Master Budget - Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them. Requirement 1- To prepare: Monthly sales budget

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Answer 1

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 22, Problem 4APSA

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 1-

To prepare:

Monthly sales budget

Expert Solution

Answer to Problem 4APSA

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

ZIGBY Manufacturing
Monthly sales budget

	April	May	June	Quarter
Sales in units	20,500	19,500	20,000	60,000
Selling price per unit	$23.85	$23.85	$23.85	$23.85
Dollar sales value($)	488,925	465,075	477,000	1,431,000

Explanation of Solution

Given,

Sales units for April = 20,500
Sales units for May = 19,500
Sales units for June = 20,000
Selling price per unit = $23.85

Sales units for quarter=April sales+May sales+June sales Sales units for quarter=20,500+19,500+20,000Sales units for quarter=60,000

Dollar sales value for each month is calculated as follows-

Dollar sales value=Sales in units×Selling price per unitDollar sales value for April=20,500×$23.85 Dollar sales value for April=$488,925 Dollar sales value for May=19,500×$23.85 Dollar sales value for May=$465,075 Dollar sales value for June=20,000×$23.85 Dollar sales value for June=$477,000 Dollar sales value for Quarter=60,000×$23.85 Dollar sales value for Quarter=$1,431,000

Conclusion:

Thus, the monthly sales budget has been prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 2-

To prepare:

Production budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Production budgets

	April	May	June	Quarter
Budgeted Sales for the month	20,500	19,500	20,000
Ending inventory in units	15,600	16,000	16,400
Total Needs	36,100	35,500	36,400
Less: Beginning inventory	(16,400)	(15,600)	(16,000)
Units to be produced	19,700	19,900	20,400	60,000

Explanation of Solution

First, ending inventory in units is required to be calculated-

Calculation of ending inventory in units is as under-

Ending inventory requirement = 80% of Next Months Expected sales unitsEnding inventory requirement for April =80%X Expected sales units forMay Ending inventory requirement for April =80%X 19,500 unitsEnding inventory requirement for April =15,600 unitsEnding inventory requirement for May =80%X Expected sales units for JuneEnding inventory requirement for May =80% X 20,000 unitsEnding inventory requirement for May =16,000 unitsEnding inventory requirement for June =80%X Expected sales units for JulyEnding inventory requirement for June =80% X 20,500unitsEnding inventory requirement for June = 16,400 units

Ending inventory requirement = 80% of Next Months Expected sales unitsEnding inventory requirement for March =80%X Expected sales units forApril Ending inventory requirement for March =80%X 20,500 unitsEnding inventory requirement for March =16,400 unit

Now, Merchandise purchases required is to be calculated-

Required merchandise purchases= Ending Inventory + Expected sales of the month – Beginning Inventory

Given, Expected sales of the month-

April − 20,500 units
May − 19,500 units
June − 20,000 units

Ending inventory −

April − 15,600 units
May − 16,000 units
June − 16,400 units

Beginning inventory-

- Ending inventory of the previous month shall be beginning inventory of current month.

April − 16,400 units
May − 15,600 units
June − 16,000 units

Total requirement for the month of April, May and June-

Required merchandise purchases = Ending Inventory + Expected sales of the month – Beginning Inventory Required merchandise purchases for April=20,500 units+15,600 units–16,400 units Required merchandise purchases for April=19,700 units Required merchandise purchases for May=19,500 units+16,000 units–15,600 units Required merchandise purchases for May =19,900units Required merchandise purchases for June=20,000 units+16,400 units–16,000 unitsRequired merchandise purchases for June=20,400units

Conclusion:

Thus, the Production budget has been prepared for the months of April, May and June.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 3-

To prepare:

Raw materials Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Raw Materials budgets

	April	May	June	Quarter

Production Budget	19,700	19,900	20,400
Materials requirement per unit	0.5	0.5	0.5
Materials needed for production	9,850	9,950	10,200
Add: Budgeted ending raw material inventory	4,975	5,100	4,000
Total material requirements (units)	14,825	15,050	14,200
Less: Desired opening raw material inventory	(4,925)	(4,975)	(5,100)
Materials to be purchased	9,900	10,075	9,100	29,075
Materials price per unit	$20	$20	$20	$20
Total cost of direct material purchases	$198,000	$201,500	$182,000	$581,500

Explanation of Solution

Given,

Materials requirement per unit = 0.5
Desired opening raw material inventory for April = 4,925 units
Desired ending raw material inventory for June = 4,000 units
Materials price per unit = $20
Production Budget = Calculated in Req.2

Materials needed for production= Production Budget× Materials requirement per unitMaterials needed for production for April=19,700×0.5Materials needed for production for April=9,850 unitsMaterials needed for production for May=19,900×0.5Materials needed for production for May=9,950 unitsMaterials needed for production for June=20,400×0.5Materials needed for production for June=10,200

Ending inventory is 50% of next month's Materials requirements-

Ending inventory requirement = 50% of Next Months Materials requirementsEnding inventory requirement for April =50%X Materials requirements forMay Ending inventory requirement for April =50%X 9,950 unitsEnding inventory requirement for April =4,975 unitsEnding inventory requirement for May =50%X Materials requirements for JuneEnding inventory requirement for May =50% X 10,200 unitsEnding inventory requirement for May =5,100 units

Beginning raw material inventory-

- Ending raw material inventory of the previous month shall be beginning raw material inventory of current month.

April − 4,925 units
May − 4,975 units
June − 5,100 units

Now, we need to calculate Materials to be purchased-

Materials to be purchased =Materials needed for production+ Budgeted ending raw material inventory− Desired opening raw material inventory Materials to be purchased for April=9,850+4,975−4,925 Materials to be purchased for April=9,900 units Materials to be purchased for May=9,950+5,100−4,975 Materials to be purchased for May=10,075 Materials to be purchased for June=10,200+4,000−5,100Materials to be purchased for June=9,100

Total cost of direct materials purchases is calculated below-

Cost of direct materials purchases=Materials to be purchased×Material price per unit Cost of direct materials purchases for April=9,900×$20 Cost of direct materials purchases for April=$198,000 Cost of direct materials purchases for May=10,075×$20 Cost of direct materials purchases for May=$201,500 Cost of direct materials purchases for June=9,100×$20Cost of direct materials purchases for June=$182,000

Conclusion:

Thus, Raw materials budget has been prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 4-

To prepare:

Direct Labor Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Direct Labor budgets

	April	May	June	Total
Budgeted production (units)	19,700	19,900	20,400
Labor requirements per unit (hours)	0.5	0.5	0.5
Total labor hours needed	9,850	9,950	10,200	30,000
Labor rate (per hour)	$15	$15	$15	$15
Labor Dollars	$147,750	$149,250	153,000	$450,000

Explanation of Solution

Given,

Production Budget = Calculated in Req.2
Labor requirements per unit= 0.5
Labor rate (per hour) = $15

Total labor hours needed is calculated as below-

Total labor hours needed= Budgeted production×Budgeted production Total labor hours needed for April=19,700×0.5 Total labor hours needed for April=9,850 Total labor hours needed for May=19,900×0.5 Total labor hours needed for May=9,950 Total labor hours needed for June=20,400×0.5Total labor hours needed for June=10,200

Now, we need to calculate Labor dollars-

Labor dollars for April= Total labor hours needed for April× Labor rate ( per hour)Labor dollars for April=9,850×$15Labor dollars for April=$147,750

Labor dollars for May= Total labor hours needed for May × Labor rate ( per hour)Labor dollars for May =9,950×$15Labor dollars for May =$149,250

Labor dollars for June= Total labor hours needed for June × Labor rate ( per hour)Labor dollars for June =10,200×$15Labor dollars for June =$153,000

Conclusion:

Thus, Labor budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 5-

To prepare:

Factory overhead Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Factory overhead budget

	April	May	June	Total
Labor hours needed	9,850	9,950	10,200
Variable factory overhead rate	$2.70	$2.70	$2.70
Budgeted variable overhead	$26,595	$26,865	$27,540	$81,000
Budgeted fixed overhead	$20,000	$20,000	$20,000	$60,000
Budgeted total overhead	$46,595	$46,865	$47,540	$141,000

Explanation of Solution

Given,

Labor hours needed- Calculated in Requirement 4
Variable factory overhead rate - $2.70
Budgeted fixed overhead (Depreciation)- $20,000

First we need to calculate Budgeted variable overhead-

Budgeted variable overhead is calculated as under-

Budgeted variable overhead= Labor hours needed× Variable factory overhead rate

Budgeted variable overhead for April=9,850×$2.70Budgeted variable overhead for April=$26,595

Budgeted variable overhead for May=9,950*$2.70Budgeted variable overhead for May=$26,865

Budgeted variable overhead for June=10,200×$2.70Budgeted variable overhead for June=$27,540

Budgeted total overhead-

Budgeted total overhead=Budgeted variable overhead+ Budgeted fixed overhead Budgeted total overhead for April=$26,595+$20,000 Budgeted total overhead for April=$46,595 Budgeted total overhead for May=$26,865+$20,000 Budgeted total overhead for May=$46,865 Budgeted total overhead for June=$27,540+$20,000Budgeted total overhead for June=$47,540

Conclusion:

Thus, factory overhead budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 6-

To prepare:

Selling expense Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Selling Expense budgets

	April ($)	May ($)	June ($)	Total ($)
Sales commissions	39,114	37,206	38,160	114,480
Sales salaries	3,000	3,000	3,000	9,000
Selling expenses	42,114	40,206	41,160	123,480

Explanation of Solution

First we need to calculate Sales commissions.

Calculation of sales commission is as under-

Sales are calculated in Requirement 1

Sales Commission=8%×SalesSales Commission for April=8%×$488,925 Sales Commission for April=$39,114 Sales Commission for May=8%×$465,075 Sales Commission for May=$37,206 Sales Commission for June=8%×$477,000Sales Commission for June=$38,160

Sales salary for each month- $3,000 (Given)

Selling expense for each month is calculated as under-

Selling Expense=Sales Commission+Sales salarySelling Expense for April=$39,114+$3,000 Selling Expense for April=$42,114 Selling Expense for May=$37,206+$3,000 Selling Expense for May=$40,206 Selling Expense for June=$38,160+$3,000 Selling Expense for June=$41,160

Conclusion:

Thus, the selling expense budget is prepared for the month of April, May and June.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 7-

To prepare:

General and administrative expense Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
General and administrative budgets

	April	May	June	Total ($)
Salaries	12,000	12,000	12,000	36,000
Interest on long term note	4,500	4,500	4,500	13,500
Total general and administrative expenses	16,500	16,500	16,500	49,500

Explanation of Solution

Given:

Salaries Expense = $12,000 per month

Interest on long term note-

Interest on long term note=Long term note payable×Interest rateInterest on long term note=$500,000×0.9%Interest on long term note= $4,500

Total General and administrative expenses for each month is calculated as under-

Total General and administrative expenses= Salaries expense+ Interest on long term noteTotal General and administrative expenses=$12,000+$4,500Total General and administrative expenses=$16,500

Conclusion:

Thus, the general and administrative expenses budget is prepared for the month of April, May and June. Expense for each month is $16,500.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 8-

To prepare:

Cash Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Cash Budget

	April	May	June
Beginning cash balance	40,000	83,346	124,295
Add: Cash receipts from customers	488,925	481,770	468,653
Total cash available	528,925	565,116	592,948
Less: Cash disbursements
Payment for raw materials	200,500	198,000	201,500
Payment for direct labor	147,750	149,250	153,000
Payments for variable overhead	26,595	26,865	27,540
Sales commission	39,114	37,206	38,160
Sales salaries	3,000	3,000	3,000
General and administrative salaries	12,000	12,000	12,000
Dividends	0	10,000	0
Loan interest	120	0	0
Long term note interest	4,500	4,500	4,500
Purchase of equipment	0	0	130,000
Total cash disbursements	433,579	440,821	569,700
Excess of cash receipts over cash disbursements	95,346	124,295	23,248
Additional loan (Loan repayment)	(12,000)		16,752
Ending cash balance	83,346	124,295	40,000

Explanation of Solution

Given-

Beginning cash balance = $40,000
Payment for raw materials − Calculated in Req. 3
Payment for direct labor - Calculated in Req. 4
Payments for variable overhead - Calculated in Req. 5
Sales commission - Calculated in Req. 6
Sales salaries - Calculated in Req. 6
General and administrative salaries - Calculated in Req.7
Long term note interest - Calculated in Req.7
Dividends - $10,000
Purchase of equipment - $130,000

Total cash available

Calculation of cash receipts from customers is as under-

-It is given that amount of credit sales will be collected in the month following the sale.

Calculation of cash receipts from customers-
	April	May	June

Total budgeted sales (Req.1)	488,925	465,075	477,000
Cash Sales (30%)	146,677.50	139,522.50	143,100
Credit sales (70%)	342,247.50	325,552.50	333,900

Total cash receipts from customers
Current month's cash sales	146,677.50	139,522.50	143,100
Collection of receivables	342,247.50	342,247.50	325,553
Total cash receipts	488,925	481,770	468,653

Total cash available-

Total cash available= Beginning cash balance+Total cash receiptsTotal cash available for April=$40,000+$488,925Total cash available for April=$528,925Total cash available for May=$83,346+$481,770Total cash available for May=$565,116Total cash available for June=$124,295+$468,653Total cash available for June=$592,948

Total cash disbursementsLoan interest-

Loan interest = Loan amount×Rate of interestLoan interest = $12,000×1%Loan interest = $120

Total cash disbursements-

Total cash disbursements for April= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission + Sales salaries+ General and administrative salaries+Loan interest+ Long term note interest) Total cash disbursements for April= $200,500+$147,750+$26,595+$39,114+$3,000+$12,000+$120+$4,500Total cash disbursements for April=$433,579

Total cash disbursements for May= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission+ Sales salaries+ General and administrative salaries+Dividends+ Long term note interest) Total cash disbursements for May= $198,000+$149,250+$26,865+$37,206+$3,000+$12,000+$10,000+$4,500Total cash disbursements for May=$440,821

Total cash disbursements for June= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission+ Sales salaries+ General and administrative salaries+Long term note interest+Purchase of equipment) Total cash disbursements for June= $201,500+$153,000+$27,540+$38,160+$3,000+$12,000+$4,500+$130,000Total cash disbursements for June=$569,700

Excess of cash receipts over cash disbursements

Excess of cash receipts over cash disbursements=Total cash available−Total cash disbursementsExcess of cash receipts over cash disbursements for April=$528,925−$433,579 Excess of cash receipts over cash disbursements for April=$95,346 Excess of cash receipts over cash disbursements for May=$565,116−$440,821 Excess of cash receipts over cash disbursements for May=$124,295 Excess of cash receipts over cash disbursements for June=$592,948−$569,700Excess of cash receipts over cash disbursements for June=$23,248

- It is given that Company need to maintain minimum cash balance of $40,000. In June month they don't have sufficient cash balance so, need to borrow loan to meet minimum cash balance as $40,000.

Loan amount for June month-

Available cash balance=$23,248

Loan amount = $40,000−$23,248Loan amount =$16,752

-Loan is repaid in the month of April of $12,000.

Ending cash balance-

Ending cash balance April = $95,346−$12,000Ending cash balance April= $83,346Ending cash balance May = $124,295Ending cash balance June=$23,248+$16,752Ending cash balance June=$40,000

Conclusion:

Thus, cash budget is prepared with ending cash balance in the month of June $40,000.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 9-

To prepare:

Budgeted income statement

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Income Statement

Particulars	Amount ($)	Amount ($)
Sales		1,431,000
Cost of merchandise sold		1,191,000
Gross Profit		240,000
Operating expenses:
Sales Commissions	114,480
Sales Salaries	9,000
Long term note interest	13,500
General and administrative expenses	36,000
Interest expense	120	173,100
Income before tax		66,900
Tax @ 40%		23,415
Net operating income		43,485

Explanation of Solution

Given,

Sales = $1,431,000 Calculated in Req.1
Sales commission - $114,480 Calculated in Req. 6
Sales salaries - $9,000Calculated in Req. 6
General and administrative salaries - $36,000 Calculated in Req.7
Long term note interest - $13,500 Calculated in Req.7
Interest expense -$120 Calculated in Req.8

Cost of merchandise sold-

Cost of merchandise sold = No. of units ×Cost priceCost of merchandise sold =60,000×$19,85Cost of merchandise sold =$1,191,000

Gross profit is calculated as under-

Gross profit = Sales – Cost of merchandise soldGross profit =$1,431,000−$1,191,000Gross profit =$240,000

Total operating expenses-

TotalOperating expenses= Sales Commissions+ Sales Salaries+ Long term note interest +General and administrative expenses+ Interest expenseTotalOperating expenses=$114,480+$9,000+$13,500+$36,000+$120TotalOperating expenses=$173,100

Income before tax-

Income before tax=Gross profit – Total operating expensesIncome before tax=$240,000−$173,100Income before tax=$66,900

Tax Expense-

Tax Expense=Income before tax×Tax RateTax Expense=$66,900×35%Tax Expense=$23,415

Net Operating income is calculated as under-

Net Operating income= Income before tax−Tax ExpenseNet Operating income=$66,900−$23,415Net Operating income=$43,485

Conclusion:

Thus, Income statement is prepared for the quarter.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 10-

To prepare:

Budgeted Balance sheet.

