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The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 2013:

   

ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2013
Assets
Cash	$	48,000
Accounts receivable		438,750
Raw materials inventory		87,900
Finished goods inventory		383,760
Total current assets		958,410
Equipment, gross		616,000
Accumulated depreciation		(158,000)
Equipment, net		458,000
Total assets	$	1,416,410
Liabilities and Equity
Accounts payable		187,200
Short-term notes payable		20,000
Total current liabilities	$	207,200
Long-term note payable		508,000
Total liabilities		715,200
Common stock		343,000
Retained earnings		358,210
Total stockholders’ equity		701,210
Total liabilities and equity	$	1,416,410

  

To prepare a master budget for April, May, and June of 2013, management gathers the following information.

  

a.	Sales for March total 19,500 units. Forecasted sales in units are as follows: April, 19,500; May, 17,100; June, 21,300; July, 19,500. Sales of 248,000 units are forecasted for the entire year. The product’s selling price is $30.00 per unit and its total product cost is $24.60 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 4,395 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,800 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 15,600 units, which complies with the policy
d.	Each finished unit requires 0.50 hours of direct labor at a rate of $23 per hour.
e.	Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.40 per direct labor hour. Depreciation of $27,020 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 $3,800 per month.
g.	Monthly general and administrative expenses include $20,000 administrative salaries and 0.5% monthly interest on the long-term note payable.
h.	The company expects 25% of sales to be for cash and the remaining 75% 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 $48,000. 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 $18,000 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 $138,000 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 budgets. (Round budgeted unit price answer to 2 decimal places.) ZIGBY MANUFACTURING Sales Budget April, May, and June 2013 Budgeted Unit Budgeted Unit Budgeted Total Sales Price Dollars April 2013 May 2013 June 2013 Totals for the quarter

Answer 1

Solution 1:

ZIGBY MANUFACTURING
Sales Budget
April, May, and June 2013
	Budgeted Unit Sales	Budgeted Unit Price	Budgeted Sales Dollars
Apr-13	19500	$30.00	$585,000.00
May-13	17100	$30.00	$513,000.00
Jun-13	21300	$30.00	$639,000.00
Totals for the second quarter	57900	$30.00	$1,737,000.00

Solution 2:

ZIGBY MANUFACTURING
Production Budget
April, May, and June 2013
	April	May	June
Next month's budgeted sales (units)	17100	21300	19500
Ratio of inventory to future sales	80%	80%	80%
Desired ending inventory	13680	17040	15600
Budgeted sales units	19500	17100	21300
Required units of available production	33180	34140	36900
Beginning inventory	15600	13680	17040
Units to be produced	17580	20460	19860

Solution 3:

ZIGBY MANUFACTURING
Raw Materials Budget
April, May, and June 2013
	April	May	June
Production budget (units)	17580	20460	19860
Raw material per unit	0.5	0.5	0.5
Materials needed for production	8790	10230	9930
Desired ending inventory	5115	4965	4800
Total materials requirements (units)	13905	15195	14730
Beginning inventory	4395	5115	4965
Materials to be purchased	9510	10080	9765
Material price per unit	$20.00	$20.00	$20.00
Budgeted raw material purchases	$190,200.00	$201,600.00	$195,300.00

Solution 4:

ZIGBY MANUFACTURING
Direct Labor Budget
April, May, and June 2013
	April	May	June	Total
Budgeted production (units)	17580	20460	19860	57900
Direct labor hour per unit	0.5	0.5	0.5	0.5
Total labor hours needed	8790	10230	9930	28950
Direct labor rate per hour	$23.00	$23.00	$23.00	$23.00
Budgeted direct labor cost	$202,170.00	$235,290.00	$228,390.00	$665,850.00

Solution 5:

ZIGBY MANUFACTURING
Factory overhead Budget
April, May, and June 2013
	April	May	June	Total
Labor hours needed	8790	10230	9930	28950
Variable overhead rate per hour	$3.40	$3.40	$3.40	$3.40
Budgeted variable overhead	$29,886.00	$34,782.00	$33,762.00	$98,430.00
Budgeted fixed overhead	$27,020.00	$27,020.00	$27,020.00	$81,060.00
Budgeted total overhead	$56,906.00	$61,802.00	$60,782.00	$179,490.00

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