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Albert Enterprises is a manufacturing company that builds heavy equipment repair
Albert Enterprises is a manufacturing company that builds heavy equipment repair parts for the construction industry. Albert is providing the following information for preparing their budgets for the first quarter of 2023.
• Sales: November, 2022 Actual Sales were $1,500,000 and December, 2022 Actual Sales were $2,100,000
• Budgeted Sales for the first 5 months of 2023 are:
o January 30,000 units
o February 40,000 units
o March 50,000 units
o April 45,000 units
o May 35,000 units
• Budgeted selling price is $60/unit
• All sales are made on the account. 30% is collected in the month of the sale, 50% is collected in the first month following the sale, and the remaining 20% is collected in the second month after the sale.
• The company wants to maintain a finished goods inventory equal to 40% of next month’s budgeted units of sales.
• Each unit of production requires 3kg of materials. The company maintains raw materials inventory equal to 20% of next month’s production needs. The budgeted purchase price for raw materials is $8/kg.
• All purchases of materials are made on account. 30% of the month’s purchases are paid in the month of purchase and the remaining 70% are paid the following month.
• Each unit of production requires 2 direct labor hours. The direct labor rate per hour is $6/hour and all labor costs are paid by the end of the month.
• Variable manufacturing overhead per direct labor hour is $2. The budgeted monthly fixed manufacturing overhead is $200,000 which includes monthly depreciation of $25,000.
• Variable selling expenses per unit sold are $2/unit. The budgeted monthly fixed selling and administrative expenses are $120,000 which includes monthly depreciation of $20,000.
• The company will be acquiring some additional equipment in the first quarter of the year. They will purchase equipment for $300,000 in cash in January.
• Dividends of $150,000 will be paid out in March.
• The company has a policy that it needs to maintain a cash balance of $50,000 at all times. They do have a line of credit with their bank. It has an annual interest rate of 12%. Borrowing, if needed, will occur at the beginning of the month and repayment of the principal and interest will occur at the end of the month. Borrowings and repayments are done in increments of $5,000.
REQUIRED:
1. Prepare the sales budget for each month of the first quarter. (25 points)
2. Prepare the schedule of expected cash collections for each month of the first quarter. (25 points)
3. Prepare the production budget for each month of the first quarter. (25 points)
4. Prepare the direct materials budget for each month of the first quarter. (25 points)
5. Prepare the schedule of cash payments to suppliers for each month of the first quarter. (25 points)
6. Prepare the direct labor budget for each month of the first quarter. (25 points)
7. Prepare the manufacturing overhead budget for each month of the first quarter. (25 points)
8. Prepare the selling and administrative expense budget for each month of the first quarter. (25 points)
9. Prepare the cash budget for each month of the first quarter. (50 points)
10. Prepare the budgeted income statement for the full quarter. (75 points)
11. Prepare the budgeted balance sheet as of March 31, 2023. (75 points)
Please read the following instructions carefully before you begin to attempt the project:
• Please complete each of the 10 budget templates for Albert Enterprises by month for the first quarter of the year (January, February, March 2023). The balance sheet will be as of March 31, 2023, and the Income Statement will be for the full quarter ended March 31, 2023.
• You will be utilizing the format and templates I had you work on during my video lecture. Please refer to the Module 2 PowerPoint presentation for guidance and format of each of the 10 budget schedules.
• You should prepare each schedule on a separate tab within Excel. If you create formulas as you build each template and link the schedules; it will allow you to make changes that will automatically update all schedules. This could be a tool you keep and use in your future companies.
• The learning outcome from this assignment is to give you the tools to complete a budget from start (Sales) to finish (financial statements).
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