Prompt : You are a manager for Peyton Approved, a pet supplies manufacturer. This responsibility requires you to create budgets, make pricing decisions, and analyze the results of operations to determine if changes need to be made to make the company more efficient.

You will be preparing a budget for the quarter July through September 2014. You are provided the following information. The budgeted balance sheet on June 30, 2014, is:

Peyton Approved

Budgeted Balance Sheet

Jun 30-Jun-15

ASSETS

Cash $42,000

Accounts receivable 259,900

Raw materials inventory 35,650

Finished goods inventory 241,080

Total current assets 578,630

Equipment $720,000

Less accumulated depreciation 240,000 480,000

Total assets $1,058,630

LIABILITIES AND EQUITY

Accounts payable $63,400

Short-term notes payable 24,000

Taxes payable 10,000

Total current liabilities 97,400

Long-term note payable 300,000

Total liabilities 397,400

Common stock $600,000

Retained earnings 61,230

Total stockholders' equity 661,230

Total liabilities and equity $1,058,630

1. Sales were 20,000 units in June 2015. Forecasted sales in units are as follows: July, 18,000; August, 22,000; September, 20,000; October, 24,000. The products selling price is $18.00 per unit and its total product cost is $14.35 per unit.
2. The June 30 finished goods inventory is 16,800 units.
3. Going forward, company policy calls for a given months ending finished goods inventory to equal 70% of the next months expected unit sales.
4. The June 30 raw materials inventory is 4,600 units. The budgeted September 30 raw materials inventory is 1,980 units. Raw materials cost $7.75 per unit. Each finished unit requires 0.50 units of raw materials. Company policy calls for a given months ending raw materials inventory to equal 20% of the next months materials requirements.
5. Each finished unit requires 0.50 hours of direct labor at a rate of $16 per hour.
6. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $1.35 per unit produced. Depreciation of $20,000 per month is treated as fixed factory overhead.
7. Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable.
8. Sales representatives commissions are 12% of sales and are paid in the month of the sales. The sales managers monthly salary is $3,750 per month.

Specifically, the following critical elements must be addressed:

1. Operating Budget Prepare operating budget.

A) Prepare sales budget. Ensure accuracy of data.

B) Prepare production budget. Ensure the accuracy of your data.

C) Prepare manufacturing budget. Ensure the accuracy of your data.

D) Prepare selling expense budget. Ensure the accuracy of your data.

E) Prepare general and administrative expense budget using appropriate costing methods.