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Balance sheet as of June 30

	Amount ($)	Amount ($)
Assets
Cash	40,000
Accounts receivable	333,900
Raw materials Inventory	80,000
Finished goods inventory	325,540
Total current assets		779,440
Equipment	730,000
Less: Accumulated depreciation	(210,000)
Equipment net		520,000
Total assets		1,299,440
Stockholder's Equity and Liabilities
Accounts payable	182,000
Bank loan payable	16,752
Tax payable	23,415
Current liabilities		222,167
Long term note payable		500,000
Common stock	335,000
Retained earnings	242,273
Total Stockholder's Equity		577,273
Total Stockholder's Equity and Liabilities		1,299,440

Explanation of Solution

Assets

Given,

Cash = $40,000 (Req.8)

Calculation of other current assets-

Particulars	Amount ($)
Accounts Receivables
Beginning receivables	342,248
Credit sales	1,001,701
Less: Collections	(1,010,049)
Ending Receivables	333,900

Raw material inventory
Beginning raw materials	98,500
Purchases of raw materials	581,500
Less: Materials used in production	(600,000)
Ending raw materials inventory	80,000

Finished goods inventory
Beginning Finished goods inventory	325,540
Cost of goods completed during the period	1,191,000
Less: Cost of goods sold during the period	(1,191,000)
Ending Finished goods inventory	325,540

Total current assets-

Total current assets=Cash +Accounts receivables+Raw material inventory+ Finished goods inventory Total current assets=$40,000+$333,900+$80,000+$325,540Total current assets=$779,440

Calculation of Equipment-

Particulars	Amount ($)
Equipment Gross
Beginning Equipment	600,000
Purchased in June	130,000
Total (A)	730,000

Accumulated Depreciation
Beginning Accumulated Depreciation	150,000
Depreciation expense	60,000
Total (B)	210,000

Equipment (A-B)	520,000

Total Assets-

Total assets = Total current assets + EquipmentTotal assets = $779,440 + $520,000Total assets = $1,299,440

Stockholder's Equity and Liabilities

Given,

Bank loan payable = $16,752 (Req.8)
Taxes payable = $23,415 (Req.9)
Long −term note payable = $500,000
Common stock = $335,000

Accounts payable-

Particulars	Amount ($)
Accounts Payables
Beginning accounts payable	200,500
Purchase of raw materials	581,500
Payments of raw materials	(600,000)
Ending accounts payable	182,000

Total current liabilities-

Total current liabilities=Accounts payable+Bank loan payable+Taxes payableTotal current liabilities=$182,000+$16,752+$23,415Total current liabilities=$222,167

Retained Earnings-

Particulars	Amount ($)
Retained Earnings
Retained Earnings, Beginning	208,788
Add: Net Income	43,485
	252,273
Less: Dividends	(10,000)
Retained Earnings, Ending	242,273

Total stockholder's equity-

Total stockholder’s equity = Common stock+Retained EarningsTotal stockholder’s equity =$335,000+$242,273Total stockholder’s equity =$577,273

Total Stockholder's Equity and Liabilities-

Total Stockholder's Equity and Liabilities=Current liabilities+Long term note payable+Total stockholder’s equityTotal Stockholder's Equity and Liabilities=$222,167+$500,000+$577,273Total Stockholder's Equity and Liabilities=$1,299,440

Conclusion:

Thus, Budgeted balance sheet is prepared with total of $1,299,440

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Answer 2

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 22, Problem 4APSA

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 1-

To prepare:

Monthly sales budget

Expert Solution

Answer to Problem 4APSA

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

ZIGBY Manufacturing
Monthly sales budget

	April	May	June	Quarter
Sales in units	20,500	19,500	20,000	60,000
Selling price per unit	$23.85	$23.85	$23.85	$23.85
Dollar sales value($)	488,925	465,075	477,000	1,431,000

Explanation of Solution

Given,

Sales units for April = 20,500
Sales units for May = 19,500
Sales units for June = 20,000
Selling price per unit = $23.85

Sales units for quarter=April sales+May sales+June sales Sales units for quarter=20,500+19,500+20,000Sales units for quarter=60,000

Dollar sales value for each month is calculated as follows-

Dollar sales value=Sales in units×Selling price per unitDollar sales value for April=20,500×$23.85 Dollar sales value for April=$488,925 Dollar sales value for May=19,500×$23.85 Dollar sales value for May=$465,075 Dollar sales value for June=20,000×$23.85 Dollar sales value for June=$477,000 Dollar sales value for Quarter=60,000×$23.85 Dollar sales value for Quarter=$1,431,000

Conclusion:

Thus, the monthly sales budget has been prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 2-

To prepare:

Production budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Production budgets

	April	May	June	Quarter
Budgeted Sales for the month	20,500	19,500	20,000
Ending inventory in units	15,600	16,000	16,400
Total Needs	36,100	35,500	36,400
Less: Beginning inventory	(16,400)	(15,600)	(16,000)
Units to be produced	19,700	19,900	20,400	60,000

Explanation of Solution

First, ending inventory in units is required to be calculated-

Calculation of ending inventory in units is as under-

Ending inventory requirement = 80% of Next Months Expected sales unitsEnding inventory requirement for April =80%X Expected sales units forMay Ending inventory requirement for April =80%X 19,500 unitsEnding inventory requirement for April =15,600 unitsEnding inventory requirement for May =80%X Expected sales units for JuneEnding inventory requirement for May =80% X 20,000 unitsEnding inventory requirement for May =16,000 unitsEnding inventory requirement for June =80%X Expected sales units for JulyEnding inventory requirement for June =80% X 20,500unitsEnding inventory requirement for June = 16,400 units

Ending inventory requirement = 80% of Next Months Expected sales unitsEnding inventory requirement for March =80%X Expected sales units forApril Ending inventory requirement for March =80%X 20,500 unitsEnding inventory requirement for March =16,400 unit

Now, Merchandise purchases required is to be calculated-

Required merchandise purchases= Ending Inventory + Expected sales of the month – Beginning Inventory

Given, Expected sales of the month-

April − 20,500 units
May − 19,500 units
June − 20,000 units

Ending inventory −

April − 15,600 units
May − 16,000 units
June − 16,400 units

Beginning inventory-

- Ending inventory of the previous month shall be beginning inventory of current month.

April − 16,400 units
May − 15,600 units
June − 16,000 units

Total requirement for the month of April, May and June-

Required merchandise purchases = Ending Inventory + Expected sales of the month – Beginning Inventory Required merchandise purchases for April=20,500 units+15,600 units–16,400 units Required merchandise purchases for April=19,700 units Required merchandise purchases for May=19,500 units+16,000 units–15,600 units Required merchandise purchases for May =19,900units Required merchandise purchases for June=20,000 units+16,400 units–16,000 unitsRequired merchandise purchases for June=20,400units

Conclusion:

Thus, the Production budget has been prepared for the months of April, May and June.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 3-

To prepare:

Raw materials Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Raw Materials budgets

	April	May	June	Quarter

Production Budget	19,700	19,900	20,400
Materials requirement per unit	0.5	0.5	0.5
Materials needed for production	9,850	9,950	10,200
Add: Budgeted ending raw material inventory	4,975	5,100	4,000
Total material requirements (units)	14,825	15,050	14,200
Less: Desired opening raw material inventory	(4,925)	(4,975)	(5,100)
Materials to be purchased	9,900	10,075	9,100	29,075
Materials price per unit	$20	$20	$20	$20
Total cost of direct material purchases	$198,000	$201,500	$182,000	$581,500

Explanation of Solution

Given,

Materials requirement per unit = 0.5
Desired opening raw material inventory for April = 4,925 units
Desired ending raw material inventory for June = 4,000 units
Materials price per unit = $20
Production Budget = Calculated in Req.2

Materials needed for production= Production Budget× Materials requirement per unitMaterials needed for production for April=19,700×0.5Materials needed for production for April=9,850 unitsMaterials needed for production for May=19,900×0.5Materials needed for production for May=9,950 unitsMaterials needed for production for June=20,400×0.5Materials needed for production for June=10,200

Ending inventory is 50% of next month's Materials requirements-

Ending inventory requirement = 50% of Next Months Materials requirementsEnding inventory requirement for April =50%X Materials requirements forMay Ending inventory requirement for April =50%X 9,950 unitsEnding inventory requirement for April =4,975 unitsEnding inventory requirement for May =50%X Materials requirements for JuneEnding inventory requirement for May =50% X 10,200 unitsEnding inventory requirement for May =5,100 units

Beginning raw material inventory-

- Ending raw material inventory of the previous month shall be beginning raw material inventory of current month.

April − 4,925 units
May − 4,975 units
June − 5,100 units

Now, we need to calculate Materials to be purchased-

Materials to be purchased =Materials needed for production+ Budgeted ending raw material inventory− Desired opening raw material inventory Materials to be purchased for April=9,850+4,975−4,925 Materials to be purchased for April=9,900 units Materials to be purchased for May=9,950+5,100−4,975 Materials to be purchased for May=10,075 Materials to be purchased for June=10,200+4,000−5,100Materials to be purchased for June=9,100

Total cost of direct materials purchases is calculated below-

Cost of direct materials purchases=Materials to be purchased×Material price per unit Cost of direct materials purchases for April=9,900×$20 Cost of direct materials purchases for April=$198,000 Cost of direct materials purchases for May=10,075×$20 Cost of direct materials purchases for May=$201,500 Cost of direct materials purchases for June=9,100×$20Cost of direct materials purchases for June=$182,000

Conclusion:

Thus, Raw materials budget has been prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 4-

To prepare:

Direct Labor Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Direct Labor budgets

	April	May	June	Total
Budgeted production (units)	19,700	19,900	20,400
Labor requirements per unit (hours)	0.5	0.5	0.5
Total labor hours needed	9,850	9,950	10,200	30,000
Labor rate (per hour)	$15	$15	$15	$15
Labor Dollars	$147,750	$149,250	153,000	$450,000

Explanation of Solution

Given,

Production Budget = Calculated in Req.2
Labor requirements per unit= 0.5
Labor rate (per hour) = $15

Total labor hours needed is calculated as below-

Total labor hours needed= Budgeted production×Budgeted production Total labor hours needed for April=19,700×0.5 Total labor hours needed for April=9,850 Total labor hours needed for May=19,900×0.5 Total labor hours needed for May=9,950 Total labor hours needed for June=20,400×0.5Total labor hours needed for June=10,200

Now, we need to calculate Labor dollars-

Labor dollars for April= Total labor hours needed for April× Labor rate ( per hour)Labor dollars for April=9,850×$15Labor dollars for April=$147,750

Labor dollars for May= Total labor hours needed for May × Labor rate ( per hour)Labor dollars for May =9,950×$15Labor dollars for May =$149,250

Labor dollars for June= Total labor hours needed for June × Labor rate ( per hour)Labor dollars for June =10,200×$15Labor dollars for June =$153,000

Conclusion:

Thus, Labor budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 5-

To prepare:

Factory overhead Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Factory overhead budget

	April	May	June	Total
Labor hours needed	9,850	9,950	10,200
Variable factory overhead rate	$2.70	$2.70	$2.70
Budgeted variable overhead	$26,595	$26,865	$27,540	$81,000
Budgeted fixed overhead	$20,000	$20,000	$20,000	$60,000
Budgeted total overhead	$46,595	$46,865	$47,540	$141,000

Explanation of Solution

Given,

Labor hours needed- Calculated in Requirement 4
Variable factory overhead rate - $2.70
Budgeted fixed overhead (Depreciation)- $20,000

First we need to calculate Budgeted variable overhead-

Budgeted variable overhead is calculated as under-

Budgeted variable overhead= Labor hours needed× Variable factory overhead rate

Budgeted variable overhead for April=9,850×$2.70Budgeted variable overhead for April=$26,595

Budgeted variable overhead for May=9,950*$2.70Budgeted variable overhead for May=$26,865

Budgeted variable overhead for June=10,200×$2.70Budgeted variable overhead for June=$27,540

Budgeted total overhead-

Budgeted total overhead=Budgeted variable overhead+ Budgeted fixed overhead Budgeted total overhead for April=$26,595+$20,000 Budgeted total overhead for April=$46,595 Budgeted total overhead for May=$26,865+$20,000 Budgeted total overhead for May=$46,865 Budgeted total overhead for June=$27,540+$20,000Budgeted total overhead for June=$47,540

Conclusion:

Thus, factory overhead budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 6-

To prepare:

Selling expense Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Selling Expense budgets

	April ($)	May ($)	June ($)	Total ($)
Sales commissions	39,114	37,206	38,160	114,480
Sales salaries	3,000	3,000	3,000	9,000
Selling expenses	42,114	40,206	41,160	123,480

Explanation of Solution

First we need to calculate Sales commissions.

Calculation of sales commission is as under-

Sales are calculated in Requirement 1

Sales Commission=8%×SalesSales Commission for April=8%×$488,925 Sales Commission for April=$39,114 Sales Commission for May=8%×$465,075 Sales Commission for May=$37,206 Sales Commission for June=8%×$477,000Sales Commission for June=$38,160

Sales salary for each month- $3,000 (Given)

Selling expense for each month is calculated as under-

Selling Expense=Sales Commission+Sales salarySelling Expense for April=$39,114+$3,000 Selling Expense for April=$42,114 Selling Expense for May=$37,206+$3,000 Selling Expense for May=$40,206 Selling Expense for June=$38,160+$3,000 Selling Expense for June=$41,160

Conclusion:

Thus, the selling expense budget is prepared for the month of April, May and June.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 7-

To prepare:

General and administrative expense Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
General and administrative budgets

	April	May	June	Total ($)
Salaries	12,000	12,000	12,000	36,000
Interest on long term note	4,500	4,500	4,500	13,500
Total general and administrative expenses	16,500	16,500	16,500	49,500

Explanation of Solution

Given:

Salaries Expense = $12,000 per month

Interest on long term note-

Interest on long term note=Long term note payable×Interest rateInterest on long term note=$500,000×0.9%Interest on long term note= $4,500

Total General and administrative expenses for each month is calculated as under-

Total General and administrative expenses= Salaries expense+ Interest on long term noteTotal General and administrative expenses=$12,000+$4,500Total General and administrative expenses=$16,500

Conclusion:

Thus, the general and administrative expenses budget is prepared for the month of April, May and June. Expense for each month is $16,500.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 8-

To prepare:

Cash Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Cash Budget

	April	May	June
Beginning cash balance	40,000	83,346	124,295
Add: Cash receipts from customers	488,925	481,770	468,653
Total cash available	528,925	565,116	592,948
Less: Cash disbursements
Payment for raw materials	200,500	198,000	201,500
Payment for direct labor	147,750	149,250	153,000
Payments for variable overhead	26,595	26,865	27,540
Sales commission	39,114	37,206	38,160
Sales salaries	3,000	3,000	3,000
General and administrative salaries	12,000	12,000	12,000
Dividends	0	10,000	0
Loan interest	120	0	0
Long term note interest	4,500	4,500	4,500
Purchase of equipment	0	0	130,000
Total cash disbursements	433,579	440,821	569,700
Excess of cash receipts over cash disbursements	95,346	124,295	23,248
Additional loan (Loan repayment)	(12,000)		16,752
Ending cash balance	83,346	124,295	40,000

Explanation of Solution

Given-

Beginning cash balance = $40,000
Payment for raw materials − Calculated in Req. 3
Payment for direct labor - Calculated in Req. 4
Payments for variable overhead - Calculated in Req. 5
Sales commission - Calculated in Req. 6
Sales salaries - Calculated in Req. 6
General and administrative salaries - Calculated in Req.7
Long term note interest - Calculated in Req.7
Dividends - $10,000
Purchase of equipment - $130,000

Total cash available

Calculation of cash receipts from customers is as under-

-It is given that amount of credit sales will be collected in the month following the sale.

Calculation of cash receipts from customers-
	April	May	June

Total budgeted sales (Req.1)	488,925	465,075	477,000
Cash Sales (30%)	146,677.50	139,522.50	143,100
Credit sales (70%)	342,247.50	325,552.50	333,900

Total cash receipts from customers
Current month's cash sales	146,677.50	139,522.50	143,100
Collection of receivables	342,247.50	342,247.50	325,553
Total cash receipts	488,925	481,770	468,653

Total cash available-

Total cash available= Beginning cash balance+Total cash receiptsTotal cash available for April=$40,000+$488,925Total cash available for April=$528,925Total cash available for May=$83,346+$481,770Total cash available for May=$565,116Total cash available for June=$124,295+$468,653Total cash available for June=$592,948

Total cash disbursementsLoan interest-

Loan interest = Loan amount×Rate of interestLoan interest = $12,000×1%Loan interest = $120

Total cash disbursements-

Total cash disbursements for April= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission + Sales salaries+ General and administrative salaries+Loan interest+ Long term note interest) Total cash disbursements for April= $200,500+$147,750+$26,595+$39,114+$3,000+$12,000+$120+$4,500Total cash disbursements for April=$433,579

Total cash disbursements for May= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission+ Sales salaries+ General and administrative salaries+Dividends+ Long term note interest) Total cash disbursements for May= $198,000+$149,250+$26,865+$37,206+$3,000+$12,000+$10,000+$4,500Total cash disbursements for May=$440,821

Total cash disbursements for June= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission+ Sales salaries+ General and administrative salaries+Long term note interest+Purchase of equipment) Total cash disbursements for June= $201,500+$153,000+$27,540+$38,160+$3,000+$12,000+$4,500+$130,000Total cash disbursements for June=$569,700

Excess of cash receipts over cash disbursements

Excess of cash receipts over cash disbursements=Total cash available−Total cash disbursementsExcess of cash receipts over cash disbursements for April=$528,925−$433,579 Excess of cash receipts over cash disbursements for April=$95,346 Excess of cash receipts over cash disbursements for May=$565,116−$440,821 Excess of cash receipts over cash disbursements for May=$124,295 Excess of cash receipts over cash disbursements for June=$592,948−$569,700Excess of cash receipts over cash disbursements for June=$23,248

- It is given that Company need to maintain minimum cash balance of $40,000. In June month they don't have sufficient cash balance so, need to borrow loan to meet minimum cash balance as $40,000.

Loan amount for June month-

Available cash balance=$23,248

Loan amount = $40,000−$23,248Loan amount =$16,752

-Loan is repaid in the month of April of $12,000.

