The management of Zigby Manufacturing prepared the following balance sheet for March 31. ZIGBY MANUFACTURING Balance Sheet March 31 Cash Accounts receivable Assets Raw materials inventory Finished goods inventory Equipment Less: Accumulated depreciation $ 2,160,000 540,000 $ 144,000 Liabilities 1,239,840 354,600 1,171,944 1,620,000 Liabilities and Equity Accounts payable Loan payable Long-term note payable Equity Common stock Retained earnings $ 723,600 12,000 1,800,000 1,206,000 788,784 $ 2,535,600 Total cash available Less: Cash payments for: 1,994,784 $4,530,384 Total assets $4,530,384 Total liabilities and equity To prepare a master budget for April, May, and June, management gathers the following information. a. Sales for March total 73,800 units. Budgeted sales in units follow: April, 73,800; May, 70,200; June, 72,000; and July, 73,800. The product's selling price is $24.00 per unit and its total product cost is $19.85 per unit. b. Raw materials inventory consists solely of direct materials that cost $20 per pound. Company policy calls for a given month's ending materials inventory to equal 50% of the next month's direct materials requirements. The March 31 raw materials inventory is 17,730 pounds. The budgeted June 30 ending raw materials inventory is 14,400 pounds. Each finished unit requires 0.50 pound of direct materials. c. Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's budgeted unit sales. The March 31 finished goods inventory is 59,040 units. d. Each finished unit requires 0.50 hour of direct labor at a rate of $15 per hour. e. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $72,000 per month is the only fixed factory overhead item. f. Sales commissions of 8% of sales are paid in the month of the sales. The sales manager's monthly salary is $10,800. g. Monthly general and administrative expenses include $43,200 for administrative salaries and 0.9% monthly interest on the long- term note payable. h. The company budgets 30% of sales to be for cash and the remaining 70% on credit. Credit sales are collected in full in the month following the sale (no credit sales are collected in the month of sale). i. All raw materials purchases are on credit, and accounts payable are solely tied to raw materials purchases. Raw materials purchases are fully paid in the next month (none are paid in the month of purchase). Beginning cash balance Less: Cash receipts from sales j. The minimum ending cash balance for all months is $144,000. If necessary, the company borrows enough cash using a loan to reach the minimum. Loans require an interest payment of 1% at each month-end (before any repayment). If the month-end preliminary cash balance exceeds the minimum, the excess will be used to repay any loans. Direct material Direct labor Variable overhead Sales commissions Sales salaries General and administrative salaries Dividends Loan interest Long-term note interest Purchases of equipment Total cash payments Preliminary cash balance Additional loan (loan repayment) Ending cash balance Loan balance - Beginning of month k. Dividends of $36,000 are budgeted to be declared and paid in May. 1. No cash payments for income taxes are budgeted in the second calendar quarter. Income tax will be assessed at 35% in the Additional loan (loan repayment) quarter and budgeted to be paid in the third calendar quarter. Loan balance - End of month m. Equipment purchases of $360,000 are budgeted for the last day of June. Cash Budget $ April $ 144,000 1,771,200 1,915,200 Loan balance 723,600 723,600 April 0 May 2,250,720 712,800 712,800 May June 1,697,76 725,40 725,40 June