The management of Nabar Manufacturing prepared the following estimated balance sheet for June, 2013: To prepare a master budget for July, August, and September of 2013, management gathers the following information: a. Sales were 20,000 units in June. Forecasted sales in units are as follows: July, 21,000; August, 19,000; September, 20,000; October, 24,000. The products selling price is $ 17
To prepare a master budget for July, August, and September of 2013, management gathers the following information:
a. Sales were 20,000 units in June. Forecasted sales in units are as follows: July, 21,000; August, 19,000; September, 20,000; October, 24,000. The products selling price is $ 17 per unit and its total product cost is $ 14.35 per unit.
b. Company policy calls for a given months ending finished goods inventory to equal 70% of the next months expected unit sales. The June 30 finished goods inventory is 16,800 units, which does not comply with the policy.
c. Company policy calls for a given months ending raw materials inventory to equal 20% of the next months materials requirements. The June 30 raw materials inventory is 4,375 units (which also fails to meet the policy). The budgeted September 30 raw materials inventory is 1,980 units. Raw materials cost $ 8 per unit. Each finished unit requires 0.50 units of raw materials.
d. Each finished unit requires 0.50 hours of direct labor at a rate of $ 16 per hour.
e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $ 1.35 per direct labor hour. Depreciation of $ 20,000 per month is treated as fixed factory overhead.
f. Monthly general and administrative expenses include $ 9,000 administrative salaries and 0.9% monthly interest on the long- term note payable.
g. Sales representatives commissions are 10% of sales and are paid in the month of the sales. The sales managers monthly salary is $ 3,500 per month.
h. The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of the sale).
i. All raw materials purchases are on credit, and no payables arise from any other transactions. One months raw materials purchases are fully paid in the next month.
j. Dividends of $ 20,000 are to be declared and paid in August.
k. Income taxes payable at June 30 will be paid in July. Income tax expense will be assessed at 35% in the quarter and paid in October.
l. Equipment purchases of $ 100,000 are budgeted for the last day of September.
m. The minimum ending cash balance for all months is $ 40,000. If necessary, the company borrows enough cash using a short- term note to reach the minimum. Short- term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the mini-mum, the excess will be applied to repaying the short- term notes payable balance.
Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. Round calculations to the nearest whole dollar:
1. Sales budget.
2. Production budget.
3. Raw materials budget.
4. Direct labor budget.
5. Factory overhead budget.
6. Selling expense budget.
7. General and administrative expense budget.
8. Cash budget.
9. Budgeted income statement for the entire quarter (not for each month separately).
10. Budgeted statement of retained earnings for the quarter.
11. Budgeted balance sheet as of September 30,2013.