The management of Zigby Manufacturing prepared the following estimated balance s
ID: 2573654 • Letter: T
Question
The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 2015:
To prepare a master budget for April, May, and June of 2015, management gathers the following information.
Sales for March total 22,800 units. Forecasted sales in units are as follows: April, 22,800; May, 16,000; June, 23,000; July, 22,800. Sales of 255,000 units are forecasted for the entire year. The product’s selling price is $24.00 per unit and its total product cost is $19.30 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 4,510 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,500 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 70% of the next month’s expected unit sales. The March 31 finished goods inventory is 15,960 units, which complies with the policy.
Each finished unit requires 0.50 hours of direct labor at a rate of $11 per hour.
Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $4.20 per direct labor hour. Depreciation of $35,020 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 $4,500.
Monthly general and administrative expenses include $27,000 administrative salaries and 0.6% monthly interest on the long-term note payable.
The company expects 20% of sales to be for cash and the remaining 80% 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 $55,000. 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:
Budgeted income statement for the entire first quarter (not for each month separately).
The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 2015:
Explanation / Answer
Required information for Zigby is as prepared below:
1. Sales Budget Zigby Manufacturing Sales Budget For the quarter ended June 30,2017 Month Particulars April May June Total Sale Units (a) 22,800 16,000 23,000 61,800 *Price per unit (b) $24.0 $24.0 $24.0 $24.0 Total Sales $547,200 $384,000 $552,000 1,483,200 Zigby Manufacturing Schedule of expected Cash collections For the quarter ended June 30,2017 Month Particulars April May June Total Beginning Accounts Receivable (a) 437,760 437,760 April Cash Sales 109,440 109,440 April Credit Sales 437,760 437,760 May Cash Sales 76,800 384,000 May Credit Sales 307,200 110,400 June Cash Sales 110,400 417,600 Total collections 547,200 514,560 417,600 1,061,760 2. Production Budget Zigby Manufacturing Production Budget For the quarter ended June 30,2017 Month Particulars April May June Total Sale Units (a) 22,800 16,000 23,000 61,800 Planned ending units (b) 11,200 16,100 15,960 15,960 Beginning units (c ) 15,960 11,200 16,100 15,960 Planned production units (d)= (a+b-c) 18,040 20,900 22,860 61,800 3. Raw material Budget Zigby Manufacturing Raw Material Purchase Budget For the quarter ended June 30,2017 Month Particulars April May June Total Planned production units (a) 18,040 20,900 22,860 61,800 *Direct Material required per unit (b) 0.5 0.5 0.5 0.5 Direct Material Required for production (c ) 9,020 10,450 11,430 30,900 Budgeted ending Direct Material (d) 5,225 5,715 5,500 5,500 Beginning Direct Material (e ) 4,510 5,225 5,715 4,510 Budgeted direct material purchase f= c+d-e 9,735 10,940 11,215 31,890 Cost per unit (g) $20 $20 $20 $20 BudgetedDM purchases $194,700 $218,800 $224,300 637,800 Zigby Manufacturing Schedule of expected Cash payments For the quarter ended June 30,2017 Month Particulars April May June Total Beginning Accounts Payable (a) $204,500 $204,500 April Purchases (b) $194,700 $194,700 May Purchases (c ) $218,800 $218,800 June Purchases (d) $0 Total payments (a+b+c+d) $204,500 $194,700 $218,800 $618,000 4. Direct labour Budget Zigby Manufacturing Direct Labour Budget For the quarter ended June 30,2017 Month Particulars April May June Total Planned production units (a) 18,040 20,900 22,860 61,800 *Direct labour required per unit (b) 0.5 0.5 0.5 0.5 Budgeted Direct labour hours 9,020 10,450 11,430 30,900 Cost per direct labour hour 11 11 11 11 Budgeted Direct labour Cost $99,220 $114,950 $125,730 $339,900 5. Factory Overhead Budget Zigby Manufacturing Factory Overhead Budget For the quarter ended June 30,2017 Month Particulars April May June Total Variable Factory Overhead: Budgeted Direct labour hours 9,020.0 10,450.0 11,430.0 30,900.0 Variable Overhead rate 4.2 4.2 4.2 4.2 Total Variable overhead 37,884 43,890 48,006 129,780 Fixed factory overhead Depreciation 35,020 35,020 35,020 105,060 6. selling expense budget Zigby Manufacturing Selling expense Budget For the quarter ended June 30,2017 Month Particulars April May June Total Budgeted Sales 547,200 384,000 552,000 1,483,200 Sales commisssions (10% of sales) 54,720 38,400 55,200 148,320 Salaries 4,500 4,500 4,500 13,500 7. General and administrative expense budget Zigby Manufacturing General and administrative expense Budget For the quarter ended June 30,2017 Month Particulars April May June Total Administrative salaries 27,000 27,000 27,000 81,000 Interest (.6%*515,000) 3,090 3,090 3,090 9,270 Total expense 30,090 30,090 30,090 90,270 Zigby Manufacturing Cash Budget For the quarter ended June 30,2017 Month Particulars April May June Total Beginning Cash balance 65,000 154,016 217,046 65,000 Add: Collection from customers $547,200 $514,560 $417,600 $1,479,360 cash available for use $612,200 $668,576 $634,646 $1,544,360 Less: cash Disbursements Merchandise purchase $204,500 $194,700 $218,800 $618,000 Direct labour 99,220 114,950 125,730 $339,900 Manufacturing overhead 37,884 43,890 48,006 $129,780 sales commision 54,720 38,400 55,200 $148,320 Salaries 4,500 4,500 4,500 $13,500 Administrative saleries 27,000 27,000 27,000 $81,000 Interest on bond (515,000*.6%) 3,090 3,090 3,090 $9,270 Dividend paid 25,000 $25,000 Equipment purchase 145,000 $145,000 Total disbusrement 430,914 451,530 627,326 1,509,770 Cash surplus/Deficit 181,286 217,046 7,320 34,590.0 Financing Borrowing 47,680 47,680 Repayment -27,000 -27,000 Interest -270 -270 Net cash from Financing -27,270 0 47,680 20,410 Budgeted ending cash balance 154,016 217,046 55,000 55,000Related Questions
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