Beirut Rifles Inc. produces and distributes different kinds of guns. The information below about Beirut's operations...

  

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Beirut Rifles Inc. produces and distributes different kinds of guns. The information below about Beirut's operations has been assembled to assist budget preparation. The company is preparing its master budget for the first quarter of 2020. The budget will detail each month's activity and the activity for the quarter in total. The master budget will be based on the following information: a. Selling price was $65 per unit in 2019 and will not change during 2020. Actual and Estimated Sales are as follows - Estimated 2020 January: 22,000 units Actual 2019 December: 15,000 units February: 18,000 units March: 15,000 units April: 16,000 units May: 15,000 units b. The company produces enough units each month to meet that month's sales plus a desired inventory level equal to 25% of next month's estimated sales. Finished goods inventory at the end of 2019 consisted of 2,000 units. c. The company purchases enough raw materials each month for the current month's production requirement and 20% of next month's production requirement. Each unit of product requires 4 kilograms of raw material at $0.50 per kilogram. There were 25,000 kilograms of raw materials in inventory at the end of 2019. Beirut pays 30% of the raw material purchases in the month of purchase and the remaining 70% in the following month. d. Each unit of finished product requires 1.5 labor-hours. The average wage rate is $18 per hour. e. Variable manufacturing overhead is 40% of the direct labor cost. f. Sales are 30% in cash and 70% in credit. Credit sales are collected in the month following sale. g. Fixed manufacturing overhead costs (per month) are as follows - $ 6,500 $ 3,400 $85,000 $ 2,000 Factory Manager's Salary Factory Insurance Factory Rent Depreciation of factory equipment h. Total fixed S & A expenses are as follows - $ 3,000 $ 8,000 $ 750 $ 5,000 $12,950 Advertising Depreciation Insurance Salaries Other i. Variable selling and administrative expenses consist of $3/unit for shipping and 10% of sales for commissions. j. The balance sheet as of December 31, 2019 is as follows - Assets $ 70,000 Cash Accounts Receivable Inventory: Raw Materials Inventory: Finished Goods Plant and Equipment Less: Accumulated Depreciation 512,000 $ 12,500 82,000 $1,100,000 (180,000) 94,500 920,000 $1,596,500 Total Assets Liabilities and Equity Accounts Payable Long-Term Notes payable $ 27,500 819,000 Common Shares 635,000 Retained Earnings Total Liabilities and Shareholder's Equity 115,000 $1,596,500 Additional information is as follows - All cash payments except purchases of raw materials are made monthly as incurred • All borrowings occur at the beginning of each month, and all repayments occur at the end of the month. Ignore interest rates and income tax. A minimum cash balance of $40,000 is required at the end of each month. Required: 1. Prepare the following budgets for each of the first three months of 2020. [21 marks) a. Sales budget. b. Production budget. c. Raw materials purchases budget. d. Direct labour and manufacturing overhead budget. e. Ending finished goods inventory budget f. Selling and administrative budget. g. Cash budget. 2. Prepare a budgeted income statement for the first three months of 2020 and a budgeted balance sheet as of March 31, 2020. [9 marks) Beirut Rifles Inc. produces and distributes different kinds of guns. The information below about Beirut's operations has been assembled to assist budget preparation. The company is preparing its master budget for the first quarter of 2020. The budget will detail each month's activity and the activity for the quarter in total. The master budget will be based on the following information: a. Selling price was $65 per unit in 2019 and will not change during 2020. Actual and Estimated Sales are as follows - Estimated 2020 January: 22,000 units Actual 2019 December: 15,000 units February: 18,000 units March: 15,000 units April: 16,000 units May: 15,000 units b. The company produces enough units each month to meet that month's sales plus a desired inventory level equal to 25% of next month's estimated sales. Finished goods inventory at the end of 2019 consisted of 2,000 units. c. The company purchases enough raw materials each month for the current month's production requirement and 20% of next month's production requirement. Each unit of product requires 4 kilograms of raw material at $0.50 per kilogram. There were 25,000 kilograms of raw materials in inventory at the end of 2019. Beirut pays 30% of the raw material purchases in the month of purchase and the remaining 70% in the following month. d. Each unit of finished product requires 1.5 labor-hours. The average wage rate is $18 per hour. e. Variable manufacturing overhead is 40% of the direct labor cost. f. Sales are 30% in cash and 70% in credit. Credit sales are collected in the month following sale. g. Fixed manufacturing overhead costs (per month) are as follows - $ 6,500 $ 3,400 $85,000 $ 2,000 Factory Manager's Salary Factory Insurance Factory Rent Depreciation of factory equipment h. Total fixed S & A expenses are as follows - $ 3,000 $ 8,000 $ 750 $ 5,000 $12,950 Advertising Depreciation Insurance Salaries Other i. Variable selling and administrative expenses consist of $3/unit for shipping and 10% of sales for commissions. j. The balance sheet as of December 31, 2019 is as follows - Assets $ 70,000 Cash Accounts Receivable Inventory: Raw Materials Inventory: Finished Goods Plant and Equipment Less: Accumulated Depreciation 512,000 $ 12,500 82,000 $1,100,000 (180,000) 94,500 920,000 $1,596,500 Total Assets Liabilities and Equity Accounts Payable Long-Term Notes payable $ 27,500 819,000 Common Shares 635,000 Retained Earnings Total Liabilities and Shareholder's Equity 115,000 $1,596,500 Additional information is as follows - All cash payments except purchases of raw materials are made monthly as incurred • All borrowings occur at the beginning of each month, and all repayments occur at the end of the month. Ignore interest rates and income tax. A minimum cash balance of $40,000 is required at the end of each month. Required: 1. Prepare the following budgets for each of the first three months of 2020. [21 marks) a. Sales budget. b. Production budget. c. Raw materials purchases budget. d. Direct labour and manufacturing overhead budget. e. Ending finished goods inventory budget f. Selling and administrative budget. g. Cash budget. 2. Prepare a budgeted income statement for the first three months of 2020 and a budgeted balance sheet as of March 31, 2020. [9 marks)