Question

Mayson Company produces wooden craft table. The company is completing its fifth year of operations and is preparing to build its master budget for the coming year (2020). The budget will detail each quarter’s activity and the activity for the year in total. The master budget will be based on the following information: a Unit sales by quarter (for 2020) are projected as follows:

First-quarter	60 000
Second quarter	75 000
Third-quarter	80 000
Fourth-quarter	95 000

It is expected the sales of the first and second quarter of 2021 will be the same as the fourth quarter of 2020. The selling price is $950 per unit. 50% of sales are cash sales, and 50% are credit sales. Mayson collected 60% of credit sales in the first quarter after the sales, 35% in the following quarter. Allowance for doubtful debts is 5% of credit sales.

The ending finished good inventory is 20% of the following quarter sales. Last year, the selling price and product cost/ unit were $900 and $750 respectively. Mayson uses FIFO inventory costing method.

b Each furniture unit uses four hours of direct labour and six meters of teak wood and a half slab of marble. The cost of teakwood and marble are the same as last year. Workers are paid $25 per hour, and one meter of teak wood costs $80, while one slab of marble costs $600. c At the end of each quarter, Mayson plans to have 30% of the teak wood and marble needed for next quarter’s unit production.

4. Mayson buys teak wood and marble on the account. Half of the purchases are paid for in the quarter of acquisition, and the remaining half is paid for in the following quarter. Wages and salaries are paid on the 15th and 30th of each month.
5. Fixed overhead totals $500 000 each quarter. Of this total, $250 000 represents plant and equipment depreciation. All other fixed expenses are paid for in cash in the quarter incurred. The fixed overhead rate is computed by dividing the year’s total fixed overhead by the total labour hours needed for

the year.

6. Variable overhead is budgeted at $10 per direct labour hour. All variable overhead expenses are paid for in the quarter incurred.
7. Fixed selling and administrative expenses total $50 000 per quarter, including $5 000 depreciation. h Variable selling and administrative expenses are budgeted at $10 per unit sold.

All selling and administrative expenses are paid for in the quarter incurred.

i The balance sheet as at 31 December 2019 is as follows:

ASSETS
Cash	$ 250 000
Direct materials inventory	14 742 000
Inventory Finished good	9 000 000
Accounts receivable, net	3 300 000
Plant and equipment, net	33 500 000
Total assets	$60 792 000

LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$ 7 371 000*
Capital share	25 571,000
Retained earnings	27 850 000
Total liabilities and shareholders’ equity	$60 792 000

^* For purchase of direct materials only.

The ending balance of Account receivable will be paid in the first quarter of 2020.

10. Mayson will pay quarterly dividends of $500 000. At the end of the third quarter, $200,000 of equipment will be purchased and paid in cash. This equipment is estimated to have five years of useful life, and Mason applies the straight-line depreciation method. After five years, it is estimated that the equipment can be sold for $5,000
11. Mayson maintains a 12% open line of credit for $20 000 000. Interests are paid at the end of each quarter. Mayson maintains a minimum cash balance of $200,000. The company borrows on the first day of the quarter and repays loans on the last day of the quarter, both in multiples of $ 100,000.

50. The tax rate is 30%.

REQUIRED:

Prepare a master budget for Mayson Company for each quarter of 2020 and for the year in total. The following component budgets must be included:

1. Sales budget (in thousands)
2. Production budget
3. Direct materials purchases budget
4. Direct labour budget
5. Overhead budget
6. Selling and administrative expenses budget
7. Ending finished goods inventory budget
8. Cost of goods sold budget (Note: Assume that there is no change in work in process inventories)
9. Cash budget
10. Pro Forma Profit and Loss Statement

Answer 1

Sales Budget	2020					2021
	Q1	Q2	Q3	Q4	2020	Q1	Q2	First Half
Sales Units	60000	75000	80000	95000	310000	60000	75000	135000
Sales Price per unit	$         950.00	$         950.00	$         950.00	$         950.00		$         950.00	$         950.00
Sales Revenue (in thousands)	$         57,000	$         71,250	$         76,000	$         90,250	$       294,500	$         57,000	$         71,250	$       128,250

Production Budget
	2020					2021
	Q1	Q2	Q3	Q4	2020	Q1	Q2	First Half
Sales Units	60000	75000	80000	95000	310000	60000	75000	135000
Add : Desired Ending Inventory	15000	16000	19000	12000	12000	15000
Total Units required	75000	91000	99000	107000	322000	75000
Less : Beginning Inventory	12000	15000	16000	19000	12000	12000
Production Required	63000	76000	83000	88000	310000	63000

Purchases Budget
	2020
	Q1	Q2	Q3	Q4	2020	Q1
Wood
Production Required	63000	76000	83000	88000	310000	63000
Raw Material Per unit (Meter)	6	6	6	6		6
Raw Material for Production	378000	456000	498000	528000	1860000	378000
Add : Desired Ending Inventory	136800	149400	158400	113400	113400
Total Needs	514800	605400	656400	641400	1973400
Less : Beginning Inventory	113400	136800	149400	158400	113400
Raw Material Purchase Units	401400	468600	507000	483000	1860000
Cost per meter	$            80.00	$            80.00	$            80.00	$            80.00
Raw Material Purchase (in thousands)	$         32,112	$         37,488	$         40,560	$         38,640	$       148,800
Purchases Budget
	2020
	Q1	Q2	Q3	Q4	2020	Q1
Marble
Production Required	63000	76000	83000	88000	310000	63000
Raw Material Per unit (Slabs)	0.5	0.5	0.5	0.5		0.5
Raw Material for Production	31500	38000	41500	44000	155000	31500
Add : Desired Ending Inventory	11400	12450	13200	9450	9450
Total Needs	42900	50450	54700	53450	164450
Less : Beginning Inventory	9450	11400	12450	13200	9450
Raw Material Purchase Units	33450	39050	42250	40250	155000
Cost per slab	$         600.00	$         600.00	$         600.00	$         600.00
Raw Material Purchase (in thousands)	$         20,070	$         23,430	$         25,350	$         24,150	$         93,000

Direct labor Budget
	2020
	Q1	Q2	Q3	Q4	2020
Production Required	63000	76000	83000	88000	310000
Hours per unit	4	4	4	4
Hours required	252000	304000	332000	352000	1240000
Rate per hour	$            25.00	$            25.00	$            25.00	$            25.00
Direct labor cost (in thousands)	$            6,300	$            7,600	$            8,300	$            8,800	$         31,000

Overhead Budget
	2020
	Q1	Q2	Q3	Q4	2020
Production Required	63000	76000	83000	88000	310000
Hours per unit	4	4	4	4
Hours required	252000	304000	332000	352000	1240000
Variable Overhead rate per hour	$            10.00	$            10.00	$            10.00	$            10.00
Variable Overhead (in thousands)	$            2,520	$            3,040	$            3,320	$            3,520	$         12,400
Fixed Overhead (in thousands)	$               500	$               500	$               500	$               500	$            2,000
Total Overhead (in thousands)	$            3,020	$            3,540	$            3,820	$            4,020	$         14,400

As per HOMEWORKLIB RULES we are supposed to solve 4 subparts, i have solved 5, kindly post others separately