The management of Zigby Manufacturing prepared the following estimated balance s
ID: 2483505 • Letter: T
Question
The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 2013:
ZIGBY MANUFACTURING
Estimated Balance Sheet
March 31, 2013
Assets
Cash
$
59,000
Accounts receivable
487,500
Raw materials inventory
93,010
Finished goods inventory
433,000
Total current assets
1,072,510
Equipment, gross
638,000
Accumulated depreciation
(169,000)
Equipment, net
469,000
Total assets
$
1,541,510
Liabilities and Equity
Accounts payable
215,410
Short-term notes payable
31,000
Total current liabilities
$
246,410
Long-term note payable
530,000
Total liabilities
776,410
Common stock
354,000
Retained earnings
411,100
Total stockholders’ equity
765,100
Total liabilities and equity
$
1,541,510
To prepare a master budget for April, May, and June of 2013, management gathers the following information.
a.
Sales for March total 25,000 units. Forecasted sales in units are as follows: April, 25,000; May, 17,000; June, 22,400; July, 25,000. Sales of 259,000 units are forecasted for the entire year. The product’s selling price is $26.00 per unit and its total product cost is $21.65 per unit.
b.
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 4,650 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,900 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.
c.
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 20,000 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 $4.60 per direct labor hour. Depreciation of $39,710 per month is treated as fixed factory overhead.
f.
Sales representatives’ commissions are 5% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $4,900 per month.
g.
Monthly general and administrative expenses include $34,000 administrative salaries and 0.8% monthly interest on the long-term note payable.
h.
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).
i.
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.
J.
The minimum ending cash balance for all months is $98,000. 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.
K.
Dividends of $29,000 are to be declared and paid in May.
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 $149,000 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 budgets. (Round budgeted unit price answer to 2 decimal places.)
2. Production budget.
3. Raw materials budget. (Round Materials requirements per unit answers to 2 decimal places.)
4. Direct labor budget. (Round Labor requirements per unit answers to 2 decimal places.)
5. Factory overhead budget. (Round Variable factory overhead rate answers to 2 decimal places.)
6. Selling expense budget.
7. General and administrative expense budget.
ZIGBY MANUFACTURING
Estimated Balance Sheet
March 31, 2013
Assets
Cash
$
59,000
Accounts receivable
487,500
Raw materials inventory
93,010
Finished goods inventory
433,000
Total current assets
1,072,510
Equipment, gross
638,000
Accumulated depreciation
(169,000)
Equipment, net
469,000
Total assets
$
1,541,510
Liabilities and Equity
Accounts payable
215,410
Short-term notes payable
31,000
Total current liabilities
$
246,410
Long-term note payable
530,000
Total liabilities
776,410
Common stock
354,000
Retained earnings
411,100
Total stockholders’ equity
765,100
Total liabilities and equity
$
1,541,510
Explanation / Answer
1. Sales Budget
2. Production Budget
Note 1. Closing Stock units
3. Raw Materials Budget
4. Direct Labour Budget
5. Factory Overhead Budget
6.Selling Expense Budget
7. General and Administrative expense budget
Sales Budget Month April May June Sales Budget (in Quantity ) 25000 17000 22400 Sellng Price per unit 26 26 26 Sales Budget (in $) 650000 442000 582400Related Questions
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