ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2015 To prepare a master b
ID: 2480947 • Letter: Z
Question
ZIGBY MANUFACTURING
Estimated Balance Sheet
March 31, 2015
To prepare a master budget for April, May, and June of 2015, management gathers the following information.
Sales for March total 22,300 units. Forecasted sales in units are as follows: April, 22,300; May, 16,300; June, 22,700; July, 22,300. Sales of 252,000 units are forecasted for the entire year. The product’s selling price is $26.00 per unit and its total product cost is $21.00 per unit.
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 4,375 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,200 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.
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 17,840 units, which complies with the policy.
Each finished unit requires 0.50 hours of direct labor at a rate of $15 per hour.
Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.90 per direct labor hour. Depreciation of $31,670 per month is treated as fixed factory overhead.
Sales representatives’ commissions are 10% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $4,200.
Monthly general and administrative expenses include $24,000 administrative salaries and 0.9% monthly interest on the long-term note payable.
The company expects 25% of sales to be for cash and the remaining 75% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of the sale).
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.
The minimum ending cash balance for all months is $62,000. 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.
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.
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:
ZIGBY MANUFACTURING
Sales Budget
April, May, and June 2015
Budgeted Unit Sales
Budgeted Unit Price
Budgeted Total Dollars
April 2015
May 2015
June 2015
Totals for the quarter
2. Production Budget
ZIGBY MANUFACTURING
Production Budget
April, May, and June 2015
April
May
June
Next month's budgeted sales (units)
16,300
22,700
22,300
Ratio of inventory to future sales
80%
80%
80%
Required units of available production
Units to be produced
3. Raw Materials Budget
ZIGBY MANUFACTURING
Raw Materials Budget
April, May, and June 2015
April
May
June
Production budget (units)
Materials needed for production
Total materials requirements (units)
Materials to be purchased
Material price per unit
Total cost of direct material purchases
4. Direct Labor Budget
ZIGBY MANUFACTURING
Raw Materials Budget
April, May, and June 2015
April
May
June
Production budget (units)
Materials needed for production
Total materials requirements (units)
Materials to be purchased
Material price per unit
Total cost of direct material purchases
5. Factory overhead budget
ZIGBY MANUFACTURING
Factory Overhead Budget
April, May, and June 2015
April
May
June
Total
Labor hours needed
Budgeted variable overhead
Budgeted fixed overhead
Budgeted total overhead
6. Selling Expense Budget
ZIGBY MANUFACTURING
Factory Overhead Budget
April, May, and June 2015
April
May
June
Total
Labor hours needed
Budgeted variable overhead
Budgeted fixed overhead
Budgeted total overhead
7. General and administrative expense budget
ZIGBY MANUFACTURING
Factory Overhead Budget
April, May, and June 2015
April
May
June
Total
Labor hours needed
Budgeted variable overhead
Budgeted fixed overhead
Budgeted total overhead
8.
Cash budget. (Negative balance and Loan repayment amount should be indicated with minus sign. Round your answers to 2 decimal places.)
