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	$	80,000
Accounts receivable		364,000
Raw materials inventory		96,000
Finished goods inventory		364,800
Total current assets		904,800
Equipment		610,000
Accumulated depreciation		(155,000	)
Equipment, net		455,000
Total assets	$	1,359,800
Liabilities and Equity
Accounts payable	$	195,500
Short-term notes payable		17,000
Total current liabilities		212,500
Long-term note payable		510,000
Total liabilities		722,500
Common stock		340,000
Retained earnings		297,300
Total stockholders’ equity		637,300
Total liabilities and equity	$	1,359,800

To prepare a master budget for April, May, and June of 2019, management gathers the following information.

1. Sales for March total 20,000 units. Forecasted sales in units are as follows: April, 20,000; May, 19,000; June, 19,500; and July, 20,000. Sales of 245,000 units are forecasted for the entire year. The product’s selling price is $26.00 per unit and its total product cost is $22.80 per unit.
2. 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 4,800 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,500 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.
3. 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 16,000 units, which complies with the policy.
4. Each finished unit requires 0.50 hours of direct labor at a rate of $20 per hour.
5. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.20 per direct labor hour. Depreciation of $23,400 per month is treated as fixed factory overhead.
6. Sales representatives’ commissions are 6% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $3,500.
7. Monthly general and administrative expenses include $17,000 administrative salaries and 0.9% monthly interest on the long-term note payable.
8. The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale).
9. 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.
10. The minimum ending cash balance for all months is $45,000. 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.
11. Dividends of $15,000 are to be declared and paid in May.
12. No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 35% in the quarter and paid in the third calendar quarter.
13. Equipment purchases of $135,000 are budgeted for the last day of June.

Answer 1

Answer with full working is given below

1 Sales Budget Sales Units Total Budgeted Sales Cash Sales Sales on Credit April 20,000 $520,000 $156,000 $364,000 May 19,000 $494,000 $148,200 $345,800 June Quarter 19,500 58,500 $507,000 $1,521,000 $152,100 $456,300 $354,900 $1,064,700 Total Cash receipts from Customers April May June Quarter Collection Current Month Cash Sales Collection of Receivables Total collection- AR $156,000 $364,000 $520,000 $148,200 $364,000 $512,200 $152,100 $456,300 $345,800 $1,073,800 $497,900 $1,530,100 2 Production Budget Budgeted Sales Add: Closing inventory - (80% of next month sales) Total Requirement Less: Opening Inventory Production Units Closing stock of month will be opening stock of next month April 20,000 15,200 35,200 16,000 19,200 May 19,000 15,600 34,600 15,200 19,400 June 19,500 16,000 35,500 15,600 19,900 Quarter 58,500 16,000 74,500 16,000 58,500 3 Raw Material purchase budget Consumed for production-0.50 units per output Add : Closing inventory - (50% of next month prod requirement) Total Needs Less: Opening Inventory Purchase Budget (Units) Purchase price per unit Purchase budget in value April 9,600 4,850 14,450 4,800 9,650 $20.00 $193,000 May 9,700 4,975 14,675 4,850 9,825 $20.00 $196,500 June 9,950 4,500 14,450 4,975 9,475 $20.00 $189,500 Quarter 29,250 4,500 33,750 4,800 28,950 $20.00 $579,000 Expected Cash disbursements for Materials Purchases April May June Quarter $193,000 Cash payments for purchase April Purchase May Purchase March Purchase Total purchase payment $196,500 $193,000 $196,500 $195,500 $585,000 $195,500 $195,500 $193,000 $196,500 4 Direct Labor Cost Budget May Quarter 19,400 June 19,900 0.50 0.50 April 19,200 0.50 9,600 $20 $192,000 $192,000 9,700 Production Direct labor hour per unit Direct Labor needed Direct Labor rate Direct Labor budget Direct labor cost budget 9,950 $20 $194,000 $194,000 $20 $199,000 $199,000 $585,000 $585,000 5 Manufacturing overhead budget Quarter 29,250 Production Direct Labor hours needed Variable Overhead rate per hour Variable overheads Manufacturing overhead budget April 19,200 9,600 $3.201 $30,720 $30,720 May 19,400 9,700 $3.20 $31,040 $31,040 June 19,900 9,950 $3.20 $31,840 $31,840 $93,600 $93,600 Budgeted Sales Sales Commission Sales manager salary Selling Expense Budget April $520,000 $31,200 $3,500 $34,700 May | $494,000 $29,640 $3,500 $33,140 June Quarter $507,000 $1,521,000 $30,420 $91,260 $3,500 $10,500 $33,920 $101,760 General and administration expense budget April General administrative salaries $17,000 Interest on Long-term note payable $4,590 Total Budgeted G & A Expense $21,590 May $17,000 $4,590 $21,590 June $17,000 $4,590 $21,590 Quarter $51,000 $13,770 $64,770 ZIGBY MANUFACTURING Cash budget April, May and June 2019 April $80,000 May $108,320 June $132,750 Quarter $80,000 $520,000 $600,000 $512,200 $620,520 $497,900 $1,530,100 $630,650 $1,610,100 Beginning cash balance Add: Cash receipts Cash Receipts from Customers Total cash available Cash payments for Raw Materials Direct labor Variable Overhead General & administrative Salaries Sales Commission Sales Salaries Loan Interest Dividends Purchases of Equipment Long term note interest Total cash payments Preliminary cash balance Financing Loan repaid $195,500 $192,000 $30,720 $17,000 $31,200 $3,500 $170 $193,000 $194,000 $31,040 $17,000 $29,640 $3,500 $196,500 $585,000 $199,000 $585,000 $31,840 $93,600 $17,000 $51,000 $30,420 $91,260 $3,500 $10,500 $170 $15,000 $135,000 $135,000 $4,590 $13,770 $617,850 $1,580,300 $12,800 $29,800 $15,000 $4,590 $474,680 $125,320 $4,590 $487,770 $132,750 -$17,000 -$17,000 $108,320 $0 $32,200 $32,200 $45,000 $15,200 $15,200 $45,000 Ending cash balance $132,750 Loan Balance May June $0 $32,200 Loan Balance - Beginning of the month Additional loan (loan repayment) Loan Balance - End of the month April $17,000 -$17,000 $0 $0 $32,200

