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The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2017: ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2017 Assets Cash Accounts receivable Raw materials inventory Finished goods inventory Total current assets Equipment, gro Accumulated depreciation Equipment, net Total assets $ 50,000 434,240 84,210 368,000 936,450 602,000 151,000 451,000 $1,387,450 ss 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 $ 196,610 12,000 208,610 505,000 713,610 336,000 337,840 673,840 $1,387,450To prepare a master budget for April, May, and June of 2017, management gathers the following information a. Sales for March total 23,000 units. Forecasted sales in units are as follows: April, 23,000; May, 15,300; June, 20,400; and July 23,000. Sales of 241,000 units are forecasted for the entire year. The products selling price is $23.60 per unit and its total product cost is $20.00 per unit. b. Company policy calls for a given months ending raw materials inventory to equal 50% of the next months materials requirements The March 31 raw materials inventory is 4,210 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,100 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials c. Company policy calls for a given months ending finished goods inventory to equal 80% of the next months expected unit sales The March 31 finished goods inventory is 18,400 units, which complies with the policy d. Each finished unit requires 0.50 hours of direct labor at a rate of $15 per hour e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $2.80 per direct labor hour f. Sales representatives, commissions are 10% of sales and are paid in the month of the sales. The sales managers monthly salary is g, Monthly general and administrative expenses include $13,000 administrative salaries and 0.5% monthly interest on the long-term h. The company expects 20% of sales to be for cash and the remaining 80% on credit. Receivables are collected in full in the month i. All raw materials purchases are on credit, and no payables arise from any other transactions. One months raw materials purchases j. The minimum ending cash balance for all months is $41,000. If necessary, the company borrows enough cash using a short-term Depreciation of $21,520 per month is treated as fixed factory overhead $3,100 note payable following the sale (none are collected in the month of the sale) are fully paid in the next month 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 k. Dividends of $11,000 are to be declared and paid in Ma l. No cash payments for income taxes are to be made during the second calendar quarter income tax will be assessed at 40% in the quarter and paid in the third calendar quarter m. Equipment purchases of $131,000 are budgeted for the last day of JuneRequired: 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. 5. Factory overhead budget. 6. Selling expense budget. 7. General and administrative expense budget. 8. Cash budget. 9. Budgeted income statement for the entire second quarter (not for each month separately) 10. Budgeted balance sheet.ZIGBY MANUFACTURING Budgeted Balance Sheet June 30, 2017 Assets Cash Accounts receivable Finished goods inventory Raw materials inventory Total current assets Equipment Accumulated depreciation Equipment, net Total assets Liabilities and Equity Liabilities Accounts payable Bank loan payable Income taxes payable Total current liabilities Long-term note payable Stockholders Equity Common stock Retained earnings Total Stockholders Equity Total Liabilities and Equity

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Answer #1

Ans-2- Zigby Manufacturing

Production Budget

April,May and June

April May June
Next month budgeted sales (units) 15,300 20,400 23,000
Ratio of inventory and future sales 80% 80% 80%
Required Ending Inventory 12,240 16,320 18,400
Current month sales 23,000 15,300 20,400
Total units required 35,240 31,620 38,800
Less: beginning inventory -18,400 -12,240 -16,320
Units required to be produced 16,840 19,380 22,480

Ans-3- Zigby Manufacturing

Raw material budget

April , May and June

April May June
Production budget (units) 16,840 19,380 22,480
Materials needed for production (50% of production budget) 8,420 9,690 11,240
Add: Desired ending inventory 4,845 5,620 4,100
Total 13,265 15,310 15,340
Less:Beginning balance 4,210 4,845 5,620
Raw material required to purchased 9,055 10,465 9,720
Material price per unit $20 $20 $20
Total cost of direct materials purchase $181,100 $209,300 $194,400

4-

Direct Labor Budget

April, May and June

April May June Total
Budgeted production (units) 16,840 19,380 22,480 58,700
Total labor hours needed 8,420 9,690 11,240 29,350
labor rate per hour $15 $15 $15 $15
Labor dollars $126,300 $145,350 $168,600 $440,250

5-Factory Overhead Budget

April, May and June

April May June Total
Labor hours needed 8,420 9,690 11,240 29,350
Predetermined overhead rate $2.80 $2.80 $2.80 $2.80
Budgeted variable overhead 23,576 27,132 31,472 82,180
Budgeted fixed overhead 21,520 21,520 21,520 64,560
Budgeted total overhead $45,096 $48,652 $52,992 $146,740

6- Selling Expenses Budget

April, May and June

April May June Total
Budgeted Sales

$542,800

(23,000*$23.60)

$361,080

(15,300*$23.60)

$481,440

(20,400*$23.60)

 $1,385,320
Sales commission 10% 10% 10%
Variable Sales commission Dollars 54,280 36,108 48,144 $138,532
Fixed Sales Expenses 3,100 3,100 3,100 $9,300
Total sales expenses $57,380 $39,208 $51,244 $147,832

7- General and administrative expenses budget

April, May and June

April May June Total
Administrative Expenses $13,000 $13,000 $13,000 $39,000
Monthly interest ($505,000*0.5%) $2,525 $2,525 $2,525 $7,575
Total general and administrative expenses $15,525 $15,525 $15,525 $46,575

8- Calculation of cash receipts from customers

April, May and June

April May June
Total budgeted sales $542,800 $361,080 $481,440
Cash Sales 20% $108,560 $72,216 $96,288
Sales on credit 80% $434,240 $288,864 $385,152

Total Cash receipts from customers

April May June
Current months cash sales $108,560 $72,216 $96,288
Collection of receivables $434,240 $434,240 $288,864
Total $542,800 $506,456 $385,152

9- Calculations of cash payments for purchase of raw materials

April, May and June

April May June
Cash Payment to suppliers $196,610 $181,100 $209,300

10- Cash Budget

April May June
Beginning cash balance $41,000 $142,889 $208,510
Cash Receipts 542,800 506,456 385,152
Total Cash Available $583,800 $649,345 $593,662
Cash disbursements:-
Payment towards purchase of raw materials 196,610 181,100 209,300
Direct Labor 126,300 145,350 168,600
Overhead 45,096 48,652 52,992
Sales Expenses 57,380 39,208 51,244
General and administrative expenses 15,525 15,525 15,525
Dividends 11,000
Equipment purchases 131,000
Total Cash disbursements $440,911 $440,835 $628,661
Ending cash balance $142,889 $208,510 -$34,999
Borrowing $75,999
Ending Cash Balance $142,880 $208,510 $41,000

Income Statement

For three months ended June 30,2017

Sales $1,385,320
Less: Cost of goods sold $1,174,000
Gross Profit $211,320
Operating expenses:
General and administrative expenses 39,000
Sales expenses:-
Sales commission 138,532
Salaries to sales representatives 9,300 186,832
Net income before interest and tax 24,488
Less: interest on short term notes payable -760
Monthly interest -7,575
Net income before tax 16,153
Income tax (40%of $16,153) 6,461
Net Income $9,692
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