Developing a Master Budget for a Manufacturing Organization

Cubs Incorporated manufactures a product with a selling price of $60 per unit. Units and monthly cost

data follow:

Variable:

Selling and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$5 per unit sold

Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 per unit manufactured

Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 per unit manufactured

Variable manufacturing overhead. . . . . . . . . . . . . . . . . . . . . . . . . . .6 per unit manufactured

Fixed:

Selling and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$17,000 per month

Manufacturing (including depreciation of $11,000). . . . . . . . . . . .34,000 per month

Cubs Inc. pays all bills in the month incurred. All sales are on account with 50 percent collected the month

of sale and the balance collected the following month. There are no sales discounts or bad debts.

Cubs Inc. desires to maintain an ending finished goods inventory equal to 20 percent of the follow-

ing months sales and a raw materials inventory equal to 10 percent of the following months produc-

tion. January 1, 2017, inventories are in line with these policies.

Actual unit sales for December and budgeted unit sales for January, February, and March of 2017

are as follows:

CUBS INCORPORATED

Sales Budget

For the Months of January, February, and March 2017

Month December January February March

SalesUnits........................11,250 10,000 15,000 13,000

SalesDollars ......................$675,000 $600,000 $900,000 $ 780,000

Additional information:

The January 1 beginning cash is projected as $6,000.

For the purpose of operational budgeting, units in the January 1 inventory of finished goods are

valued at variable manufacturing cost.

Each unit of finished product requires one unit of raw materials.

Cubs Inc. intends to pay a cash dividend of $12,000 in January

Required

a. A production budget for January and February.

b. A purchases budget in units for January.

c. A manufacturing cost budget for January.

d. A cash budget for January.

e. A budgeted contribution income statement for January.