Prepare a Master Budget which includes the following:
1) Sales Budget
2) Production Budget
3) Direct Materials Purchases Budget
4) Direct Labour Cost Budget
5) Factory Overhead Cost Budget
6) Selling and Administrative Expenses Budget
7) Budgeted Income Statement
8) Schedule of Collections from Sales
9) Schedule of Payments for Manufacturing Costs
10) Cash Budget
All budgets should be for the individual three (3) months of the first quarter of 2017.
Include a quarterly total column on the right side. (except for #7 and #10) Show your work (calculations) for each budget.

1. Sales
	2016 Actual Sales		2017 Estimated Sales
	Nov	Dec	Jan	Feb	Mar	Apr	May
Units	7,835	7,970	7,450	7,090	8,320	9,070	10,120
The selling price per unit has remained constant for the past year and is expected to
remain unchanged throughout the first quarter of 2017 at an amount of $68.99
2. Cash Collection Policy
Total sales consist of the following:
Cash sales:		5%
Credit sales:		95%
Credit collections are as follows:
In the month following the month of sale:					75%
In the second month following the month of sale:					25%
The Company does not have any bad debts.
3. Production Policy
The Company's policy is to produce during each month, enough units to meet the current
month's sales as well as a desired inventory at the end of the month which should be
equal to 23% of next month's estimated sales. On December 31, 2016, the finished
goods inventory consisted of 1,714 units at a cost of $50.40.
4. Direct Materials Purchasing Policy
Each month the Company purchases enough direct materials to meet that month's
production requirements and an amount equal to 25% of the next month's estimated
production requirements. Each unit of finished product requires 2.83 pounds of direct
materials at a cost of $1.38 per pound. On December 31, 2016, the direct materials
inventory consisted of 5,213 lbs. at a cost of $1.38.
Payments are made as follows:
In the month of purchase:				80%
In the following month the balance:				20%
The accounts payable balance of $5,755.15 as of December 31, 2016, represents 20% of
purchases made in December 2016 to be paid in January 2017.
5. Direct Labor Costs
Direct labor hours required per unit of finished product:						1.75
Average rate per direct labor hour:				$12.25
6. Factory Overhead
The Company applies variable factory overhead cost at the rate of 120% of direct
labor cost and fixed factory overhead on the basis of the number of direct labor hours.
The company has the following fixed overhead expenses per month:
	Factory supervisor's salary				$54,000.00
	Factory rent				6,000.00
	Factory insurance				6,500.00
	Depreciation of factory equipment				600.00
All factory overhead costs, except depreciation, are paid for in cash during the
month in which they are incurred.
7. Selling and Administrative Expenses
Variable selling expenses are:
	Freight out		$0.80	per unit
	Sales commissions		1%	of sales
Fixed selling and administrative expenses per month are:
	Salaries				$8,700.00
	Rent				1,800.00
	Advertising				150.00
	Insurance				250.00
	Depreciation (excluding depreciation of
	computer to be purchased at the end
	of January 2017				10,050.00
8. Income Taxes
Combined tax rate is 30% of Income before taxes computed at the end of the
quarter ending March 31, 2017 , payable in the second quarter.
9. Capital Expenditures
The Company expects to buy a new computer on January 31, 2017, for use in the sales and
administrative offices at a cost of $180,000.00, which will be paid in cash. Monthly
depreciation expense will be an additional $3,000.00 .
10. Financing Policy
On March 31, 2017, the Company is scheduled to pay $300,000.00 , of the long-term notes
payable plus interest expense for the first quarter at a rate of 12%
With respect to short-term borrowing, the Company's policy is to borrow at the beginning
of a month with an anticipated cash deficiency. A minimum cash balance of $25,000.00 is
required of the end of each month. The Company repays the principal of such short-term
borrowing at the end of the first following month to the extent of anticipated excess cash.
Interest must be paid the following month at a rate of 12%. Borrowing and principal
repayments are made in multiples of $1,000.00 .
11. Investing Policy
Investments earn interest of the rate of 6% per annum which is credited to our Checking
account by the bank at the beginning of the following month. You may assume that the balance
of Marketable Securities at December 31, 2016, was outstanding throughout the entire month.
12. General Information
Use proper rounding and show two (2) decimal places of accuracy on dollar amounts.
Round up and show whole amounts on all other figures.