Ending cash balance-

Ending cash balance April = $95,346−$12,000Ending cash balance April= $83,346Ending cash balance May = $124,295Ending cash balance June=$23,248+$16,752Ending cash balance June=$40,000

Conclusion:

Thus, cash budget is prepared with ending cash balance in the month of June $40,000.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 9-

To prepare:

Budgeted income statement

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Income Statement

Particulars	Amount ($)	Amount ($)
Sales		1,431,000
Cost of merchandise sold		1,191,000
Gross Profit		240,000
Operating expenses:
Sales Commissions	114,480
Sales Salaries	9,000
Long term note interest	13,500
General and administrative expenses	36,000
Interest expense	120	173,100
Income before tax		66,900
Tax @ 40%		23,415
Net operating income		43,485

Explanation of Solution

Given,

Sales = $1,431,000 Calculated in Req.1
Sales commission - $114,480 Calculated in Req. 6
Sales salaries - $9,000Calculated in Req. 6
General and administrative salaries - $36,000 Calculated in Req.7
Long term note interest - $13,500 Calculated in Req.7
Interest expense -$120 Calculated in Req.8

Cost of merchandise sold-

Cost of merchandise sold = No. of units ×Cost priceCost of merchandise sold =60,000×$19,85Cost of merchandise sold =$1,191,000

Gross profit is calculated as under-

Gross profit = Sales – Cost of merchandise soldGross profit =$1,431,000−$1,191,000Gross profit =$240,000

Total operating expenses-

TotalOperating expenses= Sales Commissions+ Sales Salaries+ Long term note interest +General and administrative expenses+ Interest expenseTotalOperating expenses=$114,480+$9,000+$13,500+$36,000+$120TotalOperating expenses=$173,100

Income before tax-

Income before tax=Gross profit – Total operating expensesIncome before tax=$240,000−$173,100Income before tax=$66,900

Tax Expense-

Tax Expense=Income before tax×Tax RateTax Expense=$66,900×35%Tax Expense=$23,415

Net Operating income is calculated as under-

Net Operating income= Income before tax−Tax ExpenseNet Operating income=$66,900−$23,415Net Operating income=$43,485

Conclusion:

Thus, Income statement is prepared for the quarter.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 10-

To prepare:

Budgeted Balance sheet.

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Balance sheet as of June 30

	Amount ($)	Amount ($)
Assets
Cash	40,000
Accounts receivable	333,900
Raw materials Inventory	80,000
Finished goods inventory	325,540
Total current assets		779,440
Equipment	730,000
Less: Accumulated depreciation	(210,000)
Equipment net		520,000
Total assets		1,299,440
Stockholder's Equity and Liabilities
Accounts payable	182,000
Bank loan payable	16,752
Tax payable	23,415
Current liabilities		222,167
Long term note payable		500,000
Common stock	335,000
Retained earnings	242,273
Total Stockholder's Equity		577,273
Total Stockholder's Equity and Liabilities		1,299,440

Explanation of Solution

Assets

Given,

Cash = $40,000 (Req.8)

Calculation of other current assets-

Particulars	Amount ($)
Accounts Receivables
Beginning receivables	342,248
Credit sales	1,001,701
Less: Collections	(1,010,049)
Ending Receivables	333,900

Raw material inventory
Beginning raw materials	98,500
Purchases of raw materials	581,500
Less: Materials used in production	(600,000)
Ending raw materials inventory	80,000

Finished goods inventory
Beginning Finished goods inventory	325,540
Cost of goods completed during the period	1,191,000
Less: Cost of goods sold during the period	(1,191,000)
Ending Finished goods inventory	325,540

Total current assets-

Total current assets=Cash +Accounts receivables+Raw material inventory+ Finished goods inventory Total current assets=$40,000+$333,900+$80,000+$325,540Total current assets=$779,440

Calculation of Equipment-

Particulars	Amount ($)
Equipment Gross
Beginning Equipment	600,000
Purchased in June	130,000
Total (A)	730,000

Accumulated Depreciation
Beginning Accumulated Depreciation	150,000
Depreciation expense	60,000
Total (B)	210,000

Equipment (A-B)	520,000

Total Assets-

Total assets = Total current assets + EquipmentTotal assets = $779,440 + $520,000Total assets = $1,299,440

Stockholder's Equity and Liabilities

Given,

Bank loan payable = $16,752 (Req.8)
Taxes payable = $23,415 (Req.9)
Long −term note payable = $500,000
Common stock = $335,000

Accounts payable-

Particulars	Amount ($)
Accounts Payables
Beginning accounts payable	200,500
Purchase of raw materials	581,500
Payments of raw materials	(600,000)
Ending accounts payable	182,000

Total current liabilities-

Total current liabilities=Accounts payable+Bank loan payable+Taxes payableTotal current liabilities=$182,000+$16,752+$23,415Total current liabilities=$222,167

Retained Earnings-

Particulars	Amount ($)
Retained Earnings
Retained Earnings, Beginning	208,788
Add: Net Income	43,485
	252,273
Less: Dividends	(10,000)
Retained Earnings, Ending	242,273

Total stockholder's equity-

Total stockholder’s equity = Common stock+Retained EarningsTotal stockholder’s equity =$335,000+$242,273Total stockholder’s equity =$577,273

Total Stockholder's Equity and Liabilities-

Total Stockholder's Equity and Liabilities=Current liabilities+Long term note payable+Total stockholder’s equityTotal Stockholder's Equity and Liabilities=$222,167+$500,000+$577,273Total Stockholder's Equity and Liabilities=$1,299,440

Conclusion:

Thus, Budgeted balance sheet is prepared with total of $1,299,440

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Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 22, Problem 4APSA

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 1-

To prepare:

Monthly sales budget

Expert Solution

Answer to Problem 4APSA

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

ZIGBY Manufacturing
Monthly sales budget

	April	May	June	Quarter
Sales in units	20,500	19,500	20,000	60,000
Selling price per unit	$23.85	$23.85	$23.85	$23.85
Dollar sales value($)	488,925	465,075	477,000	1,431,000

Explanation of Solution

Given,

Sales units for April = 20,500
Sales units for May = 19,500
Sales units for June = 20,000
Selling price per unit = $23.85

Sales units for quarter=April sales+May sales+June sales Sales units for quarter=20,500+19,500+20,000Sales units for quarter=60,000

Dollar sales value for each month is calculated as follows-

Dollar sales value=Sales in units×Selling price per unitDollar sales value for April=20,500×$23.85 Dollar sales value for April=$488,925 Dollar sales value for May=19,500×$23.85 Dollar sales value for May=$465,075 Dollar sales value for June=20,000×$23.85 Dollar sales value for June=$477,000 Dollar sales value for Quarter=60,000×$23.85 Dollar sales value for Quarter=$1,431,000

Conclusion:

Thus, the monthly sales budget has been prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 2-

To prepare:

Production budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Production budgets

	April	May	June	Quarter
Budgeted Sales for the month	20,500	19,500	20,000
Ending inventory in units	15,600	16,000	16,400
Total Needs	36,100	35,500	36,400
Less: Beginning inventory	(16,400)	(15,600)	(16,000)
Units to be produced	19,700	19,900	20,400	60,000

Explanation of Solution

First, ending inventory in units is required to be calculated-

Calculation of ending inventory in units is as under-

Ending inventory requirement = 80% of Next Months Expected sales unitsEnding inventory requirement for April =80%X Expected sales units forMay Ending inventory requirement for April =80%X 19,500 unitsEnding inventory requirement for April =15,600 unitsEnding inventory requirement for May =80%X Expected sales units for JuneEnding inventory requirement for May =80% X 20,000 unitsEnding inventory requirement for May =16,000 unitsEnding inventory requirement for June =80%X Expected sales units for JulyEnding inventory requirement for June =80% X 20,500unitsEnding inventory requirement for June = 16,400 units

Ending inventory requirement = 80% of Next Months Expected sales unitsEnding inventory requirement for March =80%X Expected sales units forApril Ending inventory requirement for March =80%X 20,500 unitsEnding inventory requirement for March =16,400 unit

Now, Merchandise purchases required is to be calculated-

Required merchandise purchases= Ending Inventory + Expected sales of the month – Beginning Inventory

Given, Expected sales of the month-

April − 20,500 units
May − 19,500 units
June − 20,000 units

Ending inventory −

April − 15,600 units
May − 16,000 units
June − 16,400 units

Beginning inventory-

- Ending inventory of the previous month shall be beginning inventory of current month.

April − 16,400 units
May − 15,600 units
June − 16,000 units

Total requirement for the month of April, May and June-

Required merchandise purchases = Ending Inventory + Expected sales of the month – Beginning Inventory Required merchandise purchases for April=20,500 units+15,600 units–16,400 units Required merchandise purchases for April=19,700 units Required merchandise purchases for May=19,500 units+16,000 units–15,600 units Required merchandise purchases for May =19,900units Required merchandise purchases for June=20,000 units+16,400 units–16,000 unitsRequired merchandise purchases for June=20,400units

Conclusion:

Thus, the Production budget has been prepared for the months of April, May and June.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 3-

To prepare:

Raw materials Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Raw Materials budgets

	April	May	June	Quarter

Production Budget	19,700	19,900	20,400
Materials requirement per unit	0.5	0.5	0.5
Materials needed for production	9,850	9,950	10,200
Add: Budgeted ending raw material inventory	4,975	5,100	4,000
Total material requirements (units)	14,825	15,050	14,200
Less: Desired opening raw material inventory	(4,925)	(4,975)	(5,100)
Materials to be purchased	9,900	10,075	9,100	29,075
Materials price per unit	$20	$20	$20	$20
Total cost of direct material purchases	$198,000	$201,500	$182,000	$581,500

Explanation of Solution

Given,

Materials requirement per unit = 0.5
Desired opening raw material inventory for April = 4,925 units
Desired ending raw material inventory for June = 4,000 units
Materials price per unit = $20
Production Budget = Calculated in Req.2

Materials needed for production= Production Budget× Materials requirement per unitMaterials needed for production for April=19,700×0.5Materials needed for production for April=9,850 unitsMaterials needed for production for May=19,900×0.5Materials needed for production for May=9,950 unitsMaterials needed for production for June=20,400×0.5Materials needed for production for June=10,200

Ending inventory is 50% of next month's Materials requirements-

Ending inventory requirement = 50% of Next Months Materials requirementsEnding inventory requirement for April =50%X Materials requirements forMay Ending inventory requirement for April =50%X 9,950 unitsEnding inventory requirement for April =4,975 unitsEnding inventory requirement for May =50%X Materials requirements for JuneEnding inventory requirement for May =50% X 10,200 unitsEnding inventory requirement for May =5,100 units

Beginning raw material inventory-

- Ending raw material inventory of the previous month shall be beginning raw material inventory of current month.

April − 4,925 units
May − 4,975 units
June − 5,100 units

Now, we need to calculate Materials to be purchased-

Materials to be purchased =Materials needed for production+ Budgeted ending raw material inventory− Desired opening raw material inventory Materials to be purchased for April=9,850+4,975−4,925 Materials to be purchased for April=9,900 units Materials to be purchased for May=9,950+5,100−4,975 Materials to be purchased for May=10,075 Materials to be purchased for June=10,200+4,000−5,100Materials to be purchased for June=9,100

Total cost of direct materials purchases is calculated below-

Cost of direct materials purchases=Materials to be purchased×Material price per unit Cost of direct materials purchases for April=9,900×$20 Cost of direct materials purchases for April=$198,000 Cost of direct materials purchases for May=10,075×$20 Cost of direct materials purchases for May=$201,500 Cost of direct materials purchases for June=9,100×$20Cost of direct materials purchases for June=$182,000

Conclusion:

Thus, Raw materials budget has been prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 4-

To prepare:

Direct Labor Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Direct Labor budgets

	April	May	June	Total
Budgeted production (units)	19,700	19,900	20,400
Labor requirements per unit (hours)	0.5	0.5	0.5
Total labor hours needed	9,850	9,950	10,200	30,000
Labor rate (per hour)	$15	$15	$15	$15
Labor Dollars	$147,750	$149,250	153,000	$450,000

Explanation of Solution

Given,

Production Budget = Calculated in Req.2
Labor requirements per unit= 0.5
Labor rate (per hour) = $15

Total labor hours needed is calculated as below-

Total labor hours needed= Budgeted production×Budgeted production Total labor hours needed for April=19,700×0.5 Total labor hours needed for April=9,850 Total labor hours needed for May=19,900×0.5 Total labor hours needed for May=9,950 Total labor hours needed for June=20,400×0.5Total labor hours needed for June=10,200

Now, we need to calculate Labor dollars-

Labor dollars for April= Total labor hours needed for April× Labor rate ( per hour)Labor dollars for April=9,850×$15Labor dollars for April=$147,750

Labor dollars for May= Total labor hours needed for May × Labor rate ( per hour)Labor dollars for May =9,950×$15Labor dollars for May =$149,250

Labor dollars for June= Total labor hours needed for June × Labor rate ( per hour)Labor dollars for June =10,200×$15Labor dollars for June =$153,000

Conclusion:

Thus, Labor budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 5-

To prepare:

Factory overhead Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Factory overhead budget

	April	May	June	Total
Labor hours needed	9,850	9,950	10,200
Variable factory overhead rate	$2.70	$2.70	$2.70
Budgeted variable overhead	$26,595	$26,865	$27,540	$81,000
Budgeted fixed overhead	$20,000	$20,000	$20,000	$60,000
Budgeted total overhead	$46,595	$46,865	$47,540	$141,000

Explanation of Solution

Given,

Labor hours needed- Calculated in Requirement 4
Variable factory overhead rate - $2.70
Budgeted fixed overhead (Depreciation)- $20,000

First we need to calculate Budgeted variable overhead-

Budgeted variable overhead is calculated as under-

Budgeted variable overhead= Labor hours needed× Variable factory overhead rate

Budgeted variable overhead for April=9,850×$2.70Budgeted variable overhead for April=$26,595

Budgeted variable overhead for May=9,950*$2.70Budgeted variable overhead for May=$26,865

Budgeted variable overhead for June=10,200×$2.70Budgeted variable overhead for June=$27,540

Budgeted total overhead-

Budgeted total overhead=Budgeted variable overhead+ Budgeted fixed overhead Budgeted total overhead for April=$26,595+$20,000 Budgeted total overhead for April=$46,595 Budgeted total overhead for May=$26,865+$20,000 Budgeted total overhead for May=$46,865 Budgeted total overhead for June=$27,540+$20,000Budgeted total overhead for June=$47,540

Conclusion:

Thus, factory overhead budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 6-

To prepare:

Selling expense Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Selling Expense budgets

	April ($)	May ($)	June ($)	Total ($)
Sales commissions	39,114	37,206	38,160	114,480
Sales salaries	3,000	3,000	3,000	9,000
Selling expenses	42,114	40,206	41,160	123,480

Explanation of Solution

First we need to calculate Sales commissions.

Calculation of sales commission is as under-

Sales are calculated in Requirement 1

Sales Commission=8%×SalesSales Commission for April=8%×$488,925 Sales Commission for April=$39,114 Sales Commission for May=8%×$465,075 Sales Commission for May=$37,206 Sales Commission for June=8%×$477,000Sales Commission for June=$38,160

Sales salary for each month- $3,000 (Given)

Selling expense for each month is calculated as under-

Selling Expense=Sales Commission+Sales salarySelling Expense for April=$39,114+$3,000 Selling Expense for April=$42,114 Selling Expense for May=$37,206+$3,000 Selling Expense for May=$40,206 Selling Expense for June=$38,160+$3,000 Selling Expense for June=$41,160

Conclusion:

Thus, the selling expense budget is prepared for the month of April, May and June.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 7-

To prepare:

General and administrative expense Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
General and administrative budgets

	April	May	June	Total ($)
Salaries	12,000	12,000	12,000	36,000
Interest on long term note	4,500	4,500	4,500	13,500
Total general and administrative expenses	16,500	16,500	16,500	49,500

Explanation of Solution

Given:

Salaries Expense = $12,000 per month

Interest on long term note-

Interest on long term note=Long term note payable×Interest rateInterest on long term note=$500,000×0.9%Interest on long term note= $4,500

Total General and administrative expenses for each month is calculated as under-

Total General and administrative expenses= Salaries expense+ Interest on long term noteTotal General and administrative expenses=$12,000+$4,500Total General and administrative expenses=$16,500

Conclusion:

Thus, the general and administrative expenses budget is prepared for the month of April, May and June. Expense for each month is $16,500.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 8-

To prepare:

Cash Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Cash Budget

	April	May	June
Beginning cash balance	40,000	83,346	124,295
Add: Cash receipts from customers	488,925	481,770	468,653
Total cash available	528,925	565,116	592,948
Less: Cash disbursements
Payment for raw materials	200,500	198,000	201,500
Payment for direct labor	147,750	149,250	153,000
Payments for variable overhead	26,595	26,865	27,540
Sales commission	39,114	37,206	38,160
Sales salaries	3,000	3,000	3,000
General and administrative salaries	12,000	12,000	12,000
Dividends	0	10,000	0
Loan interest	120	0	0
Long term note interest	4,500	4,500	4,500
Purchase of equipment	0	0	130,000
Total cash disbursements	433,579	440,821	569,700
Excess of cash receipts over cash disbursements	95,346	124,295	23,248
Additional loan (Loan repayment)	(12,000)		16,752
Ending cash balance	83,346	124,295	40,000

Explanation of Solution

Given-

Beginning cash balance = $40,000
Payment for raw materials − Calculated in Req. 3
Payment for direct labor - Calculated in Req. 4
Payments for variable overhead - Calculated in Req. 5
Sales commission - Calculated in Req. 6
Sales salaries - Calculated in Req. 6
General and administrative salaries - Calculated in Req.7
Long term note interest - Calculated in Req.7
Dividends - $10,000
Purchase of equipment - $130,000

Total cash available

Calculation of cash receipts from customers is as under-

-It is given that amount of credit sales will be collected in the month following the sale.

