Prepare the following budgets for the months of April, May, and June: 1. Sales budget. 2. Production budget. 3. Direct materials budget. The management of Zigby Manufacturing prepared the following balance sheet for March 31. ZIGBY MANUFACTURING Balance Sheet March 31 Assets Liabilities and Equity Cash $ 65,000 Liabilities Accounts receivable 399,000 Accounts payable $ 204,500 Raw materials inventory 90,200 Loan payable 27,000 Finished goods inventory 308,028 Long-term note payable 500,000 $ 731,500 Equipment $ 630,000 Equity Less: Accumulated depreciation 165,000 465,000 Common stock 350,000 Retained earnings 245,728 595,728 Total assets $ 1,327,228 Total liabilities and equity $ 1,327,228 To prepare a master budget for April, May, and June, management gathers the following information. Sales for March total 22,800 units. Budgeted sales in units follow: April, 22,800; May, 16,000; June, 23,000; and July, 22,800. The product’s selling price is $25.00 per unit and its total product cost is $19.30 per unit. 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 4,510 pounds. The budgeted June 30 ending raw materials inventory is 5,500 pounds. Each finished unit requires 0.50 pound of direct materials. Company policy calls for a given month’s ending finished goods inventory to equal 70% of the next month’s budgeted unit sales. The March 31 finished goods inventory is 15,960 units. Each finished unit requires 0.50 hour of direct labor at a rate of $11 per hour. The predetermined variable overhead rate is $4.20 per direct labor hour. Depreciation of $35,020 per month is the only fixed factory overhead item. Sales commissions of 10% of sales are paid in the month of the sales. The sales manager’s monthly salary is $4,500.

Prepare the following budgets for the months of April, May, and June: 1. Sales budget. 2. Production budget. 3. Direct materials budget. The management of Zigby Manufacturing prepared the following balance sheet for March 31. ZIGBY MANUFACTURING Balance Sheet March 31 Assets Liabilities and Equity Cash $ 65,000 Liabilities Accounts receivable 399,000 Accounts payable $ 204,500 Raw materials inventory 90,200 Loan payable 27,000 Finished goods inventory 308,028 Long-term note payable 500,000 $ 731,500 Equipment $ 630,000 Equity Less: Accumulated depreciation 165,000 465,000 Common stock 350,000 Retained earnings 245,728 595,728 Total assets $ 1,327,228 Total liabilities and equity $ 1,327,228 To prepare a master budget for April, May, and June, management gathers the following information. Sales for March total 22,800 units. Budgeted sales in units follow: April, 22,800; May, 16,000; June, 23,000; and July, 22,800. The product’s selling price is $25.00 per unit and its total product cost is $19.30 per unit. 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 4,510 pounds. The budgeted June 30 ending raw materials inventory is 5,500 pounds. Each finished unit requires 0.50 pound of direct materials. Company policy calls for a given month’s ending finished goods inventory to equal 70% of the next month’s budgeted unit sales. The March 31 finished goods inventory is 15,960 units. Each finished unit requires 0.50 hour of direct labor at a rate of $11 per hour. The predetermined variable overhead rate is $4.20 per direct labor hour. Depreciation of $35,020 per month is the only fixed factory overhead item. Sales commissions of 10% of sales are paid in the month of the sales. The sales manager’s monthly salary is $4,500.

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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Prepare the following budgets for the months of April, May, and June:

1. Sales budget.

2. Production budget.
3. Direct materials budget.

The management of Zigby Manufacturing prepared the following balance sheet for March 31.

ZIGBY MANUFACTURING
Balance Sheet
March 31
Assets			Liabilities and Equity
Cash		$ 65,000	Liabilities
Accounts receivable		399,000	Accounts payable	$ 204,500
Raw materials inventory		90,200	Loan payable	27,000
Finished goods inventory		308,028	Long-term note payable	500,000	$ 731,500
Equipment	$ 630,000		Equity
Less: Accumulated depreciation	165,000	465,000	Common stock	350,000
			Retained earnings	245,728	595,728
Total assets		$ 1,327,228	Total liabilities and equity		$ 1,327,228

To prepare a master budget for April, May, and June, management gathers the following information.

Sales for March total 22,800 units. Budgeted sales in units follow: April, 22,800; May, 16,000; June, 23,000; and July, 22,800. The product’s selling price is $25.00 per unit and its total product cost is $19.30 per unit.
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 4,510 pounds. The budgeted June 30 ending raw materials inventory is 5,500 pounds. Each finished unit requires 0.50 pound of direct materials.
Company policy calls for a given month’s ending finished goods inventory to equal 70% of the next month’s budgeted unit sales. The March 31 finished goods inventory is 15,960 units.
Each finished unit requires 0.50 hour of direct labor at a rate of $11 per hour.
The predetermined variable overhead rate is $4.20 per direct labor hour. Depreciation of $35,020 per month is the only fixed factory overhead item.
Sales commissions of 10% of sales 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 for administrative salaries and 0.6% monthly interest on the long-term note payable.
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).
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).
The minimum ending cash balance for all months is $65,000. 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.
Dividends of $25,000 are budgeted to be declared and paid in May.
No cash payments for income taxes are budgeted in the second calendar quarter. Income tax will be assessed at 35% in the quarter and budgeted to be paid in the third calendar quarter.
Equipment purchases of $100,000 are budgeted for the last day of June.

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Follow-up Question

Using the same above information, what would it look like to complete the following?

Schedule of cash payments for direct materials.
Cash budget.
Budgeted income statement for entire second quarter (not monthly).

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Follow-up Question

Using the same above information, what woult it look like to complete the following?

Direct labor budget.
Factory overhead budget.
Selling expense budget.
General and administrative expense budget.

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