Calculation of Cash receipts from customers:
April
May
June
Total budgeted sales
Cash sales
25%
Sales on credit
75%
Total cash receipts from customers
April
May
June
Current month's cash sales
Collections of receivables
ZIGBY MANUFACTURING
Cash Budget
April, May, and June 2015
April
May
June
Beginning cash balance
Total cash available
Cash disbursements:
Total cash disbursements
0
0
0
Preliminary cash balance
Ending cash balance
Loan balance
April
May
June
Loan balance - Beginning of month
Additional loan (loan repayment)
Loan balance - End of month
ZIGBY MANUFACTURING
Estimated Balance Sheet
March 31, 2015
Explanation / Answer
1. Sales Budget ZIGBY MANUFACTURING Sales Budget April, May, and June 2015 Apil 15 May-16 Jun-16 Totals for the quarter July Budgeted Unit Sales 22300 16300 22700 61300 22300 Budgeted Unit Price 26 26 26 26 26 Budgeted Total Dollars 579800 423800 590200 1593800 579800 2. Production Budget ZIGBY MANUFACTURING Production Budget April, May, and June 2015 Apr May June Sale 22300 16300 22700 22300 Finished goods 13040 18160 17840 Opening stock 17840 13040 18160 Production Budget 17500 21420 22380 3. Raw Materials Budget ZIGBY MANUFACTURING Raw Materials Budget April, May, and June 2015 April May June Total Total materials requirements (units) 8750 10710 11190 Issue to production 8750 10710 11190 30650 Finished Raw materials Inventory 5355 5595 5200 5200 Opening stock 4375 5355 5595 4375 Purchases of raw materials (To be purchased) 9730 10950 10795 31475 Material price per unit 20 20 20 Total cost of direct material purchases 194600 219000 215900 629500 5. Factory overhead budget ZIGBY MANUFACTURING Factory Overhead Budget April, May, and June 2015 April May June Total Production Budget 17500 21420 22380 61300 Labor hours needed 8750 10710 11190 30650 Budgeted variable overhead@3.9/DL hr. 34125 41769 43641 119535 Fixed Oh-Depreciation 31670 31670 31670 95010 Budgeted total overhead 65795 73439 75311 214545 6. Selling Expense Budget ZIGBY MANUFACTURING Selling expensesBudget April, May, and June 2015 April May June Total Sales 579800 423800 590200 1593800 Sales Rep. Commission(Variable OH) 57980 42380 59020 159380 Sales Manager salary (Fixed OH) 4200 4200 4200 12600 Budgeted total overhead 62180 46580 63220 171980 7. General and administrative expense budget ZIGBY MANUFACTURING General and administrative expense budget April, May, and June 2015 April May June Total Interest on Long term notes 4680 4680 4680 14040 Interest on Short term notes payable 240 240 Budgeted variable overhead 4920 4680 4680 14280 Budgeted fixed overhead 24000 24000 24000 72000 Budgeted total overhead 28920 28680 28680 86280 8 Cash budget. (Negative balance and Loan repayment amount should be indicated with minus sign. Round your answers to 2 decimal places.) Calculation of Cash receipts from customers: April May June Total Total budgeted sales 579800 423800 590200 1593800 Cash sales 25% 144950 105950 147550 398450 Sales on credit 75% 434850 317850 442650 1195350 Total cash receipts from customers April May June Total Current month's cash sales 144950 105950 147550 398450 Collections of receivables 434850 434850 317850 1187550 442650 Total cash receipts from customers 579800 540800 465400 1586000 442650 ZIGBY MANUFACTURING Cash Budget April, May, and June 2015 April May June Total Beginning cash balance 65000 163045 289735 65000 Cash receipts from customers 579800 540800 465400 1586000 Total cash available 644800 703845 755135 1651000 Raw material purchases 199405 194600 219000 613005 Labour 167250 122250 170250 459750 Selling OH 62180 46580 63220 171980 Administrative expenses 28920 28680 28680 86280 Dividend 0 22000 22000 Equipment Purchases 142000 142000 Loan repayment 24000 24000 Total cash disbursements 481755 414110 623150 1519015 Preliminary cash balance 163045 289735 131985 131985 Ending cash balance 163045 289735 131985 131985 Loan balance April May June Loan balance - Beginning of month 24000 Additional loan (loan repayment) 24000 Loan balance - End of month 0 Income Statement Sales 1593800 Less : Cost ofRaw Materials 30650*20 613000 Labour-61300*7.5 459750 FOH-61300*0.5*3.9+ Depn.95010 214545 1287295 Gross Profit 306505 Less : Operating expenses Sell.& Admn. Exp. 171980 Gen. Admn. Exp. 86280 258260 Income before tax 48245 Tax @40% 19298 Income after tax 28947 Less dividends 22000 Net Income trf. To Retained Earnings 6947 Assets Cash 131990 Accounts receivable 442650 Raw materials inventory 104000 Finished goods inventory 374640 Total current assets 1053280 Equipment, gross 766000 Accumulated depreciation -257010 Equipment, net 508990 Total assets 1562270 Liabilities and Equity Accounts payable 215900 Variable FOH payable 119535 Income tax payable 19298 Short-term notes payable 0 Total current liabilities 354733 Long-term note payable 520000 Total liabilities 874733 Common stock 347000 Retained earnings 340537 Total stockholders’ equity 687537 Total liabilities and equity 1562270
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