The management of Zigby Manufacturing prepared the following estimated balance s
ID: 2571044 • Letter: T
Question
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, gross Accumulated depreciation Equipment, net Total assets S43,000 432,900 86, 198 387,168 949,266 606,000 (153,000) 453, 000 $1,402,266 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 S 194,798 15,000 209, 798 500,000 709,798 338,000 354,468 692,468 $1,402,266 To prepare a master budget for April, May, and June of 2017, management gathers the following information: a. Sales for March total 22,200 units. Forecasted sales in units are as follows: April, 22,200; May, 16,000; June, 19,800, and July 22,200. Sales of 243,000 units are forecasted for the entire year. The product's selling price is $26.00 per unit and its total product cost is $21.80 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 4,310 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,300 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 17,760 units, which complies with the policy. d. Each finished unit requires 0.50 hours of direct labor at a rate of $18 per hour e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.00 per direct labor hour Depreciation of $25,134 per month is treated as fixed factory overhead f. Sales representatives' commissions are 9% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,300Explanation / Answer
1. Cash receipts from customers
Particulars
Percent
April
May
June
Total
Total Sales
577,200
416,000
514,800
1,508,000
Cash Sales
25%
144,300
104,000
128,700
377,000
Sales on credit
75%
432,900
312,000
386,100
1,131,000
Total Cash Receipts from Customers
Particulars
April
May
June
Current month cash sales
144,300
104,000
128,700
Collection of receivables
22,200 x 26 x 75% =432,900
432,900
312,000
TOTAL
577,200
536,900
440,700
2. Calculation of Finished products to be produced each month
Particulars
April
May
June
Total
Sales in units(A)
22,200
16,000
19,800
58,000
Closing Inventory Required(B)
16,000 x 80% = 12,800
19,800 x 80% = 15,840
17,760
46,400
Opening Inventory(C)
17,760
12,800
15,840
46,400
Units to be produced(A+B-C)
17,240
19,040
21,720
58,000
Calculation of Raw materials required to be purchased in units and amount
Particulars
April
May
June
Units to be produced
17,240
19,040
21,720
RM Required (0.50 per unit)
8,620
9,520
10,860
Closing Inventory required
9,520 x 50% = 4,760
10,860 x 50% = 5,430
4,300 units (given in question)
Opening Inventory
4,310 units
4,760
5,430
RM to be purchased
9,070
10,190
9,730
RM Cost ($20 per unit)
181,400
203,800
194,600
Budgeted Income Statement for the Quarter
Particulars
Amount
Total
Sales
1508,000
Less: Sales Commission (9%)
(135,720)
Net Sales
1,372,280
Operating Expenses
Cost of Product
1,264,400
Salary
9,900
General & Admin expenses
45,000
Interest on long term note payable
9,000
Total Operating Expenses
1,328,300
Operating Income
43,980
Income Tax
17,592
Net Income/ Loss
26,388
NOTE : Depreciation is assumed to be considered in cost of product since it is a fixed manufacturing overhead.
Particulars
Percent
April
May
June
Total
Total Sales
577,200
416,000
514,800
1,508,000
Cash Sales
25%
144,300
104,000
128,700
377,000
Sales on credit
75%
432,900
312,000
386,100
1,131,000
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