You have just been promoted to controller for a growing company that manufactures green products. It is October 1 and time for creation of the budget for the next year. The budget will be created in quarters using each month as a period of sales/production.

Your first task is to create the budget for the first quarter of 2016. This involves completing budgets for January, February, March and the first quarter in total for 2016. You seek out last year?s data, recent costing information and follow up on important assumptions.

The CFO wants to see the first quarter budget before you complete the rest of the year, as adjustments may be needed. You will need to create the following sub-budgets as part of the overall master budget.

Sales Budget for the 1 ^st quarter

Production Budget for the 1 ^st quarter

Materials Purchases Budget for the 1 ^st quarter

Direct Labor Budget for the 1 ^st quarter

Overhead Budget for the 1 ^st quarter

Cash Receipts of Sales Revenue for the 1 ^st quarter

Cash Payments for Material Purchases for the 1 ^st quarter

Overall Cash Budget for the 1 ^st quarter

Income Statement for the quarter ended March 31, 2016

Statement of Cash Flows for the quarter ended March 31, 2016

Several assumptions are needed to work into your models for computation. These are determined as follows and have been approved by the CFO. These are summarized on the following page.

This page illustrates all assumptions needed to create the master budget, income statement and statement of cash flows. These assumptions have been approved by the CFO. You will use them to create the master budget for January, February, and March and in total for the first quarter.

Transcribed Image Text:

Unit Sales Sales Price Desired Ending Inventory for Finished Goods Desired Ending Inventory for Material Units Cost of one lb. of materials (1 lb = 1 material unit) Units of Direct Materials to made one unit Minutes of Directo Labor to made one unit Directo Labor Ccosts per Hour Overhead Costs percentage of Direct Labor Minimum cash balance (Assume you start with this) Cash Collections in month of sale Cash collections in first month after sale Cash collections in second month after sale Cash Payments in months of purchase Cash Payments in the first month after purch Selling Costs per month (for cash budget) Administrative Costs per month (for cash budget) Annual Interest Rate for Letter of Credit Annual Interest Rate Earned on Excess Cash Sales Revenue for November Sales Revenue for December Material Purchases for November Material Purchases for December Depreciation Expense for the quarter (Operating Exp.) Income Tax Rate January 24,000 $10 20% of next dmonth's sales in units 10% of next months materials needed for production $0.25 4 15 $15 150% $10,000.00 65% 25% 10% 70% 30% $11,000.00 $15,000.00 12% 4% $350,000 $350,000 $22,000 $25,000 $5,000 February March April May 26,000 24,500 28,000 20,000 25% Unit Sales Sales Price Desired Ending Inventory for Finished Goods Desired Ending Inventory for Material Units Cost of one lb. of materials (1 lb = 1 material unit) Units of Direct Materials to made one unit Minutes of Directo Labor to made one unit Directo Labor Ccosts per Hour Overhead Costs percentage of Direct Labor Minimum cash balance (Assume you start with this) Cash Collections in month of sale Cash collections in first month after sale Cash collections in second month after sale Cash Payments in months of purchase Cash Payments in the first month after purch Selling Costs per month (for cash budget) Administrative Costs per month (for cash budget) Annual Interest Rate for Letter of Credit Annual Interest Rate Earned on Excess Cash Sales Revenue for November Sales Revenue for December Material Purchases for November Material Purchases for December Depreciation Expense for the quarter (Operating Exp.) Income Tax Rate January 24,000 $10 20% of next dmonth's sales in units 10% of next months materials needed for production $0.25 4 15 $15 150% $10,000.00 65% 25% 10% 70% 30% $11,000.00 $15,000.00 12% 4% $350,000 $350,000 $22,000 $25,000 $5,000 February March April May 26,000 24,500 28,000 20,000 25%

Answer rating: 100% (QA)

Sales budget for the 1 st quarter Production budget ... View the full answer