Manufacturing: Preparation of the Master Budget The management of Zigby Manufact

Question

Manufacturing: Preparation of the Master Budget

The management of Zigby Manufacturing prepared the following estimated Balance Sheet for March 2017.

To prepare a master budget for April, May and June 2017, management gathers the following information:

Part 1 ZIGBY MANUFACTURING Sales Budgets April, May, and June 2017 Budgeted Units Budgeted Unit Price Budgeted Total Dollars April 2015 ....................................................... 20,500 $23.85 $ 488,925 May 2015 ........................................................ 19,500 $23.85 $ 465,075 June 2015 ....................................................... 20,200 $23.85 $ 481,770 Total for the second quarter......................... 60,200 $1,435,770 Part 2 ZIGBY MANUFACTURING Production Budget April, May, and June 2017 April May June Total Next month’s budgeted sales ............ 20,500 19,500 20,200 Ratio of inventory to future sales ...... x      80% x     80% x     80% Budgeted ending inventory................ Add budgeted sales ............................ Required units to be produced .......... Deduct beginning inventory............... Units to be produced .......................... 60,000

Explanation / Answer

ZIGBY MANUFACTURING Cash Budget April, May, June 2017 April May June Beginning cash balance 50000 161289 248430 Cash receipt from customers 542800 506456 385152 Total cash available 592800 667745 633582 Cash payments for: Direct labor 126300 145350 168600 Raw materials 196610 181100 209300 Variable overhead 23576 27132 31472 Sales commissions 54280 36108 48144 Sales salaries 3100 3100 3100 General & Administrative salaries 13000 13000 13000 Dividends 11000 Loan interest 120 Long-term note interest 2525 2525 2525 Purchase of equipment 131000 Total cash payments 419511 419315 607141 Preliminary cash balance 173289 248430 26441 Additional loan (loan repayment) 12000 14559 Ending cash balance 161289 248430 41000 Loan Balance April May June Loan balance-beginning of month 12000 Additional loan (loan repayment) -12000 14559 Loan balance-ending of month 0 0 14559 Budgeted Income Statement FTME June 2017 Sales 1385320 Cost of goods sold 1171790 Gross profit 213530 Operating expense Sales commissions 138532 Sales salaries 9300 General & Admin Salaries 39000 Long-term note interest 7575 Bank loan interest expense 120 Total operating expense 194527 Income before tax 19003 Income tax 7601 Net income 11402 Budgeted Balance Sheet FTPE June 30, 2017 Assets: Cash 41000 Accounts receivable Finished goods inventory 82000 Total current assets Equipment Equipment, net Total Assets Liabilities & Equity: Liabilities: Accounts payable Bank loan payable 14559 Income taxes payable 476317 Total current liabilities Stockholder's equity Common stock Total stockholder's equity Total liabilities & equity

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