,360 Production Budget Budgeted Sales Add: Closing inventory - (70% of next month sales) Total Requirement Less: Opening Inventory Production Units Closing stock of month will be opening stock of next month April 22,800 11,200 34,000 15,960 18,040 May 16,000 16,100 32,100 11,200 20,900 June 23,000 15,960 38,960 16,100 22,860 Quarter 61,800 15,960 77,760 15,960 61,800 3 Raw Material purchase budget Consumed for production-0.50 units per output Add: Closing inventory - (50% of next month prod requirement) Total Needs Less: Opening Inventory Purchase Budget (Units) Purchase price per unit Purchase budget in value April 9,020 5,225 14,245 4,510 May 10,450 5,715 16,165 5,225 10,940 $20.00 $218,800 June 11,430 5,500 16,930 5,715 11,215 $20.00 $224,300 Quarter 30,900 5,500 36,400 4,510 31,890 $20.00 $637,800 9,735 $20.00 $194,700 Expected Cash disbursements for Materials Purchases 1 April May June Quarter $194,700 Cash payments for purchase April Purchase May Purchase March Purchase Total purchase payment $218,800 $194,700 $218,800 $204,500 $618,000 $204,500 $204,500 $194,700 $218,800 4 Direct Labor Cost Budget Quarter Production Direct labor hour per unit Direct Labor needed Direct Labor rate Direct Labor budget Direct labor cost budget April 18,040 0.50 9,020 $11 $99,220 $99,220 May 20,900 0.50 10,450 $11 $114,950 $114,950 June 22,860 0.50 11,430 $11 $125,730 $125,730 $339,900 $339,900 5 Manufacturing overhead budget May Quarter 20,900 30,900 Production Direct Labor hours needed Variable Overhead rate per hour Variable overheads Manufacturing overhead budget April 18,040 9,020 $4.20 $37,884 $37,884 10,450 $4.20 $43,890 $43,890 June 22,860 11,430 $4.20 $48,006 $48,006 $129,780 $129,780 Budgeted Sales Sales Commission Sales manager salary Selling Expense Budget April $547,200 $54,720 $4,500 $59,220 May $384,000 $38,400 $4,500 $42,900 June Quarter $552,000 $1,483,200 $55,200 $148,320 $4,500 $13,500 $59,700 $161,820 General and administration expense budget April General administrative salaries $27,000 Interest on Long-term note payable $3,090 Total Budgeted G & A Expense $30,090 May $27,000 $3,090 $30,090 June $27,000 $3,090 $30,090 Quarter $81,000 $9,270 $90,270 ZIGBY MANUFACTURING Cash budget April, May and June 2019 April $65,000 May $154,016 June $217,046 Quarter $65,000 $547,200 $612,200 $514,560 $668,576 $417,600 $1,479,360 $634,646 $1,544,360 Beginning cash balance Add: Cash receipts Cash Receipts from Customers Total cash available Cash payments for Raw Materials Direct labor Variable Overhead General & administrative Salaries Sales Commission Sales Salaries Loan Interest Dividends Purchases of Equipment Long term note interest Total cash payments Preliminary cash balance Financing Loan repaid $204,500 $99,220 $37,884 $27,000 $54,720 $4,500 $270 $194,700 $114,950 $43,890 $27,000 $38,400 $4,500 $218,800 $618,000 $125,730 $339,900 $48,006 $129,780 $27,000 $81,000 $55,200 $148,320 $4,500 $13,500 $270 $25,000 $145,000 $145,000 $3,090 $9,270 $627,326 $1,510,040 $7,320 $34,320 $25,000 $3,090 $431,184 $181,016 $3,090 $451,530 $217,046 $27,000 $27,000 $154,016 $47,680 $47,680 $55,000 $20,680 $20,680 $55,000 Ending cash balance $217,046 Loan Balance May April $27,000 -$27,000 June $47,680 Loan Balance - Beginning of the month Additional loan (loan repayment) Loan Balance -End of the month $0 SO $0 $47,680

$1,483,200 $618,000 $339,900 $234,840 $290,460 ZIGBY MANUFACTURING Budgeted Income Statement For the three month Ended June 30, 2019 Sales Cost of Goods Sold Direct Material Direct Labor Manufacturing overheads Gross Margin Operating expenses Sales Commission Sales manager salary General administrative salaries Bank Loan interest expense Long-term note interest Total Operating expenses Income Before Taxes Less: Income Tax Net Income $148,320 $13,500 $81,000 $270 $9,270 $252,360 $38,100 $15,240 $22,860 10 ZIGBY MANUFACTURING Budgeted Balance Sheet June 30, 2019 Assets Cash Accounts receivable Raw Materials inventory Finished Goods Inventory Total Current Assets Equipment gross Purchase $55,000 $441,600 $110,000 $308,028 $914,628 $630,000 $145,000 $775,000 $270,060 $504,940 $1,419,568 $224,300 $47,680 $15,240 Less : Accumulated Depreciation Total Assets Liabilities Accounts payable Bank Loan payable Income tax payable Total Current Liabilities Long term note payable Stockholders' Equity Common stock Retained earnings Total Stockholders' Equity Total Liabilities and Equity $287,220 $515,000 $350,000 $267,348 $617,348 $1,419,568 Statement of Retained Earnings for June 30, 2019 Opening Balance Add: Net profit Less: Dividend paid Closing Balance $269,488 $22,860 -$25,000 $267,348 Accounts receivable closing balance Opening Balance Add : Sales Less: Collection Closing Balance $437,760 $1,483,200 $1,479,360 $441,600 Accounts payable closing balance Opening Balance Add: Purchases Less : Payment Closing Balance $204,500 $637,800 $618,000 $224,300