Betty s Beautiful Baskets, a manufacturing business that sells baskets, wants a master budget prepared for the first three months of this year (January, February and March).

The managers of the different departments have provided the following information:

The Sales Manager has projected the following sales:

o January 5,000 units

o February 4,000 units

o March 6,000 units

o April 5,000 units

o May 11,250 units

o Projected selling price is $35.00/unit

Your Production Manager gave the following information:

o Ending Inventory is to be 20% of next month s production needs

o April s Projected Sales 5,000 units

o December 20X5 Ending Inventory was 1,000 units and December unit cost was $23.50.

The Manufacturing Manager has estimated the following:

o Each unit will require 4 grams of material

o Material in Ending Inventory is 20% of next month s needs

o December s Ending Material Inventory was 4,800 g

o Projected cost of material: $2.50/gram

The Personnel Manager has estimated that Direct Labor will be projected at:

o 0.75 hours of Direct Labor per unit

o Direct Labor Cost: $8.50/hour

The Facilities Manager has estimated that the Manufacturing Overhead will be projected at:

o Variable Overhead Rate to be $8 per Direct Labor hours

o Fixed Overhead Rate to be $3,000 per month

The Accounting Department Manager has provided the following information:

Selling and Administrative Expenses are projected to be a monthly cost of:

o Salaries $6,000

o Rent $1,500

o Advertising $1,100

o Telephone $300

o Other $500

Betty s Beautiful Baskets Page 2

Cash Receivable:

o December s Sales were $150,000

o 80% of sales is collected in the month in which they were made

o 20% of sales collected in the following month in which they were made

o Bad Debts is negligible

Accounts Payable:

o 80% of Payables is paid for in the current month

o 20% of Payables is paid for in the following month

o December s purchases were $50,000

Federal Income Tax is estimated at 22% average.

Betty s Beautiful Baskets

o has a $20,000 cash balance for the beginning of January

o pays Dividends of $8,000 to be paid in March

o pays projected Federal Income tax in March

o depreciation on the building is $150 per month

o does not carry any WIP inventory

o uses FIFO inventory costing

From the beginning Balance Sheet:

o Land = $150,000

o Building = $45,000

o Depreciation (Building) = $11,250

o Retained Earnings = $58,780

o Capital Stock = $200,470

For the Master Budget, you are expected to prepare the following:

Sales budget plus schedule of accounts receivable collections

Production budget

Direct materials budget and schedule of cash payments for purchases

Direct labor budget

Manufacturing overhead budget

Cost of Goods Sold Budget

Selling & Administrative Expenses Budget

Budgeted income statements

Cash budget

Budgeted balance sheet for each month plus a beginning balance sheet

When you prepare the cost of goods sold budget, you must calculate a unit cost for each month. You must also calculate cost of goods manufactured. Remember, there is no Work in Process inventory but you must calculate direct materials used.