The management of Zigby Manufacturing prepared the following estimated balance s
ID: 2436850 • Letter: T
Question
The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2017:
To prepare a master budget for April, May, and June of 2017, management gathers the following information:
Sales for March total 23,000 units. Forecasted sales in units are as follows: April, 23,000; May, 15,300; June, 20,400; and July, 23,000. Sales of 241,000 units are forecasted for the entire year. The product’s selling price is $23.60 per unit and its total product cost is $20.00 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 4,210 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,100 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 80% of the next month’s expected unit sales. The March 31 finished goods inventory is 18,400 units, which complies with the policy.
Each finished unit requires 0.50 hours of direct labor at a rate of $15 per hour.
Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $2.80 per direct labor hour. Depreciation of $21,520 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 $3,100.
Monthly general and administrative expenses include $13,000 administrative salaries and 0.5% 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 $41,000. 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 $11,000 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 $131,000 are budgeted for the last day of June.
9. Budgeted income statement for the entire second quarter (not for each month separately).
ZIGBY MANUFACTURINGEstimated Balance Sheet
March 31, 2017 Assets Cash $ 50,000 Accounts receivable 434,240 Raw materials inventory 84,210 Finished goods inventory 368,000 Total current assets 936,450 Equipment, gross 602,000 Accumulated depreciation (151,000 ) Equipment, net 451,000 Total assets $ 1,387,450 Liabilities and Equity Accounts payable $ 196,610 Short-term notes payable 12,000 Total current liabilities 208,610 Long-term note payable 505,000 Total liabilities 713,610 Common stock 336,000 Retained earnings 337,840 Total stockholders’ equity 673,840 Total liabilities and equity $ 1,387,450 Required 1 Required 2 Required 3 Required 4 Required 5 Required Required 7 Required 8 Required 9 Required 10 Production budget. ZIGBY MANUFACTURING Production Budget April, May, and June 2017 May 20,400 April June Next month's budgeted sales (units) Ratio of inventory to future sales Budgeted ending inventory (units) Budgeted units sales for month Required units of available production Beginning inventory (units) Units to be produced 15,300 80% 12,240 23,000 80% 80% 4,210
Explanation / Answer
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Production Budget - Zigby Manufacturing Particulars April May June Total Sales units 23000 15300 20400 58700 Add: Desired ending inventory (80% of next month sales) 12240 16320 18400 18400 Less: Opening Inventory 18400 12240 16320 18400 Budgeted Production units 16840 19380 22480 58700Related Questions
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