Question

The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2019.

J UILU Uula 10 points eBook 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 $10,000 Total liabilities 722, 500 Common stock 340,000 Retained earnings 297,300 Total stockholders' equity 637) 300 Total liabilities and equity S1,59,800 To prepare a master budget for Apr May, and June of 2019. management gathers the fo follow Anril 20.00

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.

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.

Answer 1

Solution 1:

ZIGBY MANUFACTURING
Sales Budget
April, May, and June 2019
	Budgeted Unit Sales	Budgeted Unit Price	Budgeted Sales Dollars
Apr-19	20000	$26.00	$520,000.00
May-19	19000	$26.00	$494,000.00
Jun-19	19500	$26.00	$507,000.00
Totals for the second quarter	58500	$26.00	$1,521,000.00

Solution 2:

ZIGBY MANUFACTURING
Production Budget
April, May, and June 2019
	April	May	June
Next month's budgeted sales (units)	19000	19500	20000
Ratio of inventory to future sales	80%	80%	80%
Desired ending inventory	15200	15600	16000
Budgeted sales units	20000	19000	19500
Required units of available production	35200	34600	35500
Beginning inventory	16000	15200	15600
Units to be produced	19200	19400	19900

Solution 3:

ZIGBY MANUFACTURING
Raw Materials Budget
April, May, and June 2019
	April	May	June
Production budget (units)	19200	19400	19900
Raw material per unit	0.5	0.5	0.5
Materials needed for production	9600	9700	9950
Desired ending inventory	4850	4975	4500
Total materials requirements (units)	14450	14675	14450
Beginning inventory	4800	4850	4975
Materials to be purchased	9650	9825	9475
Material price per unit	$20.00	$20.00	$20.00
Budgeted raw material purchases	$193,000.00	$196,500.00	$189,500.00

Solution 4:

ZIGBY MANUFACTURING
Direct Labor Budget
April, May, and June 2019
	April	May	June	Total
Budgeted production (units)	19200	19400	19900	58500
Direct labor hour per unit	0.5	0.5	0.5	0.5
Total labor hours needed	9600	9700	9950	29250
Direct labor rate per hour	$20.00	$20.00	$20.00	$20.00
Budgeted direct labor cost	$192,000.00	$194,000.00	$199,000.00	$585,000.00