Problem 22-4A Manufacturing: Preparation of a omplete master budget 1 P2 P3 The

Question

Problem 22-4A Manufacturing: Preparation of a omplete master budget 1 P2 P3 The management of Zigby Manufacturin 2015: e prepared the following estimated balance sheet for March. ZIGBY MANUFACTURING Estimated Balance Sheet March 31,2015 Assets Liabilities and Equity Cash Accounts receivable Raw materials inventory Finished $ 40,000 342.248 Accounts payable Short-term notes payable Total current liabillities Long-term note payable. Total liabilities . Common stock . Retained earnings Total stockholders' equity Total liabilities and equity- ,-. 2.000 212.500 500,000 712.500 335.000 208,788 543.788 806,288 Equipment, net $1,256,288 To prepare a master budget for April, May, and June of 2015, management gathers the following information: a. Sales for March total 20.500 units. Forecasted sales in units are as follows: April. 20.500: May. 19.500; June, 20,000: and July, 20,500. Sales of 240,000 units are forecasted for the entire year The product's selling price is $23.85 per unit and its total product cost is $19.85 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 4,925 units, which com- plies with the policy. The expected June 30 ending raw materials inventory is 4.000 units. Raw mate- rials 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 16.400 units, which complies with the policy c d. Each finished unit requires 0.50 hours of direct labor at a rate of $15 per hour. e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $2 70 f. Sales representatives' commissions are 8% of sales and are paid in the month of the sales-The sales g. Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% h·The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are per direct labor hour. Depreciation of $20,000 per month is treated as fixed factory overhead. manager's monthly salary is $3,000. monthly interest on the long-term note payable. collected in full in the month following the sale (none is collected in the month of the sale)

Explanation / Answer

1. sales Budget

April may June

Forcasted units 20500 19500 20000

selling price $23.85 $23.85 $23.85

Budgeted sales   

(units * price) $488925 $465075 $477000

2. Production Budget

   April may June

Forcasted units 20500 19500 20000

Add: Ending inventory 15600 16000 16400

Less: Beginning inventory (16400) (15600) (16000)

Production in units 19700 19900 20400

Note:- April may June

Ending finished inventory 19500 *80% 20000*80% 20500*80%

(80% of next month units sales )   

=15600 =16000 =16400

Beginning inventory of each month will be previous month's ending inventory

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