Question

The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2019. ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2019 Assets Cash Accounts receivable Raw materials inventory Finished goods inventory Total current assets Equipment Accumulated depreciation Equipment, net Total assets Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities Long-term note payable Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and equity $ 44,000 500,000 90,200 444,000 1,078, 200 608,000 (154,000) 454,000 $1,532,200 $ 211,300 16,000 227,300 505,000 732,300 339,000 460,900 799,900 $1,532,200 To prepare a master budget for April, May, and June of 2019, management gathers the following information. a. Sales for March total 25,000 units. Forecasted sales in units are as follows: April, 25,000; May, 16,300; June, 21,100; and July, 25,000. Sales of 244,000 units are forecasted for the entire year. The product's selling price is $25.00 per unit and its total product cost is $22.20 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 4,510 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,400 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials. c. 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. d. Each finished unit requires 0.50 hours of direct labor at a rate of $19 per hour. e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.10 per direct labor hour. Depreciation of $23,920 per month is treated as fixed factory overhead. f. Sales representatives' commissions are 6% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,400.

Answer 1

Solution 1:

ZIGBY MANUFACTURING
Sales Budget
April, May, and June 2019
	Budgeted Unit Sales	Budgeted Unit Price	Budgeted Sales Dollars
Apr-19	25000	$25.00	$625,000.00
May-19	16300	$25.00	$407,500.00
Jun-19	21100	$25.00	$527,500.00
Totals for the second quarter	62400	$25.00	$1,560,000.00

Solution 2:

ZIGBY MANUFACTURING
Production Budget
April, May, and June 2019
	April	May	June
Next month's budgeted sales (units)	16300	21100	25000
Ratio of inventory to future sales	80%	80%	80%
Desired ending inventory	13040	16880	20000
Budgeted sales units	25000	16300	21100
Required units of available production	38040	33180	41100
Beginning inventory	20000	13040	16880
Units to be produced	18040	20140	24220

Solution 3:

ZIGBY MANUFACTURING
Raw Materials Budget
April, May, and June 2019
	April	May	June
Production budget (units)	18040	20140	24220
Raw material per unit	0.5	0.5	0.5
Materials needed for production	9020	10070	12110
Desired ending inventory	5035	6055	4400
Total materials requirements (units)	14055	16125	16510
Beginning inventory	4510	5035	6055
Materials to be purchased	9545	11090	10455
Material price per unit	$20.00	$20.00	$20.00
Budgeted raw material purchases	$190,900.00	$221,800.00	$209,100.00

Solution 4:

ZIGBY MANUFACTURING
Direct Labor Budget
April, May, and June 2019
	April	May	June	Total
Budgeted production (units)	18040	20140	24220	62400
Direct labor hour per unit	0.5	0.5	0.5	0.5
Total labor hours needed	9020	10070	12110	31200
Direct labor rate per hour	$19.00	$19.00	$19.00	$19.00
Budgeted direct labor cost	$171,380.00	$191,330.00	$230,090.00	$592,800.00

Solution 5:

ZIGBY MANUFACTURING
Factory overhead Budget
April, May, and June 2019
	April	May	June	Total
Labor hours needed	9020	10070	12110	31200
Variable overhead rate per hour	$3.10	$3.10	$3.10	$3.10
Budgeted variable overhead	$27,962.00	$31,217.00	$37,541.00	$96,720.00
Budgeted fixed overhead	$23,920.00	$23,920.00	$23,920.00	$71,760.00
Budgeted total overhead	$51,882.00	$55,137.00	$61,461.00	$168,480.00

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