Calculation of cash receipts from customers-
	April	May	June

Total budgeted sales (Req.1)	488,925	465,075	477,000
Cash Sales (30%)	146,677.50	139,522.50	143,100
Credit sales (70%)	342,247.50	325,552.50	333,900

Total cash receipts from customers
Current month's cash sales	146,677.50	139,522.50	143,100
Collection of receivables	342,247.50	342,247.50	325,553
Total cash receipts	488,925	481,770	468,653

Total cash available-

Total cash available= Beginning cash balance+Total cash receiptsTotal cash available for April=$40,000+$488,925Total cash available for April=$528,925Total cash available for May=$83,346+$481,770Total cash available for May=$565,116Total cash available for June=$124,295+$468,653Total cash available for June=$592,948

Total cash disbursementsLoan interest-

Loan interest = Loan amount×Rate of interestLoan interest = $12,000×1%Loan interest = $120

Total cash disbursements-

Total cash disbursements for April= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission + Sales salaries+ General and administrative salaries+Loan interest+ Long term note interest) Total cash disbursements for April= $200,500+$147,750+$26,595+$39,114+$3,000+$12,000+$120+$4,500Total cash disbursements for April=$433,579

Total cash disbursements for May= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission+ Sales salaries+ General and administrative salaries+Dividends+ Long term note interest) Total cash disbursements for May= $198,000+$149,250+$26,865+$37,206+$3,000+$12,000+$10,000+$4,500Total cash disbursements for May=$440,821

Total cash disbursements for June= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission+ Sales salaries+ General and administrative salaries+Long term note interest+Purchase of equipment) Total cash disbursements for June= $201,500+$153,000+$27,540+$38,160+$3,000+$12,000+$4,500+$130,000Total cash disbursements for June=$569,700

Excess of cash receipts over cash disbursements

Excess of cash receipts over cash disbursements=Total cash available−Total cash disbursementsExcess of cash receipts over cash disbursements for April=$528,925−$433,579 Excess of cash receipts over cash disbursements for April=$95,346 Excess of cash receipts over cash disbursements for May=$565,116−$440,821 Excess of cash receipts over cash disbursements for May=$124,295 Excess of cash receipts over cash disbursements for June=$592,948−$569,700Excess of cash receipts over cash disbursements for June=$23,248

- It is given that Company need to maintain minimum cash balance of $40,000. In June month they don't have sufficient cash balance so, need to borrow loan to meet minimum cash balance as $40,000.

Loan amount for June month-

Available cash balance=$23,248

Loan amount = $40,000−$23,248Loan amount =$16,752

-Loan is repaid in the month of April of $12,000.

Ending cash balance-

Ending cash balance April = $95,346−$12,000Ending cash balance April= $83,346Ending cash balance May = $124,295Ending cash balance June=$23,248+$16,752Ending cash balance June=$40,000

Conclusion:

Thus, cash budget is prepared with ending cash balance in the month of June $40,000.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 9-

To prepare:

Budgeted income statement

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Income Statement

Particulars	Amount ($)	Amount ($)
Sales		1,431,000
Cost of merchandise sold		1,191,000
Gross Profit		240,000
Operating expenses:
Sales Commissions	114,480
Sales Salaries	9,000
Long term note interest	13,500
General and administrative expenses	36,000
Interest expense	120	173,100
Income before tax		66,900
Tax @ 40%		23,415
Net operating income		43,485

Explanation of Solution

Given,

Sales = $1,431,000 Calculated in Req.1
Sales commission - $114,480 Calculated in Req. 6
Sales salaries - $9,000Calculated in Req. 6
General and administrative salaries - $36,000 Calculated in Req.7
Long term note interest - $13,500 Calculated in Req.7
Interest expense -$120 Calculated in Req.8

Cost of merchandise sold-

Cost of merchandise sold = No. of units ×Cost priceCost of merchandise sold =60,000×$19,85Cost of merchandise sold =$1,191,000

Gross profit is calculated as under-

Gross profit = Sales – Cost of merchandise soldGross profit =$1,431,000−$1,191,000Gross profit =$240,000

Total operating expenses-

TotalOperating expenses= Sales Commissions+ Sales Salaries+ Long term note interest +General and administrative expenses+ Interest expenseTotalOperating expenses=$114,480+$9,000+$13,500+$36,000+$120TotalOperating expenses=$173,100

Income before tax-

Income before tax=Gross profit – Total operating expensesIncome before tax=$240,000−$173,100Income before tax=$66,900

Tax Expense-

Tax Expense=Income before tax×Tax RateTax Expense=$66,900×35%Tax Expense=$23,415

Net Operating income is calculated as under-

Net Operating income= Income before tax−Tax ExpenseNet Operating income=$66,900−$23,415Net Operating income=$43,485

Conclusion:

Thus, Income statement is prepared for the quarter.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 10-

To prepare:

Budgeted Balance sheet.

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Balance sheet as of June 30

	Amount ($)	Amount ($)
Assets
Cash	40,000
Accounts receivable	333,900
Raw materials Inventory	80,000
Finished goods inventory	325,540
Total current assets		779,440
Equipment	730,000
Less: Accumulated depreciation	(210,000)
Equipment net		520,000
Total assets		1,299,440
Stockholder's Equity and Liabilities
Accounts payable	182,000
Bank loan payable	16,752
Tax payable	23,415
Current liabilities		222,167
Long term note payable		500,000
Common stock	335,000
Retained earnings	242,273
Total Stockholder's Equity		577,273
Total Stockholder's Equity and Liabilities		1,299,440

Explanation of Solution

Assets

Given,

Cash = $40,000 (Req.8)

Calculation of other current assets-

Particulars	Amount ($)
Accounts Receivables
Beginning receivables	342,248
Credit sales	1,001,701
Less: Collections	(1,010,049)
Ending Receivables	333,900

Raw material inventory
Beginning raw materials	98,500
Purchases of raw materials	581,500
Less: Materials used in production	(600,000)
Ending raw materials inventory	80,000

Finished goods inventory
Beginning Finished goods inventory	325,540
Cost of goods completed during the period	1,191,000
Less: Cost of goods sold during the period	(1,191,000)
Ending Finished goods inventory	325,540

Total current assets-

Total current assets=Cash +Accounts receivables+Raw material inventory+ Finished goods inventory Total current assets=$40,000+$333,900+$80,000+$325,540Total current assets=$779,440

Calculation of Equipment-

Particulars	Amount ($)
Equipment Gross
Beginning Equipment	600,000
Purchased in June	130,000
Total (A)	730,000

Accumulated Depreciation
Beginning Accumulated Depreciation	150,000
Depreciation expense	60,000
Total (B)	210,000

Equipment (A-B)	520,000

Total Assets-

Total assets = Total current assets + EquipmentTotal assets = $779,440 + $520,000Total assets = $1,299,440

Stockholder's Equity and Liabilities

Given,

Bank loan payable = $16,752 (Req.8)
Taxes payable = $23,415 (Req.9)
Long −term note payable = $500,000
Common stock = $335,000

Accounts payable-

Particulars	Amount ($)
Accounts Payables
Beginning accounts payable	200,500
Purchase of raw materials	581,500
Payments of raw materials	(600,000)
Ending accounts payable	182,000

Total current liabilities-

Total current liabilities=Accounts payable+Bank loan payable+Taxes payableTotal current liabilities=$182,000+$16,752+$23,415Total current liabilities=$222,167

Retained Earnings-

Particulars	Amount ($)
Retained Earnings
Retained Earnings, Beginning	208,788
Add: Net Income	43,485
	252,273
Less: Dividends	(10,000)
Retained Earnings, Ending	242,273

Total stockholder's equity-

Total stockholder’s equity = Common stock+Retained EarningsTotal stockholder’s equity =$335,000+$242,273Total stockholder’s equity =$577,273

Total Stockholder's Equity and Liabilities-

Total Stockholder's Equity and Liabilities=Current liabilities+Long term note payable+Total stockholder’s equityTotal Stockholder's Equity and Liabilities=$222,167+$500,000+$577,273Total Stockholder's Equity and Liabilities=$1,299,440

Conclusion:

Thus, Budgeted balance sheet is prepared with total of $1,299,440

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Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 22, Problem 4APSA

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 1-

To prepare:

Monthly sales budget

Expert Solution

Answer to Problem 4APSA

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

ZIGBY Manufacturing
Monthly sales budget

	April	May	June	Quarter
Sales in units	20,500	19,500	20,000	60,000
Selling price per unit	$23.85	$23.85	$23.85	$23.85
Dollar sales value($)	488,925	465,075	477,000	1,431,000

Explanation of Solution

Given,

Sales units for April = 20,500
Sales units for May = 19,500
Sales units for June = 20,000
Selling price per unit = $23.85

Sales units for quarter=April sales+May sales+June sales Sales units for quarter=20,500+19,500+20,000Sales units for quarter=60,000

Dollar sales value for each month is calculated as follows-

Dollar sales value=Sales in units×Selling price per unitDollar sales value for April=20,500×$23.85 Dollar sales value for April=$488,925 Dollar sales value for May=19,500×$23.85 Dollar sales value for May=$465,075 Dollar sales value for June=20,000×$23.85 Dollar sales value for June=$477,000 Dollar sales value for Quarter=60,000×$23.85 Dollar sales value for Quarter=$1,431,000

Conclusion:

Thus, the monthly sales budget has been prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 2-

To prepare:

Production budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Production budgets

	April	May	June	Quarter
Budgeted Sales for the month	20,500	19,500	20,000
Ending inventory in units	15,600	16,000	16,400
Total Needs	36,100	35,500	36,400
Less: Beginning inventory	(16,400)	(15,600)	(16,000)
Units to be produced	19,700	19,900	20,400	60,000

Explanation of Solution

First, ending inventory in units is required to be calculated-

Calculation of ending inventory in units is as under-

Ending inventory requirement = 80% of Next Months Expected sales unitsEnding inventory requirement for April =80%X Expected sales units forMay Ending inventory requirement for April =80%X 19,500 unitsEnding inventory requirement for April =15,600 unitsEnding inventory requirement for May =80%X Expected sales units for JuneEnding inventory requirement for May =80% X 20,000 unitsEnding inventory requirement for May =16,000 unitsEnding inventory requirement for June =80%X Expected sales units for JulyEnding inventory requirement for June =80% X 20,500unitsEnding inventory requirement for June = 16,400 units

Ending inventory requirement = 80% of Next Months Expected sales unitsEnding inventory requirement for March =80%X Expected sales units forApril Ending inventory requirement for March =80%X 20,500 unitsEnding inventory requirement for March =16,400 unit

Now, Merchandise purchases required is to be calculated-

Required merchandise purchases= Ending Inventory + Expected sales of the month – Beginning Inventory

Given, Expected sales of the month-

April − 20,500 units
May − 19,500 units
June − 20,000 units

Ending inventory −

April − 15,600 units
May − 16,000 units
June − 16,400 units

Beginning inventory-

- Ending inventory of the previous month shall be beginning inventory of current month.

April − 16,400 units
May − 15,600 units
June − 16,000 units

Total requirement for the month of April, May and June-

Required merchandise purchases = Ending Inventory + Expected sales of the month – Beginning Inventory Required merchandise purchases for April=20,500 units+15,600 units–16,400 units Required merchandise purchases for April=19,700 units Required merchandise purchases for May=19,500 units+16,000 units–15,600 units Required merchandise purchases for May =19,900units Required merchandise purchases for June=20,000 units+16,400 units–16,000 unitsRequired merchandise purchases for June=20,400units

Conclusion:

Thus, the Production budget has been prepared for the months of April, May and June.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 3-

To prepare:

Raw materials Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Raw Materials budgets

	April	May	June	Quarter

Production Budget	19,700	19,900	20,400
Materials requirement per unit	0.5	0.5	0.5
Materials needed for production	9,850	9,950	10,200
Add: Budgeted ending raw material inventory	4,975	5,100	4,000
Total material requirements (units)	14,825	15,050	14,200
Less: Desired opening raw material inventory	(4,925)	(4,975)	(5,100)
Materials to be purchased	9,900	10,075	9,100	29,075
Materials price per unit	$20	$20	$20	$20
Total cost of direct material purchases	$198,000	$201,500	$182,000	$581,500

Explanation of Solution

Given,

Materials requirement per unit = 0.5
Desired opening raw material inventory for April = 4,925 units
Desired ending raw material inventory for June = 4,000 units
Materials price per unit = $20
Production Budget = Calculated in Req.2

Materials needed for production= Production Budget× Materials requirement per unitMaterials needed for production for April=19,700×0.5Materials needed for production for April=9,850 unitsMaterials needed for production for May=19,900×0.5Materials needed for production for May=9,950 unitsMaterials needed for production for June=20,400×0.5Materials needed for production for June=10,200

Ending inventory is 50% of next month's Materials requirements-

Ending inventory requirement = 50% of Next Months Materials requirementsEnding inventory requirement for April =50%X Materials requirements forMay Ending inventory requirement for April =50%X 9,950 unitsEnding inventory requirement for April =4,975 unitsEnding inventory requirement for May =50%X Materials requirements for JuneEnding inventory requirement for May =50% X 10,200 unitsEnding inventory requirement for May =5,100 units

Beginning raw material inventory-

- Ending raw material inventory of the previous month shall be beginning raw material inventory of current month.

April − 4,925 units
May − 4,975 units
June − 5,100 units

Now, we need to calculate Materials to be purchased-

Materials to be purchased =Materials needed for production+ Budgeted ending raw material inventory− Desired opening raw material inventory Materials to be purchased for April=9,850+4,975−4,925 Materials to be purchased for April=9,900 units Materials to be purchased for May=9,950+5,100−4,975 Materials to be purchased for May=10,075 Materials to be purchased for June=10,200+4,000−5,100Materials to be purchased for June=9,100

Total cost of direct materials purchases is calculated below-

Cost of direct materials purchases=Materials to be purchased×Material price per unit Cost of direct materials purchases for April=9,900×$20 Cost of direct materials purchases for April=$198,000 Cost of direct materials purchases for May=10,075×$20 Cost of direct materials purchases for May=$201,500 Cost of direct materials purchases for June=9,100×$20Cost of direct materials purchases for June=$182,000

Conclusion:

Thus, Raw materials budget has been prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 4-

To prepare:

Direct Labor Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Direct Labor budgets

	April	May	June	Total
Budgeted production (units)	19,700	19,900	20,400
Labor requirements per unit (hours)	0.5	0.5	0.5
Total labor hours needed	9,850	9,950	10,200	30,000
Labor rate (per hour)	$15	$15	$15	$15
Labor Dollars	$147,750	$149,250	153,000	$450,000

Explanation of Solution

Given,

Production Budget = Calculated in Req.2
Labor requirements per unit= 0.5
Labor rate (per hour) = $15

Total labor hours needed is calculated as below-

Total labor hours needed= Budgeted production×Budgeted production Total labor hours needed for April=19,700×0.5 Total labor hours needed for April=9,850 Total labor hours needed for May=19,900×0.5 Total labor hours needed for May=9,950 Total labor hours needed for June=20,400×0.5Total labor hours needed for June=10,200

Now, we need to calculate Labor dollars-

Labor dollars for April= Total labor hours needed for April× Labor rate ( per hour)Labor dollars for April=9,850×$15Labor dollars for April=$147,750

Labor dollars for May= Total labor hours needed for May × Labor rate ( per hour)Labor dollars for May =9,950×$15Labor dollars for May =$149,250

Labor dollars for June= Total labor hours needed for June × Labor rate ( per hour)Labor dollars for June =10,200×$15Labor dollars for June =$153,000

Conclusion:

Thus, Labor budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 5-

To prepare:

Factory overhead Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Factory overhead budget

	April	May	June	Total
Labor hours needed	9,850	9,950	10,200
Variable factory overhead rate	$2.70	$2.70	$2.70
Budgeted variable overhead	$26,595	$26,865	$27,540	$81,000
Budgeted fixed overhead	$20,000	$20,000	$20,000	$60,000
Budgeted total overhead	$46,595	$46,865	$47,540	$141,000

Explanation of Solution

Given,

Labor hours needed- Calculated in Requirement 4
Variable factory overhead rate - $2.70
Budgeted fixed overhead (Depreciation)- $20,000

First we need to calculate Budgeted variable overhead-

Budgeted variable overhead is calculated as under-

Budgeted variable overhead= Labor hours needed× Variable factory overhead rate

Budgeted variable overhead for April=9,850×$2.70Budgeted variable overhead for April=$26,595

Budgeted variable overhead for May=9,950*$2.70Budgeted variable overhead for May=$26,865

Budgeted variable overhead for June=10,200×$2.70Budgeted variable overhead for June=$27,540

Budgeted total overhead-

Budgeted total overhead=Budgeted variable overhead+ Budgeted fixed overhead Budgeted total overhead for April=$26,595+$20,000 Budgeted total overhead for April=$46,595 Budgeted total overhead for May=$26,865+$20,000 Budgeted total overhead for May=$46,865 Budgeted total overhead for June=$27,540+$20,000Budgeted total overhead for June=$47,540

Conclusion:

Thus, factory overhead budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 6-

To prepare:

Selling expense Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Selling Expense budgets

	April ($)	May ($)	June ($)	Total ($)
Sales commissions	39,114	37,206	38,160	114,480
Sales salaries	3,000	3,000	3,000	9,000
Selling expenses	42,114	40,206	41,160	123,480

Explanation of Solution

First we need to calculate Sales commissions.

Calculation of sales commission is as under-

Sales are calculated in Requirement 1

Sales Commission=8%×SalesSales Commission for April=8%×$488,925 Sales Commission for April=$39,114 Sales Commission for May=8%×$465,075 Sales Commission for May=$37,206 Sales Commission for June=8%×$477,000Sales Commission for June=$38,160

Sales salary for each month- $3,000 (Given)

Selling expense for each month is calculated as under-

Selling Expense=Sales Commission+Sales salarySelling Expense for April=$39,114+$3,000 Selling Expense for April=$42,114 Selling Expense for May=$37,206+$3,000 Selling Expense for May=$40,206 Selling Expense for June=$38,160+$3,000 Selling Expense for June=$41,160

Conclusion:

Thus, the selling expense budget is prepared for the month of April, May and June.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 7-

To prepare:

General and administrative expense Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
General and administrative budgets

	April	May	June	Total ($)
Salaries	12,000	12,000	12,000	36,000
Interest on long term note	4,500	4,500	4,500	13,500
Total general and administrative expenses	16,500	16,500	16,500	49,500

Explanation of Solution

Given:

Salaries Expense = $12,000 per month

Interest on long term note-

Interest on long term note=Long term note payable×Interest rateInterest on long term note=$500,000×0.9%Interest on long term note= $4,500

Total General and administrative expenses for each month is calculated as under-

Total General and administrative expenses= Salaries expense+ Interest on long term noteTotal General and administrative expenses=$12,000+$4,500Total General and administrative expenses=$16,500

Conclusion:

Thus, the general and administrative expenses budget is prepared for the month of April, May and June. Expense for each month is $16,500.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 8-

To prepare:

Cash Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Cash Budget

	April	May	June
Beginning cash balance	40,000	83,346	124,295
Add: Cash receipts from customers	488,925	481,770	468,653
Total cash available	528,925	565,116	592,948
Less: Cash disbursements
Payment for raw materials	200,500	198,000	201,500
Payment for direct labor	147,750	149,250	153,000
Payments for variable overhead	26,595	26,865	27,540
Sales commission	39,114	37,206	38,160
Sales salaries	3,000	3,000	3,000
General and administrative salaries	12,000	12,000	12,000
Dividends	0	10,000	0
Loan interest	120	0	0
Long term note interest	4,500	4,500	4,500
Purchase of equipment	0	0	130,000
Total cash disbursements	433,579	440,821	569,700
Excess of cash receipts over cash disbursements	95,346	124,295	23,248
Additional loan (Loan repayment)	(12,000)		16,752
Ending cash balance	83,346	124,295	40,000

Explanation of Solution

Given-

Beginning cash balance = $40,000
Payment for raw materials − Calculated in Req. 3
Payment for direct labor - Calculated in Req. 4
Payments for variable overhead - Calculated in Req. 5
Sales commission - Calculated in Req. 6
Sales salaries - Calculated in Req. 6
General and administrative salaries - Calculated in Req.7
Long term note interest - Calculated in Req.7
Dividends - $10,000
Purchase of equipment - $130,000

Total cash available

Calculation of cash receipts from customers is as under-

-It is given that amount of credit sales will be collected in the month following the sale.

