The management of Zigby Manufacturing prepared the following estimated balance s
ID: 2570896 • 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 25,000 units. Forecasted sales in units are as follows: April, 25,000; May, 17,000; June, 22,400; and July, 25,000. Sales of 259,000 units are forecasted for the entire year. The product’s selling price is $26.00 per unit and its total product cost is $21.65 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 4,650 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,900 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 20,000 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 $4.60 per direct labor hour. Depreciation of $39,710 per month is treated as fixed factory overhead.
Sales representatives’ commissions are 5% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $4,900.
Monthly general and administrative expenses include $34,000 administrative salaries and 0.8% monthly interest on the long-term note payable.
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 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 $98,000. 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 $29,000 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 $149,000 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.
*Count as 10 Questions.
ZIGBY MANUFACTURINGEstimated Balance Sheet
March 31, 2017 Assets Cash $ 59,000 Accounts receivable 487,500 Raw materials inventory 93,010 Finished goods inventory 433,000 Total current assets 1,072,510 Equipment, gross 638,000 Accumulated depreciation (169,000 ) Equipment, net 469,000 Total assets $ 1,541,510 Liabilities and Equity Accounts payable $ 215,410 Short-term notes payable 31,000 Total current liabilities 246,410 Long-term note payable 530,000 Total liabilities 776,410 Common stock 354,000 Retained earnings 411,100 Total stockholders’ equity 765,100 Total liabilities and equity $ 1,541,510
Explanation / Answer
1.
ZIGBY MANUFACTURING
Sales Budget
April, May, and June 2017
Month
Budgeted Unit Sales
Budgeted Unit Price
Budgeted Total Dollars
April
25,000
26
$650,000
May
17,000
26
$442,000
June
22,400
26
$582,400
Totals for the Quarter
64,400
$1,674,400
2.
ZIGBY MANUFACTURING
Production Budget
April, May, and June 2017
April
May
June
Total
Next month's budgeted sales (units)
17,000
22,400
25,000
Ratio of inventory to future sales
80%
80%
80%
Budgeted ending inventory (units)
13,600
17,920
20,000
Budgeted units sales for month
25,000
17,000
22,400
Required units of available production
38,600
34,920
42,400
Beginning inventory (units)
20,000
13,600
17,920
Units to be produced
18,600
21,320
24,480
64,400
Beginning inventory in April = Finished goods inventory on March 31st / Product cost per unit
=> 433,000 / $21.65 = 20,000
Beginning inventory in May & June = Budgeted units sales for month x 80%
Required units of available production = Budgeted ending inventory (units) + Budgeted units sales for month
Units to be produced = Required units of available production - Beginning inventory (units)
3.
ZIGBY MANUFACTURING
Raw Material Budget
April, May, and June 2017
April
May
June
Total
Production budget (units)
18,600
21,320
24,480
Materials requirements per unit
0.50
0.50
0.50
Materials needed for production
9,300
10,660
12,240
Budgeted ending inventory
5,330
6,120
5,900
Total materials requirements (units)
14,630
16,780
18,140
Beginning inventory
4,650
5,330
6,120
Materials to be purchased
9,980
11,450
12,020
Material price per unit
$20
$20
$20
Total cost of Raw material purchases
$199,600
$229,000
$240,400
$669,000
Materials needed for production = Production budget (units) x Materials requirements per unit
Budgeted ending inventory = 50% x Materials needed for production in next month
Total materials requirements (units) = Materials needed for production + Budgeted ending inventory
Beginning inventory = Ending inventory of last month
Materials to be purchased = Total materials requirements (units) - Beginning inventory
Total cost of Raw material purchases = Materials to be purchased x Material price per unit
4.
ZIGBY MANUFACTURING
Direct Labor Budget
April, May, and June 2017
April
May
June
Total
Budgeted production (units)
18,600
21,320
24,480
Labor requirements per unit (hours)
0.50
0.50
0.50
Total labor hours needed
9,300
10,660
12,240
32,200
Labor rate (per hour)
$15
$15
$15
$15
Labor dollars
$139,500
$159,900
$183,600
$483,000
Total labor hours needed = Budgeted production (units) x Labor requirements per unit (hours)
Labor dollars = Total labor hours needed x Labor rate (per hour)
5.
ZIGBY MANUFACTURING
Factory Overhead Budget
April, May, and June 2017
April
May
June
Total
Labor hours needed
9,300
10,660
12,240
Variable factory overhead rate
$4.60
$4.60
$4.60
Budgeted variable overhead
$42,780
$49,036
$56,304
$148,120
Budgeted fixed overhead
$39,710
$39,710
$39,710
$119,130
Budgeted total overhead
$82,490
$88,746
$96,014
$267,250
Budgeted variable overhead = Labor hours needed x Variable factory overhead rate
Budgeted fixed overhead = Fixed factory overhead
Budgeted total overhead = Budgeted variable overhead + Budgeted fixed overhead
Under Chegg policy, we are allowed to answer only one question with its upto 4 subparts. However, I've already answered 5 subparts. Hence, I request you to kindly post remaining questions separately.
Please don't forget to give a thumbs-up, if you find my answers to be correct. This works as life saviour for us as an expert.
ZIGBY MANUFACTURING
Sales Budget
April, May, and June 2017
Month
Budgeted Unit Sales
Budgeted Unit Price
Budgeted Total Dollars
April
25,000
26
$650,000
May
17,000
26
$442,000
June
22,400
26
$582,400
Totals for the Quarter
64,400
$1,674,400
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.