The management of Zigby Manufacturing prepared the following estimated balance s
ID: 2574041 • Letter: T
Question
The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 2015:
To prepare a master budget for April, May, and June of 2015, management gathers the following information.
Sales for March total 22,800 units. Forecasted sales in units are as follows: April, 22,800; May, 16,000; June, 23,000; July, 22,800. Sales of 255,000 units are forecasted for the entire year. The product’s selling price is $24.00 per unit and its total product cost is $19.30 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 4,510 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,500 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 70% of the next month’s expected unit sales. The March 31 finished goods inventory is 15,960 units, which complies with the policy.
Each finished unit requires 0.50 hours of direct labor at a rate of $11 per hour.
Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $4.20 per direct labor hour. Depreciation of $35,020 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 $4,500.
Monthly general and administrative expenses include $27,000 administrative salaries and 0.6% 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 is 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 $55,000. 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.
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.
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:
Cash budget.
Budgeted income statement for the entire first quarter (not for each month separately).
Budgeted balance sheet.
The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 2015:
Explanation / Answer
Cash budget.
ZIGBY MANUFACTURING Sales Budget April, May, and June 2015 Budgeted Unit Sales Budgeted Unit Price Budgeted Total Dollars Apr-15 22,800 $24.00 547,200 May-15 16,000 24 384,000 June 2013 23,000 24 552,000 Totals for the quarter 61800 24 1,483,200 Production budget. ZIGBY MANUFACTURING Production Budget April, May, and June April May June Total Next month's budgeted sales (units) 16,000 23,000 22,800 Ratio of inventory to future sales 70% 70% 70% Budgeted ending inventory (units) 11,200 16,100 15,960 15,960 Budgeted units sales for month 22,800 16,000 23,000 61,800 Required units of available production 34,000 32,100 38,960 77,760 Beginning inventory (units) 15,960 11,200 16,100 15,960 Units to be produced 18,040 20,900 22,860 61,800 Raw materials budget. (Round Materials requirements per unit answers to 2 decimal places.) ZIGBY MANUFACTURING Raw Materials Budget April, May, and June 2015 April May June Total Production budget (units) 18,040 20,900 22,860 61,800 Materials requirements per unit 0.5 0.5 0.5 0.5 Materials needed for production 9020 10450 11430 30900 Budgeted ending inventory 5,225 5,715 5,700 Total materials requirements (units) 14245 16165 17130 Beginning inventory 4,510 5,225 5,715 Materials to be purchased 9,735 10,940 11,415 32,090 Material price per unit $20 $20 $20 $20 Total cost of direct material purchases $194,700 $218,800 $228,300 $641,800 Direct labor budget. (Round Labor requirements per unit answers to 2 decimal places.) ZIGBY MANUFACTURING Direct Labor Budget April, May, and June April May June Total Budgeted production (units) 18,040 20,900 22,860 61,800 Labor requirements per unit (hours) 0.5 0.5 0.5 0.5 Total labor hours needed 9,020 10,450 11,430 30,900 Labor rate (per hour) $11 11 11 11 Labor dollars $99,220 $114,950 $125,730 $339,900 Factory overhead budget. (Round Variable factory overhead rate answers to 2 decimal places.) ZIGBY MANUFACTURING Factory Overhead Budget April, May, and June April May June Total Labor hours needed 9,020 10,450 11,430 30,900 Variable factory overhead rate 4.2 4.2 4.2 4.2 Budgeted variable overhead 37884 43890 48006 129780 Budgeted fixed overhead 35,020 35,020 35,020 105,060 Budgeted total overhead 72904 78910 83026 234840 Selling expense budget. ZIGBY MANUFACTURING Selling Expense Budget April, May, and June April May June Total Budgeted sales $547,200 $384,000 $552,000 Sales commission percent 10% 10% 10% Sales commissions $54,720 $38,400 $55,200 148320 Sales salaries 4,500 4500 4500 13500 Total selling expenses 59220 42900 59700 161820 General and administrative expense budget. ZIGBY MANUFACTURING General and Administrative Expense Budgets April, May, and June April May June Total Salaries $27,000 $27,000 $27,000 81000 Interest on long-term note (515000*.6%) 3,090 3,090 3,090 9270 Total expenses 30090 30090 30090 90270Cash budget.
Calculation of Cash receipts from customers: April May June Total Total budgeted sales $547,200 $384,000 $552,000 Cash sales 20% 109,440 76,800 110,400 296,640 Sales on credit 0.8 $437,760 $307,200 $441,600 Total cash receipts from customers April May June Total Current month's cash sales $109,440 $76,800 $110,400 296,640 Collections of receivables 437,760 437,760 307,200 1,182,720 Total cash receipts 547200 514560 417600 1,479,360 ZIGBY MANUFACTURING Cash Budget April, May, and June 2013 April May June Beginning cash balance $65,000 $154,016 $207,246 Cash receipts from customers 547,200 514,560 417,600 Total cash available 612200 668576 624846 Cash disbursements: Payments for raw materials 204,500 204,500 204,500 Payments for direct labor 99,220 114,950 125,730 Payments for variable overhead 37,884 43,890 48,006 Sales commissions 54,720 38,400 55,200 Sales salaries 4,500 4,500 4,500 General & administrative salaries 27,000 27,000 27,000 Dividends 25,000 Loan interest 270 Long-term note interest 3,090 3,090 3,090 Purchases of equipment 145,000 Taxes paid 0 0 0 Total cash disbursements 431184 461330 613026 Preliminary cash balance 181,016 207,246 11,820 Additional loan (loan repayment) -27,000 43,180 Ending cash balance $154,016 $207,246 55000 Loan balance April May June Loan balance - Beginning of month $27,000 0 0 Additional loan (loan repayment) -27,000 0 43180 Loan balance - End of month 0 0 43180 ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30, 2015 Sales 1,483,200 Less:Cost of good sold 1192740 (61800*17.6)+105060 Gross profit 290,460 Less Selling expenses 161820 Administrative expenses 81000 Total selling & administrive expenses 242820 Net Operating Income 47,640 Less: interest expenses 9540 Net Income 38,100 Cost of good sold Direct material (20*.5) 10 Direct labor (11*.5) 5.5 Variable overhead (4.2(.5) 2.1 Variable COGS 17.6Related Questions
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