Calculation of cash receipts from customers-
	April	May	June

Total budgeted sales (Req.1)	488,925	465,075	477,000
Cash Sales (30%)	146,677.50	139,522.50	143,100
Credit sales (70%)	342,247.50	325,552.50	333,900

Total cash receipts from customers
Current month's cash sales	146,677.50	139,522.50	143,100
Collection of receivables	342,247.50	342,247.50	325,553
Total cash receipts	488,925	481,770	468,653

Total cash available-

Total cash available= Beginning cash balance+Total cash receiptsTotal cash available for April=$40,000+$488,925Total cash available for April=$528,925Total cash available for May=$83,346+$481,770Total cash available for May=$565,116Total cash available for June=$124,295+$468,653Total cash available for June=$592,948

Total cash disbursementsLoan interest-

Loan interest = Loan amount×Rate of interestLoan interest = $12,000×1%Loan interest = $120

Total cash disbursements-

Total cash disbursements for April= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission + Sales salaries+ General and administrative salaries+Loan interest+ Long term note interest) Total cash disbursements for April= $200,500+$147,750+$26,595+$39,114+$3,000+$12,000+$120+$4,500Total cash disbursements for April=$433,579

Total cash disbursements for May= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission+ Sales salaries+ General and administrative salaries+Dividends+ Long term note interest) Total cash disbursements for May= $198,000+$149,250+$26,865+$37,206+$3,000+$12,000+$10,000+$4,500Total cash disbursements for May=$440,821

Total cash disbursements for June= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission+ Sales salaries+ General and administrative salaries+Long term note interest+Purchase of equipment) Total cash disbursements for June= $201,500+$153,000+$27,540+$38,160+$3,000+$12,000+$4,500+$130,000Total cash disbursements for June=$569,700

Excess of cash receipts over cash disbursements

Excess of cash receipts over cash disbursements=Total cash available−Total cash disbursementsExcess of cash receipts over cash disbursements for April=$528,925−$433,579 Excess of cash receipts over cash disbursements for April=$95,346 Excess of cash receipts over cash disbursements for May=$565,116−$440,821 Excess of cash receipts over cash disbursements for May=$124,295 Excess of cash receipts over cash disbursements for June=$592,948−$569,700Excess of cash receipts over cash disbursements for June=$23,248

- It is given that Company need to maintain minimum cash balance of $40,000. In June month they don't have sufficient cash balance so, need to borrow loan to meet minimum cash balance as $40,000.

Loan amount for June month-

Available cash balance=$23,248

Loan amount = $40,000−$23,248Loan amount =$16,752

-Loan is repaid in the month of April of $12,000.

Ending cash balance-

Ending cash balance April = $95,346−$12,000Ending cash balance April= $83,346Ending cash balance May = $124,295Ending cash balance June=$23,248+$16,752Ending cash balance June=$40,000

Conclusion:

Thus, cash budget is prepared with ending cash balance in the month of June $40,000.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 9-

To prepare:

Budgeted income statement

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Income Statement

Particulars	Amount ($)	Amount ($)
Sales		1,431,000
Cost of merchandise sold		1,191,000
Gross Profit		240,000
Operating expenses:
Sales Commissions	114,480
Sales Salaries	9,000
Long term note interest	13,500
General and administrative expenses	36,000
Interest expense	120	173,100
Income before tax		66,900
Tax @ 40%		23,415
Net operating income		43,485

Explanation of Solution

Given,

Sales = $1,431,000 Calculated in Req.1
Sales commission - $114,480 Calculated in Req. 6
Sales salaries - $9,000Calculated in Req. 6
General and administrative salaries - $36,000 Calculated in Req.7
Long term note interest - $13,500 Calculated in Req.7
Interest expense -$120 Calculated in Req.8

Cost of merchandise sold-

Cost of merchandise sold = No. of units ×Cost priceCost of merchandise sold =60,000×$19,85Cost of merchandise sold =$1,191,000

Gross profit is calculated as under-

Gross profit = Sales – Cost of merchandise soldGross profit =$1,431,000−$1,191,000Gross profit =$240,000

Total operating expenses-

TotalOperating expenses= Sales Commissions+ Sales Salaries+ Long term note interest +General and administrative expenses+ Interest expenseTotalOperating expenses=$114,480+$9,000+$13,500+$36,000+$120TotalOperating expenses=$173,100

Income before tax-

Income before tax=Gross profit – Total operating expensesIncome before tax=$240,000−$173,100Income before tax=$66,900

Tax Expense-

Tax Expense=Income before tax×Tax RateTax Expense=$66,900×35%Tax Expense=$23,415

Net Operating income is calculated as under-

Net Operating income= Income before tax−Tax ExpenseNet Operating income=$66,900−$23,415Net Operating income=$43,485

Conclusion:

Thus, Income statement is prepared for the quarter.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 10-

To prepare:

Budgeted Balance sheet.

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Balance sheet as of June 30

	Amount ($)	Amount ($)
Assets
Cash	40,000
Accounts receivable	333,900
Raw materials Inventory	80,000
Finished goods inventory	325,540
Total current assets		779,440
Equipment	730,000
Less: Accumulated depreciation	(210,000)
Equipment net		520,000
Total assets		1,299,440
Stockholder's Equity and Liabilities
Accounts payable	182,000
Bank loan payable	16,752
Tax payable	23,415
Current liabilities		222,167
Long term note payable		500,000
Common stock	335,000
Retained earnings	242,273
Total Stockholder's Equity		577,273
Total Stockholder's Equity and Liabilities		1,299,440

Explanation of Solution

Assets

Given,

Cash = $40,000 (Req.8)

Calculation of other current assets-

Particulars	Amount ($)
Accounts Receivables
Beginning receivables	342,248
Credit sales	1,001,701
Less: Collections	(1,010,049)
Ending Receivables	333,900

Raw material inventory
Beginning raw materials	98,500
Purchases of raw materials	581,500
Less: Materials used in production	(600,000)
Ending raw materials inventory	80,000

Finished goods inventory
Beginning Finished goods inventory	325,540
Cost of goods completed during the period	1,191,000
Less: Cost of goods sold during the period	(1,191,000)
Ending Finished goods inventory	325,540

Total current assets-

Total current assets=Cash +Accounts receivables+Raw material inventory+ Finished goods inventory Total current assets=$40,000+$333,900+$80,000+$325,540Total current assets=$779,440

Calculation of Equipment-

Particulars	Amount ($)
Equipment Gross
Beginning Equipment	600,000
Purchased in June	130,000
Total (A)	730,000

Accumulated Depreciation
Beginning Accumulated Depreciation	150,000
Depreciation expense	60,000
Total (B)	210,000

Equipment (A-B)	520,000

Total Assets-

Total assets = Total current assets + EquipmentTotal assets = $779,440 + $520,000Total assets = $1,299,440

Stockholder's Equity and Liabilities

Given,

Bank loan payable = $16,752 (Req.8)
Taxes payable = $23,415 (Req.9)
Long −term note payable = $500,000
Common stock = $335,000

Accounts payable-

Particulars	Amount ($)
Accounts Payables
Beginning accounts payable	200,500
Purchase of raw materials	581,500
Payments of raw materials	(600,000)
Ending accounts payable	182,000

Total current liabilities-

Total current liabilities=Accounts payable+Bank loan payable+Taxes payableTotal current liabilities=$182,000+$16,752+$23,415Total current liabilities=$222,167

Retained Earnings-

Particulars	Amount ($)
Retained Earnings
Retained Earnings, Beginning	208,788
Add: Net Income	43,485
	252,273
Less: Dividends	(10,000)
Retained Earnings, Ending	242,273

Total stockholder's equity-

Total stockholder’s equity = Common stock+Retained EarningsTotal stockholder’s equity =$335,000+$242,273Total stockholder’s equity =$577,273

Total Stockholder's Equity and Liabilities-

Total Stockholder's Equity and Liabilities=Current liabilities+Long term note payable+Total stockholder’s equityTotal Stockholder's Equity and Liabilities=$222,167+$500,000+$577,273Total Stockholder's Equity and Liabilities=$1,299,440

Conclusion:

Thus, Budgeted balance sheet is prepared with total of $1,299,440

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Answer 5

Chapter 22, Problem 4APSA

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 1-

To prepare:

Monthly sales budget

Expert Solution

Answer to Problem 4APSA

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

ZIGBY Manufacturing
Monthly sales budget

	April	May	June	Quarter
Sales in units	20,500	19,500	20,000	60,000
Selling price per unit	$23.85	$23.85	$23.85	$23.85
Dollar sales value($)	488,925	465,075	477,000	1,431,000

Explanation of Solution

Given,

Sales units for April = 20,500
Sales units for May = 19,500
Sales units for June = 20,000
Selling price per unit = $23.85

Sales units for quarter=April sales+May sales+June sales Sales units for quarter=20,500+19,500+20,000Sales units for quarter=60,000

Dollar sales value for each month is calculated as follows-

Dollar sales value=Sales in units×Selling price per unitDollar sales value for April=20,500×$23.85 Dollar sales value for April=$488,925 Dollar sales value for May=19,500×$23.85 Dollar sales value for May=$465,075 Dollar sales value for June=20,000×$23.85 Dollar sales value for June=$477,000 Dollar sales value for Quarter=60,000×$23.85 Dollar sales value for Quarter=$1,431,000

Conclusion:

Thus, the monthly sales budget has been prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 2-

To prepare:

Production budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Production budgets

	April	May	June	Quarter
Budgeted Sales for the month	20,500	19,500	20,000
Ending inventory in units	15,600	16,000	16,400
Total Needs	36,100	35,500	36,400
Less: Beginning inventory	(16,400)	(15,600)	(16,000)
Units to be produced	19,700	19,900	20,400	60,000

Explanation of Solution

First, ending inventory in units is required to be calculated-

Calculation of ending inventory in units is as under-

Ending inventory requirement = 80% of Next Months Expected sales unitsEnding inventory requirement for April =80%X Expected sales units forMay Ending inventory requirement for April =80%X 19,500 unitsEnding inventory requirement for April =15,600 unitsEnding inventory requirement for May =80%X Expected sales units for JuneEnding inventory requirement for May =80% X 20,000 unitsEnding inventory requirement for May =16,000 unitsEnding inventory requirement for June =80%X Expected sales units for JulyEnding inventory requirement for June =80% X 20,500unitsEnding inventory requirement for June = 16,400 units

Ending inventory requirement = 80% of Next Months Expected sales unitsEnding inventory requirement for March =80%X Expected sales units forApril Ending inventory requirement for March =80%X 20,500 unitsEnding inventory requirement for March =16,400 unit

Now, Merchandise purchases required is to be calculated-

Required merchandise purchases= Ending Inventory + Expected sales of the month – Beginning Inventory

Given, Expected sales of the month-

April − 20,500 units
May − 19,500 units
June − 20,000 units

Ending inventory −

April − 15,600 units
May − 16,000 units
June − 16,400 units

Beginning inventory-

- Ending inventory of the previous month shall be beginning inventory of current month.

April − 16,400 units
May − 15,600 units
June − 16,000 units

Total requirement for the month of April, May and June-

Required merchandise purchases = Ending Inventory + Expected sales of the month – Beginning Inventory Required merchandise purchases for April=20,500 units+15,600 units–16,400 units Required merchandise purchases for April=19,700 units Required merchandise purchases for May=19,500 units+16,000 units–15,600 units Required merchandise purchases for May =19,900units Required merchandise purchases for June=20,000 units+16,400 units–16,000 unitsRequired merchandise purchases for June=20,400units

Conclusion:

Thus, the Production budget has been prepared for the months of April, May and June.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 3-

To prepare:

Raw materials Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Raw Materials budgets

	April	May	June	Quarter

Production Budget	19,700	19,900	20,400
Materials requirement per unit	0.5	0.5	0.5
Materials needed for production	9,850	9,950	10,200
Add: Budgeted ending raw material inventory	4,975	5,100	4,000
Total material requirements (units)	14,825	15,050	14,200
Less: Desired opening raw material inventory	(4,925)	(4,975)	(5,100)
Materials to be purchased	9,900	10,075	9,100	29,075
Materials price per unit	$20	$20	$20	$20
Total cost of direct material purchases	$198,000	$201,500	$182,000	$581,500

Explanation of Solution

Given,

Materials requirement per unit = 0.5
Desired opening raw material inventory for April = 4,925 units
Desired ending raw material inventory for June = 4,000 units
Materials price per unit = $20
Production Budget = Calculated in Req.2

Materials needed for production= Production Budget× Materials requirement per unitMaterials needed for production for April=19,700×0.5Materials needed for production for April=9,850 unitsMaterials needed for production for May=19,900×0.5Materials needed for production for May=9,950 unitsMaterials needed for production for June=20,400×0.5Materials needed for production for June=10,200

Ending inventory is 50% of next month's Materials requirements-

Ending inventory requirement = 50% of Next Months Materials requirementsEnding inventory requirement for April =50%X Materials requirements forMay Ending inventory requirement for April =50%X 9,950 unitsEnding inventory requirement for April =4,975 unitsEnding inventory requirement for May =50%X Materials requirements for JuneEnding inventory requirement for May =50% X 10,200 unitsEnding inventory requirement for May =5,100 units

Beginning raw material inventory-

- Ending raw material inventory of the previous month shall be beginning raw material inventory of current month.

April − 4,925 units
May − 4,975 units
June − 5,100 units

Now, we need to calculate Materials to be purchased-

Materials to be purchased =Materials needed for production+ Budgeted ending raw material inventory− Desired opening raw material inventory Materials to be purchased for April=9,850+4,975−4,925 Materials to be purchased for April=9,900 units Materials to be purchased for May=9,950+5,100−4,975 Materials to be purchased for May=10,075 Materials to be purchased for June=10,200+4,000−5,100Materials to be purchased for June=9,100

Total cost of direct materials purchases is calculated below-

Cost of direct materials purchases=Materials to be purchased×Material price per unit Cost of direct materials purchases for April=9,900×$20 Cost of direct materials purchases for April=$198,000 Cost of direct materials purchases for May=10,075×$20 Cost of direct materials purchases for May=$201,500 Cost of direct materials purchases for June=9,100×$20Cost of direct materials purchases for June=$182,000

Conclusion:

Thus, Raw materials budget has been prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 4-

To prepare:

Direct Labor Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Direct Labor budgets

	April	May	June	Total
Budgeted production (units)	19,700	19,900	20,400
Labor requirements per unit (hours)	0.5	0.5	0.5
Total labor hours needed	9,850	9,950	10,200	30,000
Labor rate (per hour)	$15	$15	$15	$15
Labor Dollars	$147,750	$149,250	153,000	$450,000

Explanation of Solution

Given,

Production Budget = Calculated in Req.2
Labor requirements per unit= 0.5
Labor rate (per hour) = $15

Total labor hours needed is calculated as below-

Total labor hours needed= Budgeted production×Budgeted production Total labor hours needed for April=19,700×0.5 Total labor hours needed for April=9,850 Total labor hours needed for May=19,900×0.5 Total labor hours needed for May=9,950 Total labor hours needed for June=20,400×0.5Total labor hours needed for June=10,200

Now, we need to calculate Labor dollars-

Labor dollars for April= Total labor hours needed for April× Labor rate ( per hour)Labor dollars for April=9,850×$15Labor dollars for April=$147,750

Labor dollars for May= Total labor hours needed for May × Labor rate ( per hour)Labor dollars for May =9,950×$15Labor dollars for May =$149,250

Labor dollars for June= Total labor hours needed for June × Labor rate ( per hour)Labor dollars for June =10,200×$15Labor dollars for June =$153,000

Conclusion:

Thus, Labor budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 5-

To prepare:

Factory overhead Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Factory overhead budget

	April	May	June	Total
Labor hours needed	9,850	9,950	10,200
Variable factory overhead rate	$2.70	$2.70	$2.70
Budgeted variable overhead	$26,595	$26,865	$27,540	$81,000
Budgeted fixed overhead	$20,000	$20,000	$20,000	$60,000
Budgeted total overhead	$46,595	$46,865	$47,540	$141,000

Explanation of Solution

Given,

Labor hours needed- Calculated in Requirement 4
Variable factory overhead rate - $2.70
Budgeted fixed overhead (Depreciation)- $20,000

First we need to calculate Budgeted variable overhead-

Budgeted variable overhead is calculated as under-

Budgeted variable overhead= Labor hours needed× Variable factory overhead rate

Budgeted variable overhead for April=9,850×$2.70Budgeted variable overhead for April=$26,595

Budgeted variable overhead for May=9,950*$2.70Budgeted variable overhead for May=$26,865

Budgeted variable overhead for June=10,200×$2.70Budgeted variable overhead for June=$27,540

Budgeted total overhead-

Budgeted total overhead=Budgeted variable overhead+ Budgeted fixed overhead Budgeted total overhead for April=$26,595+$20,000 Budgeted total overhead for April=$46,595 Budgeted total overhead for May=$26,865+$20,000 Budgeted total overhead for May=$46,865 Budgeted total overhead for June=$27,540+$20,000Budgeted total overhead for June=$47,540

Conclusion:

Thus, factory overhead budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 6-

To prepare:

Selling expense Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Selling Expense budgets

	April ($)	May ($)	June ($)	Total ($)
Sales commissions	39,114	37,206	38,160	114,480
Sales salaries	3,000	3,000	3,000	9,000
Selling expenses	42,114	40,206	41,160	123,480

Explanation of Solution

First we need to calculate Sales commissions.