$1,521,000 $585,000 $585,000 $163,800 $187,200 ZIGBY MANUFACTURING Budgeted Income Statement For the three month Ended June 30, 2019 Sales Cost of Goods Sold Direct Material Direct Labor Manufacturing overheads Gross Margin Operating expenses Sales Commission Sales manager salary General administrative salaries Bank Loan interest expense Long-term note interest Total Operating expenses Income Before Taxes Less: Income Tax Net Income $91,260 $10,500 $51,000 $170 $13,770 $166,700 $20,500 $7,175 $13,325 ZIGBY MANUFACTURING Budgeted Balance Sheet June 30, 2019 Assets Cash Accounts receivable Raw Materials inventory Finished Goods Inventory Total Current Assets Equipment gross Purchase $45,000 $354,900 $90,000 $364,800 $854,700 $610,000 $135,000 $745,000 $225,200 $519,800 $1,374,500 $189,500 $32,200 $7,175 Less : Accumulated Depreciation Total Assets Liabilities Accounts payable Bank Loan payable Income tax payable Total Current Liabilities Long term note payable Stockholders' Equity Common stock Retained earnings Total Stockholders' Equity Total Liabilities and Equity $228,875 $510,000 $340,000 $295,625 $635,625 $1,374,500 Statement of Retained Earnings for June 30, 2019 Opening Balance Add: Net profit Less: Dividend paid Closing Balance $297,300 $13,325 -$15,000 $295,625 Accounts receivable closing balance Opening Balance Add : Sales Less: Collection Closing Balance $364,000 $1,521,000 $1,530,100 $354,900 Accounts payable closing balance Opening Balance Add: Purchases Less : Payment Closing Balance $195,500 $579,000 -$585,000 $189,500