Accounting Finance - Answer 2 budget questions.

Zigby Manufacturing Budget 2015

Production Budget
	April	May	June	Quarter
Budgeted Sales in Units	20,500	19,500	20,000	60,000
Add Desired Ending Inventory	15,600 (19,500*80%)	16,000 (20,000*80%)	16,400 (20,500*80%)	48,000
Required Unit of Available Production	36,100	35,500	36,400	108,000
Less Opening Inventory	16,400	15,600 (19,500*80%)	16,000 (20,000*80%)	48,000
Production Needed	$19,700	$19,900	$20,400	$60,000

Raw Materials Budget
	April	May	June	Quarter
Production Needed	19,700	19,900	20,400	60,000
Raw Material Per Unit	0.5	0.5	0.5	0.5
Total Raw Material Needed	9,850	9,950	10,200	30,000
Add Desired Ending Inventory of Raw Materials	4,975 (9,950*50%)	5,100 (10,200*50%)	4,000	14,075
Less Opening Inventory of Raw Materials	4,925	4,975 (9,950*50%)	5,100 (10,200*50%)	15,000
Raw Material to be Purchased	9,900	10,075	9,100	29,075
Material Price Per Unit	20	20	20	20
Total Cost of Raw Material Purchases	$198,000	$201,500	$182,000	$581,500

Direct Labor Budget
	April	May	June	Quarter
Production Needed	19,700	19,900	20,400	60,000
Labor Requirement Per Unit (in hours)	0.5	0.5	0.5	0.5
Total Hours Needed	9,850	9,950	10,200	30,000
Labor Cost Per Hour	15	15	15	15
Total Cost of Direct Labor	$147,750	$149,250	$153,000	$450,000

Factory Overhead Budget
	April	May	June	Quarter
Variable overhead at $2.70 per hour	26,595	26,865	27,540	81,000
Depreciation	20,000	20,000	20,000	60,000
Total overhead expenses	$46,595	$46,865	$47,540	$141,000

General and Administrative Expense Budget
	April	May	June	Quarter
Administrative Salaries	12,000	12,000	12,000	36,000
Interest on long term notes at 0.9%	4,500	4,500	4,500	13,500
Total General and administrative Expense	$16,500	$16,500	$16,500	$49,500

Cash Budget
	April	May	June
Opening Balance	40,000	83,346	124,295
Collections from customers	488,925	481,770	468,653
Total cash available	$528,925	$565,116	$592,948
Less: Payments For:
Variable Overhead	26,595	26,865	27,540
Sales Commission	39,114	37,206	38,160
Sales Salaries	3,000	3,000	3,000
Direct Labor	147,750	149,250	153,000
Dividends		10,000
Equipment Purchase			130,000
Total cash Payments	433,579	440,821	569,700
Surplus/Deficit	95,346	124,295	23,248
Add: Short-Term Notes availed			16,752
Less: Short-Term Notes repaid	(12,000)
Less: Interest on Short-Term Note	120
Balance at end of month	$83,346	$124,295	$40,000
End of Month Loan Balance			$16,752

Budgeted Income Statement for the Entire Second Quarter
Quarter Ending June 30, 2015
Sales Revenue (60,000 units)		1,431,000
Less: Cost of Goods Sold (19.85/unit) * 60,000		1,191,000
Gross Margin		240,000
Less: Other Operating expenses
Sales Representative commission 8% * sales	114,480
Sales Manager salary	9,000
Administrative salaries	36,000
Interest on Long-Term Note 0.9%	13,500
Less: Interest on Short-Term Note	120	173,100
Income Before Taxes		66,900
Less: Income Tax payable at 35%		23,415
Net Income		43,485

Budgeted balance sheet as of the end of the second calendar quarter
June, 30th, 2015
Current Assets:
Cash	40,000
Accounts Receivables	333,900
Raw Materials Inventory	80,000
Finished goods Inventory	325,540
Total current assets		$779,440
Fixed Assets:
Equipment (Gross)	730,000
Less: Accumulated Depreciation	210,000
Equipment (net)		520,000
Total Assets			1,299,440

Liabilities and Equity
Accounts Payable	182,000
Short-Term Notes Payable	16,752
Income Tax payable	23,415
Total Current Liabilities		222,167
Long-term Notes payable		500,000
Common Stock	335,000
Retained Earnings	242,273
Total Equity		577,273
Total Liabilities and Equity			$1,299,440

Explain why each budget is prepared. Why would management want to see each budget?