Damon Manufacturing is preparing its master budget for the first quarter of the upcoming year. The following data pertain to Damon Manufacturing's operations:
Current Assets as of December 31 (prior year): Cash...................................... $ 4,600
Accounts receivable, net...................................................................................... $ 46,000
Inventory............................................................................................................... $ 15,600
Property, plant, and equipment, net........................................................................ $ 121,000
Accounts payable..................................................................................................... $ 43,000
Capital stock............................................................................................................. $ 125,000
Retained earnings.................................................................................................... $ 23,000

a. Actual sales in December were $ 71,000. Selling price per unit is projected to remain stable at $ 12 per unit throughout the budget period. Sales for the first five months of the upcoming year are budgeted to be as follows:
January..................................................................................................................... $ 99,600
February................................................................................................................... $ 118,800
March....................................................................................................................... $ 115,200
April.......................................................................................................................... $ 108,000
May........................................................................................................................... $ 103,200

b. Sales are 35% cash and 65% credit. All credit sales are collected in the month ­following the sale.
c. Damon Manufacturing has a policy that states that each month's ending inventory of finished goods should be 10% of the following month's sales ( in units).
d. Of each month's direct materials purchases, 20% are paid for in the month of purchase, while the remainder is paid for in the month following purchase. Three pounds of direct material is needed per unit at $ 2 per pound. Ending inventory of direct materials should be 20% of next month's production needs.
e. Most of the labor at the manufacturing facility is indirect, but there is some direct labor incurred. The direct labor hours per unit is 0.05. The direct labor rate per hour is $ 9 per hour. All direct labor is paid for in the month in which the work is performed. The direct labor total cost for each of the upcoming three months is as follows:
January..................................................................................................................... $ 3,807
February................................................................................................................... $ 4,442
March....................................................................................................................... $ 4,293

f. Monthly manufacturing overhead costs are $ 5,500 for factory rent, $ 2,900 for other fixed manufacturing expenses, and $ 1.10 per unit for variable manufacturing over-head. No depreciation is included in these figures. All expenses are paid in the month in which they are incurred.
g. Computer equipment for the administrative offices will be purchased in the upcoming quarter. In January, Damon Manufacturing will purchase equipment for $ 5,000 (cash), while February's cash expenditure will be $ 12,200 and March's cash expenditure will be $ 16,600.
h. Operating expenses are budgeted to be $ 1.25 per unit sold plus fixed operating expenses of $ 1,800 per month. All operating expenses are paid in the month in which they are incurred.
i. Depreciation on the building and equipment for the general and administrative offices is budgeted to be $ 4,800 for the entire quarter, which includes depreciation on new acquisitions.
j. Damon Manufacturing has a policy that the ending cash balance in each month must be at least $ 4,000. It has a line of credit with a local bank. The company can borrow in increments of $ 1,000 at the beginning of each month, up to a total outstanding loan balance of $ 130,000. The interest rate on these loans is 1% per month simple interest (not compounded). The company would pay down on the line of credit balance in increments of $ 1,000 if it has excess funds at the end of the quarter. The company would also pay the accumulated interest at the end of the quarter on the funds borrowed during the quarter.
k. The company's income tax rate is projected to be 30% of operating income less interest expense. The company pays $ 10,000 cash at the end of February in estimated taxes.

Requirements
1. Prepare a schedule of cash collections for January, February, and March, and for the quarter in total. Use the following format:

2. Prepare a production budget, using the following format:

3. Prepare a direct materials budget, using the following format:

4. Prepare a cash payments budget for the direct material purchases from Requirement 3, using the following format:

5. Prepare a cash payments budget for direct labor, using the following format:

6. Prepare a cash payments budget for manufacturing overhead costs, using the following format:

7. Prepare a cash payments budget for operating expenses, using the following format:

8. Prepare a combined cash budget, using the following format:

9. Calculate the budgeted manufacturing cost per unit, using the following format (assume that fixed manufacturing overhead is budgeted to be $ 0.70 per unit for the year):

10. Prepare a budgeted income statement for the quarter ending March 31, using the ­followingformat:

Cash Collections Budget For the Quarter Ended March31 Month February anuary March Quarter 4. 5 Cash sales 6 Credit sales 7 Total cash collections Production Budget For the Quarter Ended March 31 3 Month anuary February March Quarter 5 Unit sales 6 Plus: Desired ending inventory 7 Total needed 8 Less: Beginning inventory 9Number of units to produce Direct Materials Budget For the Quarter Ended March 31 2 Month January February March- Quarter Units to be produced (from Production Budget 6 Multiply by: Quantity (pounds) of DM needed per unit 7 Quantity (pounds needed for production 8 Plus Desired ending inventory of DM 9 Total quanty (pounds) needed 10 Less: Beginning inventory of DM 11 Quantity (pounds) to purchase 12 Multiply by: Cost per pound 13 Total cost of DM purchases Cash Payments for Direct Materials Budget For the Quarter Ended March 31 Month February January March Quarter 20% of current month DM purchases 6 | 80% of current month DM purchases 7 Total cash payments Cash Payments for Direct Labor Budget For the Quarter Ended March 31 Month anuaryFebruary March Quarter 5 Total cost of direct labar ash Payments for Manufacturing Overhead Budget For the Quarter Ended March 31 Month Februar January March Quarter 4 s Variable manufacturing overhead costs 6 Rent fxed) 7 Other fixed MOH 8 Cash payments for manufacturing averhead 9 Cash Payments for Operating Expenses Budget for the Quarter Ended March 31 Month January March Quarter variable operating expenses 6 Fxed operating expenses 7 Cash payments for operating expenses Combined Cash Budgot For the Quarter Ended March 31 a ousiyCuartor Month anuary 5 Beginning cash balance 6 Plus: Cash collections 7 Total cash av ailable 8 Less cash payments 9 Direct material pur chases 10 Direct labor 11Manufacturing overhead costs er 13 Tax payment ses 15 Total cash payments 16 Ending cash bal ance before financing 7 Financing 18 Plus: New borrowings 19 Less: Debt repayments 20 Less: Interest payments 21 Ending cash bal ance Budgeted Manufacturing Cost per Unit 3 Direct materials cost per unit 4 Direct labor cost per unit 5 Variable manufacturing overhead costs per unit 6 Fixed manufacturing overhead costs perunit 7 Budgeted cost of manufacturing one unit