Assignment: MASTER BUDGET PREPARATION

Dean's Devices Corporation has the following balance sheet at December 31, 2012:

                           Assets                                                                  Liabilities

Cash......................................     $10,200          Accounts payable ...............      $ 5,400

Accounts receivable ...................  17,200              

Inventories:

Direct materials (4,400 units)........ 8,800                           

Finished goods (1,400 units)          20,160            Stockholder's Equity

Equipment ............................... 50,000               Common stock ....................10,500

Less: Accumulated depreciation ...(30,000)            Retained earnings .............. 60,460

Total liabilities and Total assets .....$76,360           Stockholders' equity             $ 76,360

The company is preparing its budget for the first quarter of 2013 and has collected the data below:

a. The sales forecast is 2,000; 1,700; 1,600; and 1,500 units for January, February, March, and April, respectively. The unit sales price is $16. All sales are on credit and collections are 40% in the month of sale and 60% the following month. Accounts receivable is for credit sales only.

b. At the end of each month Dean's Devices wants a finished goods inventory equal to 70% of the next month's sales and a direct materials inventory of 120% of that month's production requirement.

c. A unit of finished product requires 3 pounds of direct material at $2 a pound, and 30 minutes of direct labor at $7 an hour. Direct materials purchases are paid 25% in the month of purchase and 75% in the following month. Accounts payable is for credit purchases only. All other costs are paid in the month incurred.

d. Manufacturing overhead consist of the following: indirect materials $0.50 per unit, indirect labor $0.60 per unit, other variable costs $0.40 per unit, salaries $3,000 per month, depreciation $1,500 per month, and other fixed costs $1,110 per month.

e. Selling costs are sales commissions ($0.30 per unit sold) and shipping ($0.14 per unit sold). Administrative costs each month are: salaries $800; rent $500; and depreciation $400.

f. Dean's Devices plans to buy equipment costing $10,000 in January.

Prepare the master budget for the first quarter of 2013 for each month and the quarter in total.