Calculation of sales commission is as under-

Sales are calculated in Requirement 1

Sales Commission=8%×SalesSales Commission for April=8%×$488,925 Sales Commission for April=$39,114 Sales Commission for May=8%×$465,075 Sales Commission for May=$37,206 Sales Commission for June=8%×$477,000Sales Commission for June=$38,160

Sales salary for each month- $3,000 (Given)

Selling expense for each month is calculated as under-

Selling Expense=Sales Commission+Sales salarySelling Expense for April=$39,114+$3,000 Selling Expense for April=$42,114 Selling Expense for May=$37,206+$3,000 Selling Expense for May=$40,206 Selling Expense for June=$38,160+$3,000 Selling Expense for June=$41,160

Conclusion:

Thus, the selling expense budget is prepared for the month of April, May and June.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 7-

To prepare:

General and administrative expense Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
General and administrative budgets

	April	May	June	Total ($)
Salaries	12,000	12,000	12,000	36,000
Interest on long term note	4,500	4,500	4,500	13,500
Total general and administrative expenses	16,500	16,500	16,500	49,500

Explanation of Solution

Given:

Salaries Expense = $12,000 per month

Interest on long term note-

Interest on long term note=Long term note payable×Interest rateInterest on long term note=$500,000×0.9%Interest on long term note= $4,500

Total General and administrative expenses for each month is calculated as under-

Total General and administrative expenses= Salaries expense+ Interest on long term noteTotal General and administrative expenses=$12,000+$4,500Total General and administrative expenses=$16,500

Conclusion:

Thus, the general and administrative expenses budget is prepared for the month of April, May and June. Expense for each month is $16,500.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 8-

To prepare:

Cash Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Cash Budget

	April	May	June
Beginning cash balance	40,000	83,346	124,295
Add: Cash receipts from customers	488,925	481,770	468,653
Total cash available	528,925	565,116	592,948
Less: Cash disbursements
Payment for raw materials	200,500	198,000	201,500
Payment for direct labor	147,750	149,250	153,000
Payments for variable overhead	26,595	26,865	27,540
Sales commission	39,114	37,206	38,160
Sales salaries	3,000	3,000	3,000
General and administrative salaries	12,000	12,000	12,000
Dividends	0	10,000	0
Loan interest	120	0	0
Long term note interest	4,500	4,500	4,500
Purchase of equipment	0	0	130,000
Total cash disbursements	433,579	440,821	569,700
Excess of cash receipts over cash disbursements	95,346	124,295	23,248
Additional loan (Loan repayment)	(12,000)		16,752
Ending cash balance	83,346	124,295	40,000

Explanation of Solution

Given-

Beginning cash balance = $40,000
Payment for raw materials − Calculated in Req. 3
Payment for direct labor - Calculated in Req. 4
Payments for variable overhead - Calculated in Req. 5
Sales commission - Calculated in Req. 6
Sales salaries - Calculated in Req. 6
General and administrative salaries - Calculated in Req.7
Long term note interest - Calculated in Req.7
Dividends - $10,000
Purchase of equipment - $130,000

Total cash available

Calculation of cash receipts from customers is as under-

-It is given that amount of credit sales will be collected in the month following the sale.

Calculation of cash receipts from customers-
	April	May	June

Total budgeted sales (Req.1)	488,925	465,075	477,000
Cash Sales (30%)	146,677.50	139,522.50	143,100
Credit sales (70%)	342,247.50	325,552.50	333,900

Total cash receipts from customers
Current month's cash sales	146,677.50	139,522.50	143,100
Collection of receivables	342,247.50	342,247.50	325,553
Total cash receipts	488,925	481,770	468,653

Total cash available-

Total cash available= Beginning cash balance+Total cash receiptsTotal cash available for April=$40,000+$488,925Total cash available for April=$528,925Total cash available for May=$83,346+$481,770Total cash available for May=$565,116Total cash available for June=$124,295+$468,653Total cash available for June=$592,948

Total cash disbursementsLoan interest-

Loan interest = Loan amount×Rate of interestLoan interest = $12,000×1%Loan interest = $120

Total cash disbursements-

Total cash disbursements for April= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission + Sales salaries+ General and administrative salaries+Loan interest+ Long term note interest) Total cash disbursements for April= $200,500+$147,750+$26,595+$39,114+$3,000+$12,000+$120+$4,500Total cash disbursements for April=$433,579

Total cash disbursements for May= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission+ Sales salaries+ General and administrative salaries+Dividends+ Long term note interest) Total cash disbursements for May= $198,000+$149,250+$26,865+$37,206+$3,000+$12,000+$10,000+$4,500Total cash disbursements for May=$440,821

Total cash disbursements for June= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission+ Sales salaries+ General and administrative salaries+Long term note interest+Purchase of equipment) Total cash disbursements for June= $201,500+$153,000+$27,540+$38,160+$3,000+$12,000+$4,500+$130,000Total cash disbursements for June=$569,700

Excess of cash receipts over cash disbursements

Excess of cash receipts over cash disbursements=Total cash available−Total cash disbursementsExcess of cash receipts over cash disbursements for April=$528,925−$433,579 Excess of cash receipts over cash disbursements for April=$95,346 Excess of cash receipts over cash disbursements for May=$565,116−$440,821 Excess of cash receipts over cash disbursements for May=$124,295 Excess of cash receipts over cash disbursements for June=$592,948−$569,700Excess of cash receipts over cash disbursements for June=$23,248

- It is given that Company need to maintain minimum cash balance of $40,000. In June month they don't have sufficient cash balance so, need to borrow loan to meet minimum cash balance as $40,000.

Loan amount for June month-

Available cash balance=$23,248

Loan amount = $40,000−$23,248Loan amount =$16,752

-Loan is repaid in the month of April of $12,000.

Ending cash balance-

Ending cash balance April = $95,346−$12,000Ending cash balance April= $83,346Ending cash balance May = $124,295Ending cash balance June=$23,248+$16,752Ending cash balance June=$40,000

Conclusion:

Thus, cash budget is prepared with ending cash balance in the month of June $40,000.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 9-

To prepare:

Budgeted income statement

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Income Statement

Particulars	Amount ($)	Amount ($)
Sales		1,431,000
Cost of merchandise sold		1,191,000
Gross Profit		240,000
Operating expenses:
Sales Commissions	114,480
Sales Salaries	9,000
Long term note interest	13,500
General and administrative expenses	36,000
Interest expense	120	173,100
Income before tax		66,900
Tax @ 40%		23,415
Net operating income		43,485

Explanation of Solution

Given,

Sales = $1,431,000 Calculated in Req.1
Sales commission - $114,480 Calculated in Req. 6
Sales salaries - $9,000Calculated in Req. 6
General and administrative salaries - $36,000 Calculated in Req.7
Long term note interest - $13,500 Calculated in Req.7
Interest expense -$120 Calculated in Req.8

Cost of merchandise sold-

Cost of merchandise sold = No. of units ×Cost priceCost of merchandise sold =60,000×$19,85Cost of merchandise sold =$1,191,000

Gross profit is calculated as under-

Gross profit = Sales – Cost of merchandise soldGross profit =$1,431,000−$1,191,000Gross profit =$240,000

Total operating expenses-

TotalOperating expenses= Sales Commissions+ Sales Salaries+ Long term note interest +General and administrative expenses+ Interest expenseTotalOperating expenses=$114,480+$9,000+$13,500+$36,000+$120TotalOperating expenses=$173,100

Income before tax-

Income before tax=Gross profit – Total operating expensesIncome before tax=$240,000−$173,100Income before tax=$66,900

Tax Expense-

Tax Expense=Income before tax×Tax RateTax Expense=$66,900×35%Tax Expense=$23,415

Net Operating income is calculated as under-

Net Operating income= Income before tax−Tax ExpenseNet Operating income=$66,900−$23,415Net Operating income=$43,485

Conclusion:

Thus, Income statement is prepared for the quarter.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 10-

To prepare:

Budgeted Balance sheet.

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Balance sheet as of June 30

	Amount ($)	Amount ($)
Assets
Cash	40,000
Accounts receivable	333,900
Raw materials Inventory	80,000
Finished goods inventory	325,540
Total current assets		779,440
Equipment	730,000
Less: Accumulated depreciation	(210,000)
Equipment net		520,000
Total assets		1,299,440
Stockholder's Equity and Liabilities
Accounts payable	182,000
Bank loan payable	16,752
Tax payable	23,415
Current liabilities		222,167
Long term note payable		500,000
Common stock	335,000
Retained earnings	242,273
Total Stockholder's Equity		577,273
Total Stockholder's Equity and Liabilities		1,299,440

Explanation of Solution

Assets

Given,

Cash = $40,000 (Req.8)

Calculation of other current assets-

Particulars	Amount ($)
Accounts Receivables
Beginning receivables	342,248
Credit sales	1,001,701
Less: Collections	(1,010,049)
Ending Receivables	333,900

Raw material inventory
Beginning raw materials	98,500
Purchases of raw materials	581,500
Less: Materials used in production	(600,000)
Ending raw materials inventory	80,000

Finished goods inventory
Beginning Finished goods inventory	325,540
Cost of goods completed during the period	1,191,000
Less: Cost of goods sold during the period	(1,191,000)
Ending Finished goods inventory	325,540

Total current assets-

Total current assets=Cash +Accounts receivables+Raw material inventory+ Finished goods inventory Total current assets=$40,000+$333,900+$80,000+$325,540Total current assets=$779,440

Calculation of Equipment-

Particulars	Amount ($)
Equipment Gross
Beginning Equipment	600,000
Purchased in June	130,000
Total (A)	730,000

Accumulated Depreciation
Beginning Accumulated Depreciation	150,000
Depreciation expense	60,000
Total (B)	210,000

Equipment (A-B)	520,000

Total Assets-

Total assets = Total current assets + EquipmentTotal assets = $779,440 + $520,000Total assets = $1,299,440

Stockholder's Equity and Liabilities

Given,

Bank loan payable = $16,752 (Req.8)
Taxes payable = $23,415 (Req.9)
Long −term note payable = $500,000
Common stock = $335,000

Accounts payable-

Particulars	Amount ($)
Accounts Payables
Beginning accounts payable	200,500
Purchase of raw materials	581,500
Payments of raw materials	(600,000)
Ending accounts payable	182,000

Total current liabilities-

Total current liabilities=Accounts payable+Bank loan payable+Taxes payableTotal current liabilities=$182,000+$16,752+$23,415Total current liabilities=$222,167

Retained Earnings-

Particulars	Amount ($)
Retained Earnings
Retained Earnings, Beginning	208,788
Add: Net Income	43,485
	252,273
Less: Dividends	(10,000)
Retained Earnings, Ending	242,273

Total stockholder's equity-

Total stockholder’s equity = Common stock+Retained EarningsTotal stockholder’s equity =$335,000+$242,273Total stockholder’s equity =$577,273

Total Stockholder's Equity and Liabilities-

Total Stockholder's Equity and Liabilities=Current liabilities+Long term note payable+Total stockholder’s equityTotal Stockholder's Equity and Liabilities=$222,167+$500,000+$577,273Total Stockholder's Equity and Liabilities=$1,299,440

Conclusion:

Thus, Budgeted balance sheet is prepared with total of $1,299,440

Answer 6

Chapter 22, Problem 4APSA

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 1-

To prepare:

Monthly sales budget

Expert Solution

Answer to Problem 4APSA

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

ZIGBY Manufacturing
Monthly sales budget

	April	May	June	Quarter
Sales in units	20,500	19,500	20,000	60,000
Selling price per unit	$23.85	$23.85	$23.85	$23.85
Dollar sales value($)	488,925	465,075	477,000	1,431,000

Explanation of Solution

Given,

Sales units for April = 20,500
Sales units for May = 19,500
Sales units for June = 20,000
Selling price per unit = $23.85

Sales units for quarter=April sales+May sales+June sales Sales units for quarter=20,500+19,500+20,000Sales units for quarter=60,000

Dollar sales value for each month is calculated as follows-

Dollar sales value=Sales in units×Selling price per unitDollar sales value for April=20,500×$23.85 Dollar sales value for April=$488,925 Dollar sales value for May=19,500×$23.85 Dollar sales value for May=$465,075 Dollar sales value for June=20,000×$23.85 Dollar sales value for June=$477,000 Dollar sales value for Quarter=60,000×$23.85 Dollar sales value for Quarter=$1,431,000

Conclusion:

Thus, the monthly sales budget has been prepared.

Answer 7

Chapter 22, Problem 4APSA

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 1-

To prepare:

Monthly sales budget

Answer 8

Expert Solution

Answer to Problem 4APSA

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

ZIGBY Manufacturing
Monthly sales budget

	April	May	June	Quarter
Sales in units	20,500	19,500	20,000	60,000
Selling price per unit	$23.85	$23.85	$23.85	$23.85
Dollar sales value($)	488,925	465,075	477,000	1,431,000

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Given,

Sales units for April = 20,500
Sales units for May = 19,500
Sales units for June = 20,000
Selling price per unit = $23.85

Sales units for quarter=April sales+May sales+June sales Sales units for quarter=20,500+19,500+20,000Sales units for quarter=60,000

Dollar sales value for each month is calculated as follows-

Dollar sales value=Sales in units×Selling price per unitDollar sales value for April=20,500×$23.85 Dollar sales value for April=$488,925 Dollar sales value for May=19,500×$23.85 Dollar sales value for May=$465,075 Dollar sales value for June=20,000×$23.85 Dollar sales value for June=$477,000 Dollar sales value for Quarter=60,000×$23.85 Dollar sales value for Quarter=$1,431,000

Conclusion:

Thus, the monthly sales budget has been prepared.

Answer 13

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 2-

To prepare:

Production budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Production budgets

	April	May	June	Quarter
Budgeted Sales for the month	20,500	19,500	20,000
Ending inventory in units	15,600	16,000	16,400
Total Needs	36,100	35,500	36,400
Less: Beginning inventory	(16,400)	(15,600)	(16,000)
Units to be produced	19,700	19,900	20,400	60,000

Explanation of Solution

First, ending inventory in units is required to be calculated-

Calculation of ending inventory in units is as under-

Ending inventory requirement = 80% of Next Months Expected sales unitsEnding inventory requirement for April =80%X Expected sales units forMay Ending inventory requirement for April =80%X 19,500 unitsEnding inventory requirement for April =15,600 unitsEnding inventory requirement for May =80%X Expected sales units for JuneEnding inventory requirement for May =80% X 20,000 unitsEnding inventory requirement for May =16,000 unitsEnding inventory requirement for June =80%X Expected sales units for JulyEnding inventory requirement for June =80% X 20,500unitsEnding inventory requirement for June = 16,400 units

Ending inventory requirement = 80% of Next Months Expected sales unitsEnding inventory requirement for March =80%X Expected sales units forApril Ending inventory requirement for March =80%X 20,500 unitsEnding inventory requirement for March =16,400 unit

Now, Merchandise purchases required is to be calculated-

Required merchandise purchases= Ending Inventory + Expected sales of the month – Beginning Inventory

Given, Expected sales of the month-

April − 20,500 units
May − 19,500 units
June − 20,000 units

Ending inventory −

April − 15,600 units
May − 16,000 units
June − 16,400 units

Beginning inventory-

- Ending inventory of the previous month shall be beginning inventory of current month.

April − 16,400 units
May − 15,600 units
June − 16,000 units

Total requirement for the month of April, May and June-

Required merchandise purchases = Ending Inventory + Expected sales of the month – Beginning Inventory Required merchandise purchases for April=20,500 units+15,600 units–16,400 units Required merchandise purchases for April=19,700 units Required merchandise purchases for May=19,500 units+16,000 units–15,600 units Required merchandise purchases for May =19,900units Required merchandise purchases for June=20,000 units+16,400 units–16,000 unitsRequired merchandise purchases for June=20,400units

Conclusion:

Thus, the Production budget has been prepared for the months of April, May and June.

Answer 14

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 2-

To prepare:

Production budget

Answer 15

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Production budgets

	April	May	June	Quarter
Budgeted Sales for the month	20,500	19,500	20,000
Ending inventory in units	15,600	16,000	16,400
Total Needs	36,100	35,500	36,400
Less: Beginning inventory	(16,400)	(15,600)	(16,000)
Units to be produced	19,700	19,900	20,400	60,000

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

First, ending inventory in units is required to be calculated-

Calculation of ending inventory in units is as under-

Ending inventory requirement = 80% of Next Months Expected sales unitsEnding inventory requirement for April =80%X Expected sales units forMay Ending inventory requirement for April =80%X 19,500 unitsEnding inventory requirement for April =15,600 unitsEnding inventory requirement for May =80%X Expected sales units for JuneEnding inventory requirement for May =80% X 20,000 unitsEnding inventory requirement for May =16,000 unitsEnding inventory requirement for June =80%X Expected sales units for JulyEnding inventory requirement for June =80% X 20,500unitsEnding inventory requirement for June = 16,400 units

Ending inventory requirement = 80% of Next Months Expected sales unitsEnding inventory requirement for March =80%X Expected sales units forApril Ending inventory requirement for March =80%X 20,500 unitsEnding inventory requirement for March =16,400 unit

Now, Merchandise purchases required is to be calculated-

Required merchandise purchases= Ending Inventory + Expected sales of the month – Beginning Inventory

Given, Expected sales of the month-

April − 20,500 units
May − 19,500 units
June − 20,000 units

Ending inventory −

April − 15,600 units
May − 16,000 units
June − 16,400 units

Beginning inventory-

- Ending inventory of the previous month shall be beginning inventory of current month.

