Question

The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2017: ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2017 Assets Cash 58,000 484,640 91,290 Accounts receivable Raw materials inventory Finished goods inventory 393,304 Total current assets 1,027,234 Equipment, gross Accumulated depreciation Equipment, net 636,000 168,000) 468,000 $1,495,234 Total assets Liabilities and Equity Accounts payable Short-term notes payable 206,390 30,000 Total current liabilities 236,390 Long-term note payable Total liabilities 525,000 761,390 Common stock 353,000 Retained earnings 380,844 Total stockholders' equity 733,844 Total liabilities and equity $1,495,234 To prepare a master budget for April, May, and June of 2017, management gathers the following information: a. Sales for March total 23,300 units. Forecasted sales in units are as follows: April, 23,300; May, 17,000; June, 21,900; and July 23,300. Sales of 258,000 units are forecasted for the entire year. The product's selling price is $26.00 per unit and its total product cost is $21.10 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 4,565 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,800 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 18,640 units, which complies with the policy. d. Each finished unit requires 0.50 hours of direct labor at a rate of $14 per hour. e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $4.50 per direct labor hour. Depreciation of $38,360 per month is treated as fixed factory overhead. f. Sales representatives' commissions are 10% of sales and are paid in the month of the sales. The sales manager's monthly salary is $4,800 g. Monthly general and administrative expenses include $30,000 administrative salaries and 0.8% monthly interest on the long-term note payable. h. 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) 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 $58,000. 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 $28,000 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 40% in the quarter and paid in the third calendar quarter. m. Equipment purchases of $148,000 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 Required 2 Required 3 Required 4 Required 5 Required 6 Required 9 Required 10 Required 7 Required 8 Sales budget. (Round Budgeted unit price to 2 decimal places.) ZIGBY MANUFACTURING Sales Budget April, May, and June 2017 Budgeted Budgeted Budgeted Unit Sales Unit Price Sales Dollars April 2017 May 2017 June 2017 Totals for the second quarter Production budget ZIGBY MANUFACTURING Production Budget April, May, and June 2017 April May June Next month's budgeted sales (units) Ratio of inventory to future sales 17,000 21,900 23,300 80% 80% 80% Required units of available production Units to be produced Raw materials budget. (Round per unit values to 2 decimal places.) 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 Direct labor budget. (Round per unit values to 2 decimal places.) ZIGBY MANUFACTURING Direct Labor Budget April, May, and June 2017 April May June Total Budgeted production (units) Total labor hours needed 0 Budgeted direct labor cost Factory overhead budget. (Round per unit values to 2 decimal places.) ZIGBY MANUFACTU RING Factory Overhead Budget April, May, and June 2017 April May June Total Labor hours needed Budgeted variable overhead Budgeted fixed overhead Budgeted total overhead Selling expense budget ZIGBY MANUFACTURING Selling Expense Budget April, May, and June 2017 April May June Budgeted sales Sales commissions General and administrative expense budget ZIGBY MANUFACTURING General and Administrative Expense Budgets April, May, and June 2017 April May June Total budgeted G&A expenses Cash budget. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign.) Calculation of Cash receipts from customers: April May June Total budgeted sales Cash sales Sales on credit 20% 80% Total cash receipts from customers April May June Current month's cash sales Collections of receivables ZIGBY MANUFACTURING Cash Budget April, May, and June 2017 May April June Beginning cash balance Total cash available Cash payments for: Total cash payments C C C 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 Budgeted income statement for the entire second quarter (not for each month separately). (Round your final answers to the nearest whole dollar.) ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30, 2017 Operating expenses Total operating expenses C C ZIGBY MANUFACTURING Budgeted Balance Sheet June 30, 2017 Assets Total current assets 0 Equipment, net 0 Total assets Liabilities and Equity Liabilities Total current liabilities Stockholders' Equity Total Stockholders' Equity Total Liabilities and Equity

Answer 1

Solution 1:

Sales Budget - Zigby Manufacturing
Particulars	April	May	June	Total
Sales units	23300	17000	21900	62200
Selling price per unit	$26.00	$26.00	$26.00	$26.00
Projected Sales Revenue	$605,800.00	$442,000.00	$569,400.00	$1,617,200.00

Solution 2:

Production Budget - Zigby Manufacturing
Particulars	April	May	June	Total
Sales units	23300	17000	21900	62200
Add: Desired ending inventory (80% of next month sales)	13600	17520	18640	18640
Less: Opening Inventory	18640	13600	17520	18640
Budgeted Production units	18260	20920	23020	62200

Solution 3:

Raw Material Budget - Zigby Manufacturing
Particulars	April	May	June	Total
Budgeted Production Units	18260	20920	23020	62200
Material needed per unit	0.5	0.5	0.5	0.5
Material needed for budgeted production	9130	10460	11510	31100
Add: Budgeted ending inventory (50% of next month material requirements)	5230	5755	5800	5800
Total material requirements	14360	16215	17310	36900
Less: Beginning inventory	4565	5230	5755	4565
Materials to be purchased (units)	9795	10985	11555	32335
Cost per lb.	$20.00	$20.00	$20.00	$20.00
Total budgeted direct materials cost	$195,900.00	$219,700.00	$231,100.00	$646,700.00

Solution 4:

Direct Labor Budget - Zigby Manufacturing
Particulars	April	May	June	Total
Budgeted Production Units	18260	20920	23020	62200
Direct labor hours per unit	0.5	0.5	0.5	0.5
Direct labor hour required	9130	10460	11510	31100
Rate per direct labor hours	$14.00	$14.00	$14.00	$14.00
Budgeted direct labor cost	$127,820.00	$146,440.00	$161,140.00	$435,400.00

Solution 5:

Factory Overhead Budget - Zigby Manufacturing
Particulars	April	May	June	Total
Labor hours needed	9130	10460	11510	31100
Variable factory overhead rate	$4.50	$4.50	$4.50	$4.50
Budgeted variable overhead	$41,085.00	$47,070.00	$51,795.00	$139,950.00
Budgeted fixed overhead	$38,360.00	$38,360.00	$38,360.00	$115,080.00
Budgeted total overhead	$79,445.00	$85,430.00	$90,155.00	$255,030.00

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