B C D E G H M N O 1 Project 1 2 3 Electra Manufacturing, Inc., produces metal control valves used in the production of oil field equipment. 4 The control valves are sold to various gas and oil engineering companies throughout the United States. Projected sales in units for the coming four months are as follows: 6 January 20000 control valves February 25000 control valves 8 March 30000 control valves 9 April 30000 control valves 10 May 22000 control valves 11 12 13 The following data pertain to production policies and manufacturing specifications followed by Electra: 14 15 a. Finished goods inventory on January 1 is 13,000 units. The desired ending inventory for each month is 70 percent of the next month's sales. 16 17 b. The data on material used are as follows: for every valve 6 pounds of metal are used. One pound of metal costs $5. RM inventory on January 1 includes 60,000 pounds of metal. 19 The desired ending RM inventory for each month dictates that sufficient materials are on hand to produce 50 percent of next month's estimated production. 20 21 c. The direct labor used to make one valve is two hours. The average direct labor cost per hour is $14. 22 23 d. Overhead each month is estimated as follows (variable costs are per unit produced): 24 25 Fixed Cost Component Variable Cost Component 26 Supplies $ - $1.00 27 Power 1.1 28 Maintenance 28,000 2.1 29 Supervision 14,000 30 Depreciation 100,000 31 Taxes 7,000 32 Other 56,000 3.6 33 34 e. Monthly selling and administrative expenses are estimated as follows (variable costs are per unit sold): 35 36 Fixed Cost Component Variable Cost Component 37 Salaries $30,000 38 Commissions $0.75 39 Depreciation 5,000 40 Shipping 2.6 41 Other 10,000 0.4 42 13 f. The unit selling price of the control valve is $90.Fixed Cost Component Variable Cost Component Salaries $30,000 Commissions $0.75 Depreciation 5,000 Shipping 2.6 Other 10,000 0.4 f. The unit selling price of the control valve is $90. g. InMarch, the company plans to purchase land for future expansion. The land costs $90,000. h. 50% of sales are for cash. Remaining 50% are collected over the next month. December sales were $1,600,000. Cash balance on January 1 equals $150,400. If the firm develops a cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage. Any cash borrowed is repaid one month later, as is the interest due. The interest rate is 12 percent per annum (i.e., 1% per month). Required: Prepare the following budgets for each month (January, February and March) and for the Quarter 1 in total: 1. Sales budget. 2 . Production budget. 3. Direct materials purchase budget. 4. Direct labor budget. 5. Overhead budget. 6. Selling and administrative expense budget. 7. Ending FG budget. 8 . Cost of goods sold budget. Assume that beginning inventory in January is valued at $70/unit and the company uses FIFO. 9. Budgeted income statement (ignore income taxes) 10. Cash budget. i.e., for each budget you need to prepare four columns: January, February, March and Q1 (total for all three months, i.e., total for the first quarter)