April − 16,400 units
May − 15,600 units
June − 16,000 units

Total requirement for the month of April, May and June-

Required merchandise purchases = Ending Inventory + Expected sales of the month – Beginning Inventory Required merchandise purchases for April=20,500 units+15,600 units–16,400 units Required merchandise purchases for April=19,700 units Required merchandise purchases for May=19,500 units+16,000 units–15,600 units Required merchandise purchases for May =19,900units Required merchandise purchases for June=20,000 units+16,400 units–16,000 unitsRequired merchandise purchases for June=20,400units

Conclusion:

Thus, the Production budget has been prepared for the months of April, May and June.

Answer 20

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 3-

To prepare:

Raw materials Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Raw Materials budgets

	April	May	June	Quarter

Production Budget	19,700	19,900	20,400
Materials requirement per unit	0.5	0.5	0.5
Materials needed for production	9,850	9,950	10,200
Add: Budgeted ending raw material inventory	4,975	5,100	4,000
Total material requirements (units)	14,825	15,050	14,200
Less: Desired opening raw material inventory	(4,925)	(4,975)	(5,100)
Materials to be purchased	9,900	10,075	9,100	29,075
Materials price per unit	$20	$20	$20	$20
Total cost of direct material purchases	$198,000	$201,500	$182,000	$581,500

Explanation of Solution

Given,

Materials requirement per unit = 0.5
Desired opening raw material inventory for April = 4,925 units
Desired ending raw material inventory for June = 4,000 units
Materials price per unit = $20
Production Budget = Calculated in Req.2

Materials needed for production= Production Budget× Materials requirement per unitMaterials needed for production for April=19,700×0.5Materials needed for production for April=9,850 unitsMaterials needed for production for May=19,900×0.5Materials needed for production for May=9,950 unitsMaterials needed for production for June=20,400×0.5Materials needed for production for June=10,200

Ending inventory is 50% of next month's Materials requirements-

Ending inventory requirement = 50% of Next Months Materials requirementsEnding inventory requirement for April =50%X Materials requirements forMay Ending inventory requirement for April =50%X 9,950 unitsEnding inventory requirement for April =4,975 unitsEnding inventory requirement for May =50%X Materials requirements for JuneEnding inventory requirement for May =50% X 10,200 unitsEnding inventory requirement for May =5,100 units

Beginning raw material inventory-

- Ending raw material inventory of the previous month shall be beginning raw material inventory of current month.

April − 4,925 units
May − 4,975 units
June − 5,100 units

Now, we need to calculate Materials to be purchased-

Materials to be purchased =Materials needed for production+ Budgeted ending raw material inventory− Desired opening raw material inventory Materials to be purchased for April=9,850+4,975−4,925 Materials to be purchased for April=9,900 units Materials to be purchased for May=9,950+5,100−4,975 Materials to be purchased for May=10,075 Materials to be purchased for June=10,200+4,000−5,100Materials to be purchased for June=9,100

Total cost of direct materials purchases is calculated below-

Cost of direct materials purchases=Materials to be purchased×Material price per unit Cost of direct materials purchases for April=9,900×$20 Cost of direct materials purchases for April=$198,000 Cost of direct materials purchases for May=10,075×$20 Cost of direct materials purchases for May=$201,500 Cost of direct materials purchases for June=9,100×$20Cost of direct materials purchases for June=$182,000

Conclusion:

Thus, Raw materials budget has been prepared.

Answer 21

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 3-

To prepare:

Raw materials Budget

Answer 22

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Raw Materials budgets

	April	May	June	Quarter

Production Budget	19,700	19,900	20,400
Materials requirement per unit	0.5	0.5	0.5
Materials needed for production	9,850	9,950	10,200
Add: Budgeted ending raw material inventory	4,975	5,100	4,000
Total material requirements (units)	14,825	15,050	14,200
Less: Desired opening raw material inventory	(4,925)	(4,975)	(5,100)
Materials to be purchased	9,900	10,075	9,100	29,075
Materials price per unit	$20	$20	$20	$20
Total cost of direct material purchases	$198,000	$201,500	$182,000	$581,500

Answer 23

Expert Solution

Answer 24

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Given,

Materials requirement per unit = 0.5
Desired opening raw material inventory for April = 4,925 units
Desired ending raw material inventory for June = 4,000 units
Materials price per unit = $20
Production Budget = Calculated in Req.2

Materials needed for production= Production Budget× Materials requirement per unitMaterials needed for production for April=19,700×0.5Materials needed for production for April=9,850 unitsMaterials needed for production for May=19,900×0.5Materials needed for production for May=9,950 unitsMaterials needed for production for June=20,400×0.5Materials needed for production for June=10,200

Ending inventory is 50% of next month's Materials requirements-

Ending inventory requirement = 50% of Next Months Materials requirementsEnding inventory requirement for April =50%X Materials requirements forMay Ending inventory requirement for April =50%X 9,950 unitsEnding inventory requirement for April =4,975 unitsEnding inventory requirement for May =50%X Materials requirements for JuneEnding inventory requirement for May =50% X 10,200 unitsEnding inventory requirement for May =5,100 units

Beginning raw material inventory-

- Ending raw material inventory of the previous month shall be beginning raw material inventory of current month.

April − 4,925 units
May − 4,975 units
June − 5,100 units

Now, we need to calculate Materials to be purchased-

Materials to be purchased =Materials needed for production+ Budgeted ending raw material inventory− Desired opening raw material inventory Materials to be purchased for April=9,850+4,975−4,925 Materials to be purchased for April=9,900 units Materials to be purchased for May=9,950+5,100−4,975 Materials to be purchased for May=10,075 Materials to be purchased for June=10,200+4,000−5,100Materials to be purchased for June=9,100

Total cost of direct materials purchases is calculated below-

Cost of direct materials purchases=Materials to be purchased×Material price per unit Cost of direct materials purchases for April=9,900×$20 Cost of direct materials purchases for April=$198,000 Cost of direct materials purchases for May=10,075×$20 Cost of direct materials purchases for May=$201,500 Cost of direct materials purchases for June=9,100×$20Cost of direct materials purchases for June=$182,000

Conclusion:

Thus, Raw materials budget has been prepared.

Answer 27

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 4-

To prepare:

Direct Labor Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Direct Labor budgets

	April	May	June	Total
Budgeted production (units)	19,700	19,900	20,400
Labor requirements per unit (hours)	0.5	0.5	0.5
Total labor hours needed	9,850	9,950	10,200	30,000
Labor rate (per hour)	$15	$15	$15	$15
Labor Dollars	$147,750	$149,250	153,000	$450,000

Explanation of Solution

Given,

Production Budget = Calculated in Req.2
Labor requirements per unit= 0.5
Labor rate (per hour) = $15

Total labor hours needed is calculated as below-

Total labor hours needed= Budgeted production×Budgeted production Total labor hours needed for April=19,700×0.5 Total labor hours needed for April=9,850 Total labor hours needed for May=19,900×0.5 Total labor hours needed for May=9,950 Total labor hours needed for June=20,400×0.5Total labor hours needed for June=10,200

Now, we need to calculate Labor dollars-

Labor dollars for April= Total labor hours needed for April× Labor rate ( per hour)Labor dollars for April=9,850×$15Labor dollars for April=$147,750

Labor dollars for May= Total labor hours needed for May × Labor rate ( per hour)Labor dollars for May =9,950×$15Labor dollars for May =$149,250

Labor dollars for June= Total labor hours needed for June × Labor rate ( per hour)Labor dollars for June =10,200×$15Labor dollars for June =$153,000

Conclusion:

Thus, Labor budget is prepared.

Answer 28

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 4-

To prepare:

Direct Labor Budget

Answer 29

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Direct Labor budgets

	April	May	June	Total
Budgeted production (units)	19,700	19,900	20,400
Labor requirements per unit (hours)	0.5	0.5	0.5
Total labor hours needed	9,850	9,950	10,200	30,000
Labor rate (per hour)	$15	$15	$15	$15
Labor Dollars	$147,750	$149,250	153,000	$450,000

Answer 30

Expert Solution

Answer 31

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

Given,

Production Budget = Calculated in Req.2
Labor requirements per unit= 0.5
Labor rate (per hour) = $15

Total labor hours needed is calculated as below-

Total labor hours needed= Budgeted production×Budgeted production Total labor hours needed for April=19,700×0.5 Total labor hours needed for April=9,850 Total labor hours needed for May=19,900×0.5 Total labor hours needed for May=9,950 Total labor hours needed for June=20,400×0.5Total labor hours needed for June=10,200

Now, we need to calculate Labor dollars-

Labor dollars for April= Total labor hours needed for April× Labor rate ( per hour)Labor dollars for April=9,850×$15Labor dollars for April=$147,750

Labor dollars for May= Total labor hours needed for May × Labor rate ( per hour)Labor dollars for May =9,950×$15Labor dollars for May =$149,250

Labor dollars for June= Total labor hours needed for June × Labor rate ( per hour)Labor dollars for June =10,200×$15Labor dollars for June =$153,000

Conclusion:

Thus, Labor budget is prepared.

Answer 34

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 5-

To prepare:

Factory overhead Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Factory overhead budget

	April	May	June	Total
Labor hours needed	9,850	9,950	10,200
Variable factory overhead rate	$2.70	$2.70	$2.70
Budgeted variable overhead	$26,595	$26,865	$27,540	$81,000
Budgeted fixed overhead	$20,000	$20,000	$20,000	$60,000
Budgeted total overhead	$46,595	$46,865	$47,540	$141,000

Explanation of Solution

Given,

Labor hours needed- Calculated in Requirement 4
Variable factory overhead rate - $2.70
Budgeted fixed overhead (Depreciation)- $20,000

First we need to calculate Budgeted variable overhead-

Budgeted variable overhead is calculated as under-

Budgeted variable overhead= Labor hours needed× Variable factory overhead rate

Budgeted variable overhead for April=9,850×$2.70Budgeted variable overhead for April=$26,595

Budgeted variable overhead for May=9,950*$2.70Budgeted variable overhead for May=$26,865

Budgeted variable overhead for June=10,200×$2.70Budgeted variable overhead for June=$27,540

Budgeted total overhead-

Budgeted total overhead=Budgeted variable overhead+ Budgeted fixed overhead Budgeted total overhead for April=$26,595+$20,000 Budgeted total overhead for April=$46,595 Budgeted total overhead for May=$26,865+$20,000 Budgeted total overhead for May=$46,865 Budgeted total overhead for June=$27,540+$20,000Budgeted total overhead for June=$47,540

Conclusion:

Thus, factory overhead budget is prepared.

Answer 35

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 5-

To prepare:

Factory overhead Budget

Answer 36

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Factory overhead budget

	April	May	June	Total
Labor hours needed	9,850	9,950	10,200
Variable factory overhead rate	$2.70	$2.70	$2.70
Budgeted variable overhead	$26,595	$26,865	$27,540	$81,000
Budgeted fixed overhead	$20,000	$20,000	$20,000	$60,000
Budgeted total overhead	$46,595	$46,865	$47,540	$141,000

Answer 37

Expert Solution

Answer 38

Expert Solution

Answer 39

Expert Solution

Answer 40

Explanation of Solution

Given,

Labor hours needed- Calculated in Requirement 4
Variable factory overhead rate - $2.70
Budgeted fixed overhead (Depreciation)- $20,000

First we need to calculate Budgeted variable overhead-

Budgeted variable overhead is calculated as under-

Budgeted variable overhead= Labor hours needed× Variable factory overhead rate

Budgeted variable overhead for April=9,850×$2.70Budgeted variable overhead for April=$26,595

Budgeted variable overhead for May=9,950*$2.70Budgeted variable overhead for May=$26,865

Budgeted variable overhead for June=10,200×$2.70Budgeted variable overhead for June=$27,540

Budgeted total overhead-

Budgeted total overhead=Budgeted variable overhead+ Budgeted fixed overhead Budgeted total overhead for April=$26,595+$20,000 Budgeted total overhead for April=$46,595 Budgeted total overhead for May=$26,865+$20,000 Budgeted total overhead for May=$46,865 Budgeted total overhead for June=$27,540+$20,000Budgeted total overhead for June=$47,540

Conclusion:

Thus, factory overhead budget is prepared.

Answer 41

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 6-

To prepare:

Selling expense Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Selling Expense budgets

	April ($)	May ($)	June ($)	Total ($)
Sales commissions	39,114	37,206	38,160	114,480
Sales salaries	3,000	3,000	3,000	9,000
Selling expenses	42,114	40,206	41,160	123,480

Explanation of Solution

First we need to calculate Sales commissions.

Calculation of sales commission is as under-

Sales are calculated in Requirement 1

Sales Commission=8%×SalesSales Commission for April=8%×$488,925 Sales Commission for April=$39,114 Sales Commission for May=8%×$465,075 Sales Commission for May=$37,206 Sales Commission for June=8%×$477,000Sales Commission for June=$38,160

Sales salary for each month- $3,000 (Given)

Selling expense for each month is calculated as under-

Selling Expense=Sales Commission+Sales salarySelling Expense for April=$39,114+$3,000 Selling Expense for April=$42,114 Selling Expense for May=$37,206+$3,000 Selling Expense for May=$40,206 Selling Expense for June=$38,160+$3,000 Selling Expense for June=$41,160

Conclusion:

Thus, the selling expense budget is prepared for the month of April, May and June.

Answer 42

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 6-

To prepare:

Selling expense Budget

Answer 43

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Selling Expense budgets

	April ($)	May ($)	June ($)	Total ($)
Sales commissions	39,114	37,206	38,160	114,480
Sales salaries	3,000	3,000	3,000	9,000
Selling expenses	42,114	40,206	41,160	123,480

Answer 44

Expert Solution

Answer 45

Expert Solution

Answer 46

Expert Solution

Answer 47

Explanation of Solution

First we need to calculate Sales commissions.

Calculation of sales commission is as under-

Sales are calculated in Requirement 1

Sales Commission=8%×SalesSales Commission for April=8%×$488,925 Sales Commission for April=$39,114 Sales Commission for May=8%×$465,075 Sales Commission for May=$37,206 Sales Commission for June=8%×$477,000Sales Commission for June=$38,160

Sales salary for each month- $3,000 (Given)

Selling expense for each month is calculated as under-

Selling Expense=Sales Commission+Sales salarySelling Expense for April=$39,114+$3,000 Selling Expense for April=$42,114 Selling Expense for May=$37,206+$3,000 Selling Expense for May=$40,206 Selling Expense for June=$38,160+$3,000 Selling Expense for June=$41,160

Conclusion:

Thus, the selling expense budget is prepared for the month of April, May and June.

Answer 48

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 7-

To prepare:

General and administrative expense Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
General and administrative budgets

	April	May	June	Total ($)
Salaries	12,000	12,000	12,000	36,000
Interest on long term note	4,500	4,500	4,500	13,500
Total general and administrative expenses	16,500	16,500	16,500	49,500

Explanation of Solution

Given:

Salaries Expense = $12,000 per month

Interest on long term note-

Interest on long term note=Long term note payable×Interest rateInterest on long term note=$500,000×0.9%Interest on long term note= $4,500

Total General and administrative expenses for each month is calculated as under-

Total General and administrative expenses= Salaries expense+ Interest on long term noteTotal General and administrative expenses=$12,000+$4,500Total General and administrative expenses=$16,500

Conclusion:

Thus, the general and administrative expenses budget is prepared for the month of April, May and June. Expense for each month is $16,500.

Answer 49

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 7-

To prepare:

General and administrative expense Budget

Answer 50

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
General and administrative budgets

	April	May	June	Total ($)
Salaries	12,000	12,000	12,000	36,000
Interest on long term note	4,500	4,500	4,500	13,500
Total general and administrative expenses	16,500	16,500	16,500	49,500

Answer 51

Expert Solution

Answer 52

Expert Solution

Answer 53

Expert Solution

Answer 54

Explanation of Solution

Given:

Salaries Expense = $12,000 per month

Interest on long term note-

Interest on long term note=Long term note payable×Interest rateInterest on long term note=$500,000×0.9%Interest on long term note= $4,500

Total General and administrative expenses for each month is calculated as under-

Total General and administrative expenses= Salaries expense+ Interest on long term noteTotal General and administrative expenses=$12,000+$4,500Total General and administrative expenses=$16,500

Conclusion:

Thus, the general and administrative expenses budget is prepared for the month of April, May and June. Expense for each month is $16,500.

Answer 55

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 8-

To prepare:

Cash Budget

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Cash Budget

	April	May	June
Beginning cash balance	40,000	83,346	124,295
Add: Cash receipts from customers	488,925	481,770	468,653
Total cash available	528,925	565,116	592,948
Less: Cash disbursements
Payment for raw materials	200,500	198,000	201,500
Payment for direct labor	147,750	149,250	153,000
Payments for variable overhead	26,595	26,865	27,540
Sales commission	39,114	37,206	38,160
Sales salaries	3,000	3,000	3,000
General and administrative salaries	12,000	12,000	12,000
Dividends	0	10,000	0
Loan interest	120	0	0
Long term note interest	4,500	4,500	4,500
Purchase of equipment	0	0	130,000
Total cash disbursements	433,579	440,821	569,700
Excess of cash receipts over cash disbursements	95,346	124,295	23,248
Additional loan (Loan repayment)	(12,000)		16,752
Ending cash balance	83,346	124,295	40,000

Explanation of Solution

Given-

Beginning cash balance = $40,000
Payment for raw materials − Calculated in Req. 3
Payment for direct labor - Calculated in Req. 4
Payments for variable overhead - Calculated in Req. 5
Sales commission - Calculated in Req. 6
Sales salaries - Calculated in Req. 6
General and administrative salaries - Calculated in Req.7
Long term note interest - Calculated in Req.7
Dividends - $10,000
Purchase of equipment - $130,000

Total cash available

Calculation of cash receipts from customers is as under-

-It is given that amount of credit sales will be collected in the month following the sale.

