Question

The Diesel Dynamo Company is a high-tech diesel subsystem production business that produces technology accessories for trucks and other transport. The design of Diesel Dynamo products are unique and represent a breakthrough in the industry. The units Diesel Dynamo produces claim to provide for greater dependability, quality and longevity. The company is completing its third year of operations and is preparing to create a master budget for next year, 2017. The budget will detail each quarter’s activities and the activity for the year in total.Through connections at the Rotary Club, the CEO was able obtain a template for use in creating a master budget and has provided it to you along with financial information from the corporate controller. Your job is to create the following (This is all of the information that I was given)

Schedule of Cash Collection (per quarter and annual)

Budgeted sales in dollars

Collections in quarter of sale

Collections in quarter following sale

Total Collections

Net accounts receivable balance

Schedule of Cash Payments (for each quarter)

Raw Material Purchases

Payments in quarter of purchase

Payments in quarter following purchase

Total payments

Accounts payable balance

    DATA

Input	4th quarter 2017	1st Quarter 2018	2nd quarter 2018	3rd quarter 2018	4th quarter 2018
Budgeted sales in units	43,000	37,900	34,500	31,000	43,000

Budgeted Selling Price: $530 per production unit (finished good)

Receivables:

     Receivables Collection Schedule: 91.5% quarter of sale; 5.5% Quarter following sale; 3.0% Uncollectible (entire projected uncollectible receivables are written off each quarter

Inventory Costs:

     Direct Labor 4.5 hours; $19.50 per direct labor hour

     Raw materials: 3 direct material units per finished good production unit; $85.00 per raw material unit

     Variable Overhead: $9.50 per direct labor hour

     Fixed overhead:

           Depreciation: $304,000 per quarter

          Other fixed overhead: $950,000 per quarter

Fixed overhead Application Rate: Calculate from production budget

Inventory Accounts

Ending finished goods inventory in units	4th Quarter	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
	0	15,000	19,000	20,000	15,000

Raw Materials Inventory

     Beginning Inventory (1/1/2018): 28,436 units

     Planned Ending Inventory: 26,000 units

     Policy: 25% of next quarters' needs for production is in ending raw materials inventory

Work In Progress Inventory

     Beginning Inventory (1/1/2018): $2,850

     Planned Ending Inventory: $2,850

Payment for Raw Materials

     Payment Policy: 85% Quarter of Purchase; 15% quarter following purchase

Operating Expenses

    Wages and Salaries Payment Policy: two times monthly on the 15th and 30th; fully paid each month

    Variable selling & Administrative Expenses: 3.50% of selling price

    Fixed selling & Administrative expenses

          Depreciation: $55,000 per quarter

          Other Selling & Admin. Exp. $180,000 per quarter

Capital Expenditures

     Equipment purchases: $5,450,000 end of 4th quarter

Treasury Activities

     Dividends to be declared: $400,000 per quarter

     Minimum cash balance: $250,000 required at end of every quarter

     Interest rate for investing (short-term): 4.0% annually; Interest policy- All of the ending cash balance for the quarter earns interest for the entire quarter. All o th ending cash balance for the quarter remains in Cash at the beginning of the next quarter.

     Interest rate for borrowing: 12% annually; interest policy- $10,000 increments are used in borrowing and repayment, maintaining the minimum cash balance. Borrowing occurs at the end of each quarter. Repayments occur at the end of the quarter.

Flexible Budget

    Actual Units Produced: First quarter: 43,000 units (use for flexible budget tab only)

    Flexible Budget: Production level 1: 45,000 units; Production level 2: 40,000 units

Prior Year Results

    Assets (Total: $44,348,000)

        Cash: $6,150,000

        Inventory: $3,748,000

        Accounts receivable (Net): $5,050,000

        Plant and equipment: $29,400,000

Liabilities and Equity (Total: $44,348,000)

        Accounts Payable: $8,100,000

        Common Stock: $26,234,500

       Retained Earnings: $10,013,500

Answer 1

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		Q1	Q2	Q3	Q4	Year
Budgeted sale unit		37,900	34,500	31,000	43,000	146,400
Budgeted selling price		$                         530	$                      530	$                  530	$                  530	$                  530
Budgeted Sale		$          20,087,000	$        18,285,000	$    16,430,000	$    22,790,000	$    77,592,000
Schedule of Cash Collection (per quarter and annual)
Budgeted sales in dollars		$          20,087,000	$        18,285,000	$    16,430,000	$    22,790,000	$    77,592,000
Collections in quarter of sale	91.50%	$          18,379,605	$        16,730,775	$    15,033,450	$    20,852,850	$    70,996,680
Collections in quarter following sale	5.50%	$             5,050,000	$          1,104,785	$      1,005,675	$          903,650	$      8,064,110
Total Collections		$          23,429,605	$        17,835,560	$    16,039,125	$    21,756,500	$    79,060,790
Net accounts receivable balance						$      1,937,150
Schedule of Cash Payments (for each quarter)
Raw Material Purchases		$          13,526,815	$          9,403,125	$      8,542,500	$      9,477,500	$    40,949,940
Payments in quarter of purchase	85%	$          11,497,793	$          7,992,656	$      7,261,125	$      8,055,875	$    34,807,449
Payments in quarter following purchase	15%	$             8,100,000	$          2,029,022	$      1,410,469	$      1,281,375	$    12,820,866
Total payments		$          19,597,793	$        10,021,679	$      8,671,594	$      9,337,250	$    47,628,315
Accounts payable balance						$      1,421,625
Working:
Production Budget
Budgeted Sale		37,900	34,500	31,000	43,000	146,400
Add: Desired Ending inventory		15,000	19,000	20,000	15,000	15,000
		52,900	53,500	51,000	58,000	161,400
Less: Beginning inventory		-	(15,000)	(19,000)	(20,000)	-
Budgeted Production		52,900	38,500	32,000	38,000	161,400
Purchase Budget
Budgeted Production		52,900	38,500	32,000	38,000	161,400
Raw material per unit		3	3	3	3	3
Total Raw material needed for production		158,700	115,500	96,000	114,000	484,200
Add: Desired Ending inventory	25%	28,875	24,000	28,500	26,000	26,000
		187,575	139,500	124,500	140,000	510,200
Less: Beginning inventory		(28,436)	(28,875)	(24,000)	(28,500)	(28,436)
Budgeted Purchase		159,139	110,625	100,500	111,500	481,764
Cost per unit		$                           85	$                        85	$                    85	$                    85	$                    85
Budeted Purchase		$          13,526,815	$          9,403,125	$      8,542,500	$      9,477,500	$    40,949,940