Based on the following information, prepare the Master Budget for Brindle Arts,Inc. for Quarter 2, 2016 Beginning of quarter balances: Cash $ 60,497 Accounts Receivable $ 292,950 Finished Goods Inventory (pieces of art) $ 956 Raw Materials inventory (kits) $ 1,563 Buildings and equipment $ 200,000 Accounts Payable $ 75,222 Common Stock $ 400,000 Retained Earnings $ 251,463 Actual and budgeted sales data (pieces of artwork): MarchAprilMayJuneJulyAugust 4,250 3,825 4,156 3,902 3,865 3,941 Artwork is sold for $150 per piece. Selling price per piece of artwork $ 150 Sales are 55% for cash and 45% on credit. Credit sales are collected in the month following sale. The accounts receivable at the beginning of the quarter are a result of March's credit sales.Sales:Cash55%Credit45% The finished goods inventory on hand at the end of each month must equal 25% of the next month’s sales.Finished Goods inventory25%of next month's sales The raw materials inventory on hand at the end of each month must equal 20% of the following month’s production needs for raw materials. 2 finishing kits are needed per piece of artwork.Raw materials inventory :20%of next month's production needs Raw materials needed per piece of artwork 2finishing kitsRaw materials cost: $ 22.50per finishing kit 60% of each raw materials purchases is paid for in the month of purchase; the other 40% is paid in the following month. The accounts payable at the beginning of the quarter are the result of March raw materials purchases.Purchases:Month of60%Month after40% Manufacturing and Selling and Administrative costs: Variable cost per piece of artwork: Fixed costs per quarter: Direct materials $ 45.00 Manufacturing OH $ 250,000 Direct labor $ 20.00 Depreciation - Manuf. $ 75,000 Var. MOH $ 15.00 Selling and Admin. $ 115,000 Var. S&A $ 10.00 Depreciation - S&A $ 60,000 Office equipment costing $140,000 will be purchased for cash in April and new equipment will be purchased in May for $175,000. Office equipment $ 140,000 in April Equipment purchase $ 175,000 in May Management would like to maintain a minimum cash balance of at least $50,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 2% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter. Minimum cash on hand $ 50,000 Borrow in $ 1,000increments Interest (no compounding)1.5%

The master budget includes all the possible budgets so that the management can analyze how much they…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Based on the following information, prepare the Master Budget for Brindle Arts,Inc. for Quarter 2, 2016

	Beginning of quarter balances:
	Cash			$ 60,497
	Accounts Receivable		$ 292,950
	Finished Goods Inventory (pieces of art)	$ 956
	Raw Materials inventory (kits)		$ 1,563
	Buildings and equipment		$ 200,000
	Accounts Payable		$ 75,222
	Common Stock			$ 400,000
	Retained Earnings		$ 251,463


Actual and budgeted sales data (pieces of artwork):
	March	April	May	June	July	August
	4,250	3,825	4,156	3,902	3,865	3,941

Artwork is sold for $150 per piece.
	Selling price per piece of artwork	$ 150

Sales are 55% for cash and 45% on credit. Credit sales are collected in the month following sale. The accounts receivable at the beginning of the quarter are a result of March's credit sales.
Sales:	Cash	55%	Credit	45%

The finished goods inventory on hand at the end of each month must equal 25% of the next month’s sales.
Finished Goods inventory	25%	of next month's sales

The raw materials inventory on hand at the end of each month must equal 20% of the following month’s production needs for raw materials. 2 finishing kits are needed per piece of artwork.
Raw materials inventory :	20%	of next month's production needs
Raw materials needed per piece of artwork	2	finishing kits
Raw materials cost:	$ 22.50	per finishing kit

60% of each raw materials purchases is paid for in the month of purchase; the other 40% is paid in the following month. The accounts payable at the beginning of the quarter are the result of March raw materials purchases.
Purchases:	Month of	60%	Month after	40%

Manufacturing and Selling and Administrative costs:
	Variable cost per piece of artwork:		Fixed costs per quarter:
	Direct materials	$ 45.00		Manufacturing OH	$ 250,000
	Direct labor	$ 20.00		Depreciation - Manuf.	$ 75,000
	Var. MOH	$ 15.00		Selling and Admin.	$ 115,000
	Var. S&A	$ 10.00		Depreciation - S&A	$ 60,000

Office equipment costing $140,000 will be purchased for cash in April and new equipment will be purchased in May for $175,000.
	Office equipment	$ 140,000	in April	Equipment purchase	$ 175,000	in May

Management would like to maintain a minimum cash balance of at least $50,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 2% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
	Minimum cash on hand	$ 50,000
	Borrow in	$ 1,000	increments
	Interest (no compounding)	1.5%

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