Calculation of cash receipts from customers-
	April	May	June

Total budgeted sales (Req.1)	488,925	465,075	477,000
Cash Sales (30%)	146,677.50	139,522.50	143,100
Credit sales (70%)	342,247.50	325,552.50	333,900

Total cash receipts from customers
Current month's cash sales	146,677.50	139,522.50	143,100
Collection of receivables	342,247.50	342,247.50	325,553
Total cash receipts	488,925	481,770	468,653

Total cash available-

Total cash available= Beginning cash balance+Total cash receiptsTotal cash available for April=$40,000+$488,925Total cash available for April=$528,925Total cash available for May=$83,346+$481,770Total cash available for May=$565,116Total cash available for June=$124,295+$468,653Total cash available for June=$592,948

Total cash disbursementsLoan interest-

Loan interest = Loan amount×Rate of interestLoan interest = $12,000×1%Loan interest = $120

Total cash disbursements-

Total cash disbursements for April= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission + Sales salaries+ General and administrative salaries+Loan interest+ Long term note interest) Total cash disbursements for April= $200,500+$147,750+$26,595+$39,114+$3,000+$12,000+$120+$4,500Total cash disbursements for April=$433,579

Total cash disbursements for May= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission+ Sales salaries+ General and administrative salaries+Dividends+ Long term note interest) Total cash disbursements for May= $198,000+$149,250+$26,865+$37,206+$3,000+$12,000+$10,000+$4,500Total cash disbursements for May=$440,821

Total cash disbursements for June= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission+ Sales salaries+ General and administrative salaries+Long term note interest+Purchase of equipment) Total cash disbursements for June= $201,500+$153,000+$27,540+$38,160+$3,000+$12,000+$4,500+$130,000Total cash disbursements for June=$569,700

Excess of cash receipts over cash disbursements

Excess of cash receipts over cash disbursements=Total cash available−Total cash disbursementsExcess of cash receipts over cash disbursements for April=$528,925−$433,579 Excess of cash receipts over cash disbursements for April=$95,346 Excess of cash receipts over cash disbursements for May=$565,116−$440,821 Excess of cash receipts over cash disbursements for May=$124,295 Excess of cash receipts over cash disbursements for June=$592,948−$569,700Excess of cash receipts over cash disbursements for June=$23,248

- It is given that Company need to maintain minimum cash balance of $40,000. In June month they don't have sufficient cash balance so, need to borrow loan to meet minimum cash balance as $40,000.

Loan amount for June month-

Available cash balance=$23,248

Loan amount = $40,000−$23,248Loan amount =$16,752

-Loan is repaid in the month of April of $12,000.

Ending cash balance-

Ending cash balance April = $95,346−$12,000Ending cash balance April= $83,346Ending cash balance May = $124,295Ending cash balance June=$23,248+$16,752Ending cash balance June=$40,000

Conclusion:

Thus, cash budget is prepared with ending cash balance in the month of June $40,000.

Answer 56

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 8-

To prepare:

Cash Budget

Answer 57

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Cash Budget

	April	May	June
Beginning cash balance	40,000	83,346	124,295
Add: Cash receipts from customers	488,925	481,770	468,653
Total cash available	528,925	565,116	592,948
Less: Cash disbursements
Payment for raw materials	200,500	198,000	201,500
Payment for direct labor	147,750	149,250	153,000
Payments for variable overhead	26,595	26,865	27,540
Sales commission	39,114	37,206	38,160
Sales salaries	3,000	3,000	3,000
General and administrative salaries	12,000	12,000	12,000
Dividends	0	10,000	0
Loan interest	120	0	0
Long term note interest	4,500	4,500	4,500
Purchase of equipment	0	0	130,000
Total cash disbursements	433,579	440,821	569,700
Excess of cash receipts over cash disbursements	95,346	124,295	23,248
Additional loan (Loan repayment)	(12,000)		16,752
Ending cash balance	83,346	124,295	40,000

Answer 58

Expert Solution

Answer 59

Expert Solution

Answer 60

Expert Solution

Answer 61

Explanation of Solution

Given-

Beginning cash balance = $40,000
Payment for raw materials − Calculated in Req. 3
Payment for direct labor - Calculated in Req. 4
Payments for variable overhead - Calculated in Req. 5
Sales commission - Calculated in Req. 6
Sales salaries - Calculated in Req. 6
General and administrative salaries - Calculated in Req.7
Long term note interest - Calculated in Req.7
Dividends - $10,000
Purchase of equipment - $130,000

Total cash available

Calculation of cash receipts from customers is as under-

-It is given that amount of credit sales will be collected in the month following the sale.

Calculation of cash receipts from customers-
	April	May	June

Total budgeted sales (Req.1)	488,925	465,075	477,000
Cash Sales (30%)	146,677.50	139,522.50	143,100
Credit sales (70%)	342,247.50	325,552.50	333,900

Total cash receipts from customers
Current month's cash sales	146,677.50	139,522.50	143,100
Collection of receivables	342,247.50	342,247.50	325,553
Total cash receipts	488,925	481,770	468,653

Total cash available-

Total cash available= Beginning cash balance+Total cash receiptsTotal cash available for April=$40,000+$488,925Total cash available for April=$528,925Total cash available for May=$83,346+$481,770Total cash available for May=$565,116Total cash available for June=$124,295+$468,653Total cash available for June=$592,948

Total cash disbursementsLoan interest-

Loan interest = Loan amount×Rate of interestLoan interest = $12,000×1%Loan interest = $120

Total cash disbursements-

Total cash disbursements for April= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission + Sales salaries+ General and administrative salaries+Loan interest+ Long term note interest) Total cash disbursements for April= $200,500+$147,750+$26,595+$39,114+$3,000+$12,000+$120+$4,500Total cash disbursements for April=$433,579

Total cash disbursements for May= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission+ Sales salaries+ General and administrative salaries+Dividends+ Long term note interest) Total cash disbursements for May= $198,000+$149,250+$26,865+$37,206+$3,000+$12,000+$10,000+$4,500Total cash disbursements for May=$440,821

Total cash disbursements for June= (Payment for raw materials+ Payment for direct labor+ Payments for variable overhead+ Sales commission+ Sales salaries+ General and administrative salaries+Long term note interest+Purchase of equipment) Total cash disbursements for June= $201,500+$153,000+$27,540+$38,160+$3,000+$12,000+$4,500+$130,000Total cash disbursements for June=$569,700

Excess of cash receipts over cash disbursements

Excess of cash receipts over cash disbursements=Total cash available−Total cash disbursementsExcess of cash receipts over cash disbursements for April=$528,925−$433,579 Excess of cash receipts over cash disbursements for April=$95,346 Excess of cash receipts over cash disbursements for May=$565,116−$440,821 Excess of cash receipts over cash disbursements for May=$124,295 Excess of cash receipts over cash disbursements for June=$592,948−$569,700Excess of cash receipts over cash disbursements for June=$23,248

- It is given that Company need to maintain minimum cash balance of $40,000. In June month they don't have sufficient cash balance so, need to borrow loan to meet minimum cash balance as $40,000.

Loan amount for June month-

Available cash balance=$23,248

Loan amount = $40,000−$23,248Loan amount =$16,752

-Loan is repaid in the month of April of $12,000.

Ending cash balance-

Ending cash balance April = $95,346−$12,000Ending cash balance April= $83,346Ending cash balance May = $124,295Ending cash balance June=$23,248+$16,752Ending cash balance June=$40,000

Conclusion:

Thus, cash budget is prepared with ending cash balance in the month of June $40,000.

Answer 62

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 9-

To prepare:

Budgeted income statement

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Income Statement

Particulars	Amount ($)	Amount ($)
Sales		1,431,000
Cost of merchandise sold		1,191,000
Gross Profit		240,000
Operating expenses:
Sales Commissions	114,480
Sales Salaries	9,000
Long term note interest	13,500
General and administrative expenses	36,000
Interest expense	120	173,100
Income before tax		66,900
Tax @ 40%		23,415
Net operating income		43,485

Explanation of Solution

Given,

Sales = $1,431,000 Calculated in Req.1
Sales commission - $114,480 Calculated in Req. 6
Sales salaries - $9,000Calculated in Req. 6
General and administrative salaries - $36,000 Calculated in Req.7
Long term note interest - $13,500 Calculated in Req.7
Interest expense -$120 Calculated in Req.8

Cost of merchandise sold-

Cost of merchandise sold = No. of units ×Cost priceCost of merchandise sold =60,000×$19,85Cost of merchandise sold =$1,191,000

Gross profit is calculated as under-

Gross profit = Sales – Cost of merchandise soldGross profit =$1,431,000−$1,191,000Gross profit =$240,000

Total operating expenses-

TotalOperating expenses= Sales Commissions+ Sales Salaries+ Long term note interest +General and administrative expenses+ Interest expenseTotalOperating expenses=$114,480+$9,000+$13,500+$36,000+$120TotalOperating expenses=$173,100

Income before tax-

Income before tax=Gross profit – Total operating expensesIncome before tax=$240,000−$173,100Income before tax=$66,900

Tax Expense-

Tax Expense=Income before tax×Tax RateTax Expense=$66,900×35%Tax Expense=$23,415

Net Operating income is calculated as under-

Net Operating income= Income before tax−Tax ExpenseNet Operating income=$66,900−$23,415Net Operating income=$43,485

Conclusion:

Thus, Income statement is prepared for the quarter.

Answer 63

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 9-

To prepare:

Budgeted income statement

Answer 64

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Income Statement

Particulars	Amount ($)	Amount ($)
Sales		1,431,000
Cost of merchandise sold		1,191,000
Gross Profit		240,000
Operating expenses:
Sales Commissions	114,480
Sales Salaries	9,000
Long term note interest	13,500
General and administrative expenses	36,000
Interest expense	120	173,100
Income before tax		66,900
Tax @ 40%		23,415
Net operating income		43,485

Answer 65

Expert Solution

Answer 66

Expert Solution

Answer 67

Expert Solution

Answer 68

Explanation of Solution

Given,

Sales = $1,431,000 Calculated in Req.1
Sales commission - $114,480 Calculated in Req. 6
Sales salaries - $9,000Calculated in Req. 6
General and administrative salaries - $36,000 Calculated in Req.7
Long term note interest - $13,500 Calculated in Req.7
Interest expense -$120 Calculated in Req.8

Cost of merchandise sold-

Cost of merchandise sold = No. of units ×Cost priceCost of merchandise sold =60,000×$19,85Cost of merchandise sold =$1,191,000

Gross profit is calculated as under-

Gross profit = Sales – Cost of merchandise soldGross profit =$1,431,000−$1,191,000Gross profit =$240,000

Total operating expenses-

TotalOperating expenses= Sales Commissions+ Sales Salaries+ Long term note interest +General and administrative expenses+ Interest expenseTotalOperating expenses=$114,480+$9,000+$13,500+$36,000+$120TotalOperating expenses=$173,100

Income before tax-

Income before tax=Gross profit – Total operating expensesIncome before tax=$240,000−$173,100Income before tax=$66,900

Tax Expense-

Tax Expense=Income before tax×Tax RateTax Expense=$66,900×35%Tax Expense=$23,415

Net Operating income is calculated as under-

Net Operating income= Income before tax−Tax ExpenseNet Operating income=$66,900−$23,415Net Operating income=$43,485

Conclusion:

Thus, Income statement is prepared for the quarter.

Answer 69

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 10-

To prepare:

Budgeted Balance sheet.

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Balance sheet as of June 30

	Amount ($)	Amount ($)
Assets
Cash	40,000
Accounts receivable	333,900
Raw materials Inventory	80,000
Finished goods inventory	325,540
Total current assets		779,440
Equipment	730,000
Less: Accumulated depreciation	(210,000)
Equipment net		520,000
Total assets		1,299,440
Stockholder's Equity and Liabilities
Accounts payable	182,000
Bank loan payable	16,752
Tax payable	23,415
Current liabilities		222,167
Long term note payable		500,000
Common stock	335,000
Retained earnings	242,273
Total Stockholder's Equity		577,273
Total Stockholder's Equity and Liabilities		1,299,440

Explanation of Solution

Assets

Given,

Cash = $40,000 (Req.8)

Calculation of other current assets-

Particulars	Amount ($)
Accounts Receivables
Beginning receivables	342,248
Credit sales	1,001,701
Less: Collections	(1,010,049)
Ending Receivables	333,900

Raw material inventory
Beginning raw materials	98,500
Purchases of raw materials	581,500
Less: Materials used in production	(600,000)
Ending raw materials inventory	80,000

Finished goods inventory
Beginning Finished goods inventory	325,540
Cost of goods completed during the period	1,191,000
Less: Cost of goods sold during the period	(1,191,000)
Ending Finished goods inventory	325,540

Total current assets-

Total current assets=Cash +Accounts receivables+Raw material inventory+ Finished goods inventory Total current assets=$40,000+$333,900+$80,000+$325,540Total current assets=$779,440

Calculation of Equipment-

Particulars	Amount ($)
Equipment Gross
Beginning Equipment	600,000
Purchased in June	130,000
Total (A)	730,000

Accumulated Depreciation
Beginning Accumulated Depreciation	150,000
Depreciation expense	60,000
Total (B)	210,000

Equipment (A-B)	520,000

Total Assets-

Total assets = Total current assets + EquipmentTotal assets = $779,440 + $520,000Total assets = $1,299,440

Stockholder's Equity and Liabilities

Given,

Bank loan payable = $16,752 (Req.8)
Taxes payable = $23,415 (Req.9)
Long −term note payable = $500,000
Common stock = $335,000

Accounts payable-

Particulars	Amount ($)
Accounts Payables
Beginning accounts payable	200,500
Purchase of raw materials	581,500
Payments of raw materials	(600,000)
Ending accounts payable	182,000

Total current liabilities-

Total current liabilities=Accounts payable+Bank loan payable+Taxes payableTotal current liabilities=$182,000+$16,752+$23,415Total current liabilities=$222,167

Retained Earnings-

Particulars	Amount ($)
Retained Earnings
Retained Earnings, Beginning	208,788
Add: Net Income	43,485
	252,273
Less: Dividends	(10,000)
Retained Earnings, Ending	242,273

Total stockholder's equity-

Total stockholder’s equity = Common stock+Retained EarningsTotal stockholder’s equity =$335,000+$242,273Total stockholder’s equity =$577,273

Total Stockholder's Equity and Liabilities-

Total Stockholder's Equity and Liabilities=Current liabilities+Long term note payable+Total stockholder’s equityTotal Stockholder's Equity and Liabilities=$222,167+$500,000+$577,273Total Stockholder's Equity and Liabilities=$1,299,440

Conclusion:

Thus, Budgeted balance sheet is prepared with total of $1,299,440

Answer 70

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 10-

To prepare:

Budgeted Balance sheet.

Answer 71

Expert Solution

Answer to Problem 4APSA

ZIGBY Manufacturing
Balance sheet as of June 30

	Amount ($)	Amount ($)
Assets
Cash	40,000
Accounts receivable	333,900
Raw materials Inventory	80,000
Finished goods inventory	325,540
Total current assets		779,440
Equipment	730,000
Less: Accumulated depreciation	(210,000)
Equipment net		520,000
Total assets		1,299,440
Stockholder's Equity and Liabilities
Accounts payable	182,000
Bank loan payable	16,752
Tax payable	23,415
Current liabilities		222,167
Long term note payable		500,000
Common stock	335,000
Retained earnings	242,273
Total Stockholder's Equity		577,273
Total Stockholder's Equity and Liabilities		1,299,440

Answer 72

Expert Solution

Answer 73

Expert Solution

Answer 74

Expert Solution

Answer 75

Explanation of Solution

Assets

Given,

Cash = $40,000 (Req.8)

Calculation of other current assets-

Particulars	Amount ($)
Accounts Receivables
Beginning receivables	342,248
Credit sales	1,001,701
Less: Collections	(1,010,049)
Ending Receivables	333,900

Raw material inventory
Beginning raw materials	98,500
Purchases of raw materials	581,500
Less: Materials used in production	(600,000)
Ending raw materials inventory	80,000

Finished goods inventory
Beginning Finished goods inventory	325,540
Cost of goods completed during the period	1,191,000
Less: Cost of goods sold during the period	(1,191,000)
Ending Finished goods inventory	325,540

Total current assets-

Total current assets=Cash +Accounts receivables+Raw material inventory+ Finished goods inventory Total current assets=$40,000+$333,900+$80,000+$325,540Total current assets=$779,440

Calculation of Equipment-

Particulars	Amount ($)
Equipment Gross
Beginning Equipment	600,000
Purchased in June	130,000
Total (A)	730,000

Accumulated Depreciation
Beginning Accumulated Depreciation	150,000
Depreciation expense	60,000
Total (B)	210,000

Equipment (A-B)	520,000

Total Assets-

Total assets = Total current assets + EquipmentTotal assets = $779,440 + $520,000Total assets = $1,299,440

Stockholder's Equity and Liabilities

Given,

Bank loan payable = $16,752 (Req.8)
Taxes payable = $23,415 (Req.9)
Long −term note payable = $500,000
Common stock = $335,000

Accounts payable-

Particulars	Amount ($)
Accounts Payables
Beginning accounts payable	200,500
Purchase of raw materials	581,500
Payments of raw materials	(600,000)
Ending accounts payable	182,000

Total current liabilities-

Total current liabilities=Accounts payable+Bank loan payable+Taxes payableTotal current liabilities=$182,000+$16,752+$23,415Total current liabilities=$222,167

Retained Earnings-

Particulars	Amount ($)
Retained Earnings
Retained Earnings, Beginning	208,788
Add: Net Income	43,485
	252,273
Less: Dividends	(10,000)
Retained Earnings, Ending	242,273

Total stockholder's equity-

Total stockholder’s equity = Common stock+Retained EarningsTotal stockholder’s equity =$335,000+$242,273Total stockholder’s equity =$577,273

Total Stockholder's Equity and Liabilities-

Total Stockholder's Equity and Liabilities=Current liabilities+Long term note payable+Total stockholder’s equityTotal Stockholder's Equity and Liabilities=$222,167+$500,000+$577,273Total Stockholder's Equity and Liabilities=$1,299,440