Question

The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 2015:

ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2015
Assets
Cash	$	65,000
Accounts receivable		437,760
Raw materials inventory		90,200
Finished goods inventory		308,028
Total current assets		900,988
Equipment, gross		630,000
Accumulated depreciation		(165,000)
Equipment, net		465,000
Total assets	$	1,365,988
Liabilities and Equity
Accounts payable		204,500
Short-term notes payable		27,000
Total current liabilities	$	231,500
Long-term note payable		515,000
Total liabilities		746,500
Common stock		350,000
Retained earnings		269,488
Total stockholders’ equity		619,488
Total liabilities and equity	$	1,365,988

To prepare a master budget for April, May, and June of 2015, management gathers the following information.

a.	Sales for March total 22,800 units. Forecasted sales in units are as follows: April, 22,800; May, 16,000; June, 23,000; July, 22,800. Sales of 255,000 units are forecasted for the entire year. The product’s selling price is $24.00 per unit and its total product cost is $19.30 per unit.
b.	Company policy calls for a given month’s ending raw materials inventory to equal 50% of the next month’s materials requirements. The March 31 raw materials inventory is 4,510 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,500 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.
c.	Company policy calls for a given month’s ending finished goods inventory to equal 70% of the next month’s expected unit sales. The March 31 finished goods inventory is 15,960 units, which complies with the policy.
d.	Each finished unit requires 0.50 hours of direct labor at a rate of $11 per hour.
e.	Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $4.20 per direct labor hour. Depreciation of $35,020 per month is treated as fixed factory overhead.
f.	Sales representatives’ commissions are 10% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $4,500.
g.	Monthly general and administrative expenses include $27,000 administrative salaries and 0.6% monthly interest on the long-term note payable.
h.	The company expects 20% of sales to be for cash and the remaining 80% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of the sale).
i.	All raw materials purchases are on credit, and no payables arise from any other transactions. One month’s raw materials purchases are fully paid in the next month.
J.	The minimum ending cash balance for all months is $55,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.
K.	Dividends of $25,000 are to be declared and paid in May.

l.	No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 40% in the quarter and paid in the third calendar quarter.
m.	Equipment purchases of $145,000 are budgeted for the last day of June.

Required:

Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar:

Sales budget.

ZIGBY MANUFACTURING
Sales Budget
April, May, and June 2015
	Budgeted Unit Sales	Budgeted Unit Price	Budgeted Total Dollars
April 2015
May 2015
June 2015
Totals for the quarter

Production budget.

ZIGBY MANUFACTURING
Production Budget
April, May, and June 2015
	April	May	June
Next month's budgeted sales (units)	16,000	23,000	22,800
Ratio of inventory to future sales	70%	70%	70%
Required units of available production
Units to be produced

Raw materials budget.

ZIGBY MANUFACTURING
Raw Materials Budget
April, May, and June 2015
	April	May	June
Production budget (units)
Materials needed for production
Total materials requirements (units)
Materials to be purchased
Material price per unit
Total cost of direct material purchases

Direct labor budget.

ZIGBY MANUFACTURING
Direct Labor Budget
April, May, and June 2015
	April	May	June	Total
Budgeted production (units)
Total labor hours needed
Labor dollars

Factory overhead budget.

ZIGBY MANUFACTURING
Factory Overhead Budget
April, May, and June 2015
	April	May	June	Total
Labor hours needed
Budgeted variable overhead
Budgeted fixed overhead
Budgeted total overhead