Homework SourseThe management of Zigby Manufacturing prepared the following
The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2017:
To prepare a master budget for April, May, and June of 2017, management gathers the following information:
Sales for March total 18,000 units. Forecasted sales in units are as follows: April, 18,000; May, 17,000; June, 20,700; and July, 18,000. Sales of 247,000 units are forecasted for the entire year. The product’s selling price is $30.00 per unit and its total product cost is $24.20 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 4,300 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,700 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 14,400 units, which complies with the policy.
Each finished unit requires 0.50 hours of direct labor at a rate of $22 per hour.
Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.40 per direct labor hour. Depreciation of $27,850 per month is treated as fixed factory overhead.
Sales representatives’ commissions are 8% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $3,700.
Monthly general and administrative expenses include $19,000 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 are 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.
Dividends of $17,000 are to be declared and paid in May.
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.
Equipment purchases of $137,000 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 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.
Please help ASAP. I\'m not sure what answers are correct or not. Please post answers with detailed explanations.
| ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2017 | ||||
| Assets | ||||
| Cash | $ | 69,000 | ||
| Accounts receivable | 432,000 | |||
| Raw materials inventory | 86,000 | |||
| Finished goods inventory | 348,480 | |||
| Total current assets | 935,480 | |||
| Equipment, gross | 614,000 | |||
| Accumulated depreciation | (157,000 | ) | ||
| Equipment, net | 457,000 | |||
| Total assets | $ | 1,392,480 | ||
| Liabilities and Equity | ||||
| Accounts payable | $ | 178,700 | ||
| Short-term notes payable | 19,000 | |||
| Total current liabilities | 197,700 | |||
| Long-term note payable | 515,000 | |||
| Total liabilities | 712,700 | |||
| Common stock | 342,000 | |||
| Retained earnings | 337,780 | |||
| Total stockholders’ equity | 679,780 | |||
| Total liabilities and equity | $ | 1,392,480 | ||
Solution
1.
Sales budgets.
ZIGBY MANUFACTURING
Sales Budget
April, May, and June 2017
Budgeted Unit Sales
Budgeted Unit Price
Budgeted Total Dollars
April 2013
18,000
$30.00
540,000
May 2013
17,000
30.00
510,000
June 2013
20,700
30.00
621,000
Totals for the quarter
62,200
$25.00
1,671,000
2.
Production budget.
ZIGBY MANUFACTURING
Production Budget
April, May, and June 2017
April
May
June
Total
Next month\'s budgeted sales (units)
17,000
20,700
18,000
Ratio of inventory to future sales
80%
80%
80%
Budgeted ending inventory (units)
13,600
16,560
14,400
Budgeted units sales for month
18,000
17,000
20,700
Required units of available production
31,600
33,560
35,100
Beginning inventory (units)
(14,400)
(13,600)
(16,560)
Units to be produced
17,200
19.960
18,540
55,700
3. Raw materials budget. Solution is correct
4. Direct labor budget. Solution is correct
5.
Factory overhead budget.
ZIGBY MANUFACTURING
Factory Overhead Budget
April, May, and June 2017
April
May
June
Total
Labor hours needed
8,600
9,980
9,270
Variable factory overhead rate
3.40
3.40
3.40
Budgeted variable overhead
$29,240
$33,932
$31,518
$94,690
Budgeted fixed overhead
27,850
27,850
27,850
83,550
Budgeted total overhead
$57,090
$61,782
$59,368
$178,240
6. Selling expense budget. Solution is correct
Selling expense budget.
ZIGBY MANUFACTURING
Selling Expense Budget
April, May, and June 2017
April
May
June
Total
Budgeted sales
$540,000
510,000
621,000
Sales commission percent
8%
8%
8%
Sales commissions
$43,200
$40,800
$49,680
$133,680
Sales salaries
3,700
3,700
3,700
11,100
Total selling expenses
$46,900
$44,500
$53,380
$144,780
7. General and administrative expense budget. Solution is correct
8. Cash budget.
ZIGBY MANUFACTURING
Cash Budget
April, May, and June 2017
April
May
June
Beginning cash balance
$69,000
$120,590
$128,618
Cash receipts from customers
540,000
534,000
532,200
Total cash available
609,000
654,590
660,818
Cash disbursements:
Payments for raw materials
178,700
185,800
192,500
Payments for direct labor
189,200
219,560
203,940
Payments for variable overhead
29,240
33,932
31,518
Sales commissions
43,200
40,800
49,680
Sales salaries
3,700
3,700
3,700
General & administrative salaries
22,090
22,090
22,090
Dividends
17,000
Loan interest
190
Long-term note interest
3,090
3,090
3,090
Purchases of equipment
137,000
Taxes paid
0
0
0
Total cash disbursements
469,410
525,972
643,518
Preliminary cash balance
139,590
128,618
17,300
Additional loan (loan repayment)
(19,000)
37,700
Ending cash balance
$120,590
$128,618
$55,000
Loan balance
April
May
June
Loan balance - Beginning of month
$19,000
$0
$0
Additional loan (loan repayment)
(19,000)
37,700
Loan balance - End of month
$0
$0
$18,760
9. Budgeted income statement for the entire second quarter (not for each month separately).
ZIGBY MANUFACTURING
Budgeted income statement
June 2017
SALES
1,671,000
Cost of goods sold
1,347,940
Gross profit
323,060
Operating expenses:
Sales commision
133,680
sales salaries
11,100
General administrative salaries
66,270
long term note interest
9,270
Bank loan interest expenses
190
Total operating expenses
220,510
Income before taxes
102,550
Income taxes
41,020
Net income
61,530
10. Budgeted balance sheet:
ZIGBY MANUFACTURING
Budgeted Balance Sheet
June 30, 2017
Assets
Cash
$
55,000
Accounts receivable
496,800
Raw materials inventory
94,000
Finished goods inventory
432,000
Total current assets
1,022,800
Equipment, gross
751,000
Accumulated depreciation
(240,550)
Equipment, net
510,450
Total assets
$
1,533,250
Liabilities and Equity
Accounts payable
$
186,700
Short-term notes payable
37,700
Total current liabilities
224,400
Long-term note payable
515,000
Total liabilities
739,400
Common stock
342,000
Retained earnings
451,850
Total stockholders’ equity
793,850
Total liabilities and equity
$
1,533,250
| 1. | Sales budgets. | ||||||||||||||||||||||||||||||||||||||||||||
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| 2. | Production budget. | ||||||||||||||||||||||||||||||||||||||||||||
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